SAP's Q4 Shows Improvement, Adds Microsoft Azure Alum As Marketing Chief

SAP said its fourth quarter will be better than expected as the company aims to shift its customer base to the cloud.

The enterprise software giant said that its fourth quarter cloud revenue will be up 8% under international accounting standards (IFRS), but software license revenue will be down 15%.

In October, SAP outlined a sweeping plan to move to one data structure and aggressively move customers from licenses to cloud subscriptions. SAP also launched an IPO for Qualtrics.

SAP will report its full results Jan. 29.

For 2020, SAP said its non-IFRS operating profit will be at the high end of guidance and operating cash flow will be about €7.0 billion.

As for the 2021 outlook, SAP's guidance was muted to reflect efforts to move customers to the cloud. For 2021, SAP said it expects €9.1 billion to 9.5 billion non-IFRS cloud revenue at constant currencies and €23.3 billion to 23.8 billion non-IFRS cloud and software revenue.

Jefferies analyst Julian Serafini said that SAP's 2021 outlook looked "achievable." JMP Securities analyst Patrick Walravens said:

We continue to believe that SAP will benefit from a product upgrade cycle as its massive 30,000 customer ERP base moves to S/4HANA – and that benefit will be greater and longer lasting if as many of those new S/4HANA customers as possible are hosted in the cloud.

CFO Luka Mucic said the fourth quarter improved sequentially. Mucic said in a statement:

SAP's business performance sequentially improved in the fourth quarter even as the COVID-19 crisis persisted and lockdowns were reintroduced in many regions. Cloud revenue in the fourth quarter continued to be impacted by lower pay-as-you-go transactional revenue, mainly Concur business travel related. However, continued high demand for e-commerce, Business Technology Platform, and Qualtrics solutions along with several competitive wins – particularly for SuccessFactors Human Experience Management – produced a strong finish to the year for SAP's cloud business. SAP also saw strong early take up of its new holistic business transformation offering among pilot customers, contributing to the cloud performance in the quarter.

Separately, SAP said it appointed Julie White and Scott Russell to its executive board. White will be chief marketing and solutions officer and leaves Microsoft where she led product marketing for Microsoft Azure and Office 365 previously. Also: 

• Corporate Vice President Brad Anderson is leaving Microsoft for Qualtrics

Russell, who led SAP's Asia business, will now lead SAP's Customer Success organization.