SAP has reported total Q2 revenues of euro 2.42bn, up 10% year-on-year. Growth at constant currencies was 14%. Revenue consisted of software licences of euro 715m, up 18% (21% at constant currencies), support services of euro 948, up 13% (16%), subscription and other software related services of euro 44m, up 33% (36%), and stable professional services revenue of euro 688m. Operating income stood at euro 577m, up 10% and net income at euro 449m, up 8% over the previous year. SAP generated an operating margin of 23.8%, slightly down from 23.9% year-on-year.

Cornelia Wels-Maug, principal analysts at Ovum, commented: “The set of results comes as a belated birthday present for CEO Henning Kagermann who turned 60 this month: SAP grew despite a strong Euro with double-digits (at least in constant currencies terms) in Q2 as well as in H1. And it mainly grew organically, as opposed to its rival Oracle who has been on the acquisition trail for some time.

“In Q2, EMEA grew 12%, Asia-Pacific/Japan 25% and the Americas by 12% in constant currencies, marking the fact that the Asia-Pacific/Japan region has now become the driving force behind SAP`s new licences sales. As the Chinese and Indian economies grow, and their trade with other countries rises, so does their need for software to run those processes. As a result, SAP claims to have increased its share of the global market for core enterprise applications and related services three percent points to 26% in 2006, still well ahead of arch rival Oracle`s share of 15.5%, and Microsoft at 3.1%.

“While we are always suspicious of any single vendor`s market share figures, because they`re sometimes constructed to show that vendor in a favourable light, the relative shares of Oracle and SAP seem about right; however, the share of Microsoft is grossly under-estimated probably because of its indirect sales model.

“SAP had a very slight dip in its EBIT margin which is due to SAP investing  euro50 million in its new mid-market software product (codenamed A1S) during the first half of this year. Those investments will not translate into revenues and profits until 2008 at the earliest, but meanwhile SAP plans to spend another ?250 to ?350 million in this area over the next seven quarters. This represents a major cornerstone in SAP`s overall growth strategy, and one not without risks.

“Overall, SAP left its earnings guidance unchanged, predicting revenue growth in the range of 12-14% and an operating margin in the range of 26-27%. A major uncertainty is the potential payment it may have to make if Oracle`s legal action over TomorrowNow`s use of Oracle`s information. One thing that is for sure is that Oracle will vigorously press its case.”