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SAP Preliminary Earnings: Enterprise Software Warning?

Luka Mucic

Luka Mucic

On the one hand, SAP continues to enjoy serious momentum in the cloud market. But on the other, the German software giant issued preliminary earnings after U.S. markets closed on Friday. The timing of the statement — along with a line about business in Americas — is raising eyebrows across the investor community.

Simply put: SAP says it has enjoyed “solid execution across EMEA (Europe, Middle East and Africa) and APJ (Asia-Pacific and Japan) but “the Americas got off to a slower start” so far in 2016, according to CFO Luka Mucic.

From there, SAP offered a lengthy list of positive updates. Frankly, the overall business fundamentals sound solid. And SAP insists some contracts that slipped from Q1 are now getting signed in Q2. But there was no ignoring that line about a slower-than-expected start in the Americas. Also of concern: Publicly held companies often use Friday evening updates to soften the blow of negative news.

Still, SAP worked overtime to downplay the Americas issue. In a lengthy quote, CFO Mucic pointed out that Q1 is seasonally SAP’s smallest quarter, the EMEA and AJP regions were healthy, the transition to a cloud model is succeeding, and a “robust” pipeline will keep SAP on track to “achieve its full-year outlook.” Also, new cloud bookings grew 22 percent (25 percent at constant currencies) in the first quarter.

The big question: Is SAP just being overly cautious and covering itself a bit with a weekend statement? Or is this a first sign of larger problems in the enterprise software market.

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