TechnologySAP falters in face of cloud targets

SAP falters in face of cloud targets

SAP drops margin ambitions in favour of cloud sales

SAP falters in face of cloud targets

EUROPE’S BIGGEST software group SAP has cut profit forecasts and pulled back from a target for higher margins, with its push to deliver products through the cloud likely to have a chilling effect on profits until 2018.

SAP, along with many of its competitors, have been involved in a hard-fought race to provide cloud products to accounting firms and businesses, but the German company may now have to row back on its long-promised margin gains that had been such a draw to investors.

SAP said it expects operating profit in 2017 to be between €6.3bn (£4.82bn) and €7bn, with revenues of €21bn-€22bn.

In January 2014, SAP pushed back its target to achieve a 35% margin by 2015 for two years, and instead is focusing on driving up cloud sales.

“We are in a market-share game,” SAP chief executive Bill McDermott told Reuters. “If you can combine a healthy cloud-growth business with high renewal rates, meaning a customer is very loyal … you can really expand the margin.”

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