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SAP: Elliott Management Reveals Investment

SAP CEO Bill McDermott
SAP CEO Bill McDermott

SAP CEO Bill McDermott and the software company's executive team are earning praise from activist investor Elliott Management. But ultimately, the SAP-Elliott relationship hinges on the software company's ability to meet key profitability and business performance goals through 2023 or so.

Elliott Management owns $1.34 billion in SAP common stock, the activist investor revealed today. In a prepared statement, the investment firm said McDermott and the SAP team have the right strategy in place to hit key profit targets by 2023. But the statement also said SAP's stock has been "consistently undervalued relative to its revenue growth, and today’s announcement lays the groundwork for substantial value realization."

SAP Shakeup Shows Anecdotal Progress

SAP CEO Bill McDermott revealed a management and business shakeup in January 2019, though he insists the software company remains in growth mode amid its shift to cloud-fueled recurring revenues. Multiple executive have since departed the company. Some of those executives have since resurfaced elsewhere -- including SAP veteran Robert Enslin emerging as as president of Google Cloud's global customer operations in April 2019.

Amid the changes, the SAP shakeup appears to be performing relatively well. The company's preliminary Q1 2019 financial results, announced today, included a larger-than-expected operating profit forecast for the year. Among the key financial metrics to note from Q1 of 2019:

  • new cloud bookings rose 32 percent;
  • cloud revenue grew 45 percent;
  • software license revenue rose 4 percent; and
  • total revenue rose 16 percent.

The strong results coupled with Elliott Management's statement lifted SAP's stock about 9 percent in pre-market trading this morning.

Cloud Challenges for All

SAP and many of its core enterprise software rivals are working overtime to compete against pure cloud application providers -- such as Salesforce and Workday.

SAP's cloud-centric transformation appears to be outpacing such companies as Oracle and IBM, ChannelE2E believes, though the overall enterprise IT market is struggling to keep pace with Amazon Web Services and Microsoft Azure growth rates.

SAP will reveal more details about its partner and cloud strategy during SAP Sapphire Now 2019, a conference set for May in Orlando, Florida. The rival Oracle OpenWorld 2019 is scheduled for September in San Francisco.

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.