Wednesday, October 28, 2009

SAP -- Do They Understand Sales Cycles

SAP (SAP) reported decreased revenues and increased profits.

We are pleased to report another quarter of increasing margins despite a decline in revenues. This demonstrates our continued success in maintaining tight cost controls," said Werner Brandt, CFO of SAP. "While we are seeing signs of stabilization in the general environment, the market remains difficult. Third quarter software and software-related service revenues came in lower than we expected mainly because of a particularly challenging environment in the emerging markets and Japan."

So the CFO is admitting difficulty in hitting the numbers because of emerging markets and Japan. The sales cycle for SAP has a very long tail. You do not suddenly wake up and say lets install SAP. So what has happened with their customers and qualified prospects resulting in revenues sliding. At the same time they have the incredible foresight to reduce costs so as maintain profits.

Not exactly sure if management is really explaining the issues or just waving its hand over the globe and saying we have a problem overseas somewhere. If they understand the problem they are not discussing it publicly.