AAt its customer fair in Orlando, USA, this time SAP mainly has news for the shareholders in its luggage. The most important: The group wants to spend up to 5 billion euros on share buybacks. The program is fed by the sale of the American subsidiary Qualtrics to the financial investor Silver Lake, which brought an additional 7.7 billion dollars into the group’s coffers in the second half of the year.
The constant return of capital has priority and is an expression of financial discipline, said the new CFO Dominik Asam. The former chief financial officer of Infineon and Airbus has been on board since March and had long-awaited news for shareholders in Orlando: new medium-term targets. They were expected at the latest after the Qualtrics sale and should at the same time reflect the new optimism in the cloud business.
In concrete terms, the SAP management delivered roughly what the financial markets had expected: the loss of Qualtrics is more or less compensated for by the more rapidly growing other businesses. In detail, Europe’s largest software group expects cloud revenues to grow by an average of more than 23 percent to more than 21.5 billion euros by 2025. During this time, sales are expected to increase by 8 percent annually to more than 37.5 billion euros. For the operating result, the group is planning an average growth of 13 percent to 11.5 billion euros. The updated targets show “the dynamism of SAP in this new phase of our transaction,” said CEO Christian Klein. The “strong resilient” growth in the cloud ensures accelerated revenue and operating income growth.
Stock market has changed minds
Two and a half years ago, Klein ordered a change in strategy towards the cloud for the group, which was viewed with skepticism by investors for a long time and led to falling share prices. For six months the picture has turned again, Germany’s most valuable listed group is gaining in value again on the stock exchange. Although the new medium-term goals, together with the share buyback, did not trigger any fireworks, the share price rose by 1.5 percent to 123 euros on Wednesday. This is the first time SAP has been valued at more than 150 billion euros. The new outlook is solid, wrote the investment bank JP Morgan.
In order to drive growth, the SAP management wants to use three trends for itself. Artificial intelligence (AI), networking and sustainability. “In a world shaped by market dislocations, changing regulatory frameworks, and critical talent shortages, our customers keep turning to SAP for solutions to their most pressing problems,” said Klein.
AI cooperations with Microsoft and IBM
And this time he backed up the full-bodied announcements with a whole bunch of collaborations. The Walldorfer want to integrate Microsoft’s AI offer “Copilot” into some programs. Microsoft is the largest investor in the ChatGPT developer Open AI and uses the GPT-4 language model for Copilot itself. At the beginning of May it became known that SAP was even working with IBM on its own “generative AI”, i.e. a program that can create language and texts similar to a human being.
In a preliminary discussion about the trade fair, board member Thomas Saueressig pointed out that SAP had already integrated 130 “AI scenarios” into the programs. SAP is already “the unknown AI giant from Germany”. In fact, the group understands AI broadly, including machine learning or self-improving receivables management. According to Saueressig, the reliability of the data is important for SAP customers. SAP is able to use its large amount of data to improve the quality of the AI and thus gain more confidence in the solutions.
Networking of supply chains as a focus
In addition to AI, Saueressig named the networking of supply chains as a further focus of the future strategy. The model is Catena X, the trading platform for the automotive industry co-founded by SAP. The aim is to offer further industry solutions, for example for the pharmaceutical industry, the manufacturing industry, high-tech and consumer goods manufacturers. In addition, SAP is hoping for new growth opportunities as a result of the new requirements for sustainable management. The group wants to offer its more than 330,000 corporate customers environmental accounting, similar to financial accounting, in order to keep a constant eye on CO₂ emissions across all business processes and value chains at the push of a button.
To ensure the security of the new cloud environment, SAP relies on a new, unusual partner: the Lidl parent company, Schwarz. Its subsidiary XM Cyber has developed a solution to defend against cyber attacks, which SAP intends to use in future in its own IT infrastructure and in the systems of its customers as part of a strategic partnership. The software from the Israeli company Schwarz bought two years ago simulates hacker attacks in order to identify potential loopholes. The retail giant is constantly expanding its IT business. In addition to SAP, according to his own statements, he counts the stock exchange operator Nasdaq, the Bank of England and the Port of Hamburg among his customers.
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