Author Archives: smgAdmin

SAP’s Cloud-Computing Sales Keep Soaring

German business software giant SAP (NYSE: SAP) reported first-quarter results early Wednesday morning. The company also presented a strategic review under the more poetic banner of accelerating operational excellence. Investors were quick top embrace this one-two punch, sending SAP’s share prices as much as 13.4% higher. The stock closed Wednesday’s trading session at a 12.3% gain.

Here’s a closer look at SAP’s big news.

SAP’s first-quarter results: The raw numbers

Data source: SAP. Financial figures were translated from euro to U.S. dollars at the average rate of $1.14 dollars per euro in Q1 of 2018 and $1.23 per euro for the Q1 2019 period.

What happened with SAP this quarter?

  • Cloud computing is the core of SAP’s operations these days. Order bookings for SAP’s cloud services grew 26% in constant currencies. The company collected $1.37 billion of cloud-based revenues in this quarter, a 37% year-over-year increase. Software license sales rose a mere 4%. Recurring revenues, such as subscription fees for cloud services, accounted for 72% of total sales. The recent $8 billion acquisition of cloud computing start-up Qualtrics played into these growth rates.
  • The company’s bottom-line earnings were hit hard by a $777 million restructuring charge and other one-time costs. Adjusted earnings, which back out these unusual line items, rose 24% to $0.79 per share.
  • Separately, SAP started a comprehensive strategic review. A special board committee was appointed to find areas for improvement as SAP seeks to “accelerate operational excellence across all functional areas of SAP with a focus on growth, innovation and efficiency.” The results of this review should be available by November. SAP is not planning to kick off any further restructuring projects here, but that’s why they play the game — you just never know until the work has been done.
  • Activist investor firm Elliott Management also disclosed a $1.35 billion ownership stake in SAP. In that disclosure, the firm also said that they support SAP’s operational review. In Elliott’s view, SAP’s stock is “clearly undervalued” against the company’s dramatic revenue growth and the board is taking steps to unlock shareholder value here.
Two smiling business people share information on a laptop screen.Two smiling business people share information on a laptop screen.

Image source: Getty Images.

What management had to say

SAP’s strategic review is not the usual panic reaction to a failing business model. This time, it’s more of a value-boosting exercise. That’s the impression I get when listening to CEO Bil McDermott in the first-quarter earnings call.

“Let’s step back for a moment and look at the big picture for SAP,” McDermott said. “The facts are, we have an incredibly strong core business with a market-leading retention rate in our support business, demonstrating tremendous customer loyalty. We have a high-growth cloud portfolio powered by some of the best MA in the enterprise software industry. These cloud businesses have years and years of runway for continued growth. We have an incredible franchise, with 72% of our revenues now coming from highly predictable revenue streams. This is due to our strong cloud and solid on-premise support businesses.”

Looking ahead

Based on this quarter’s results, SAP left its full-year guidance unchanged. As a reminder, cloud revenues should land near $6.0 billion (assuming stable currency exchange trends) for a roughly 36% year-over-year boost. Total cloud and software sales should rise approximately 9% at constant currencies, stopping in the neighborhood of $19.8 billion.

Beyond that, SAP hopes to triple its cloud revenues over the next five years while gross margins should expand by roughly one percentage point per year. By the end of that “Ambition 2023” period, SAP aims for total annual revenues near $31 billion (up from $20 billion in 2018) with adjusted gross margins for the cloud business landing near 75%.

More From The Motley Fool

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

National Cyber League Sees Record High Spring Season Registration

Unlike other CTF’s that can throw you immediately into some very difficult challenges, the NCL has gone to exceptional lengths to provide a ‘gym’ that emulates the competition itself and serves as a place to practice prior to the event start.

As the demand for knowledgeable cybersecurity experts grows, so too does the need for quality training. The National Cyber League (NCL) provides intense preparation through addicting virtual, game-like competition, which was reflected in its record high registration for the Spring Season.

This season, NCL had 5,026 registrants, up from 3,350 in 2018 and 1,891 in 2017. This growth reflects how the NCL has become popular in the information security education community. The NCL is an experience and a challenge for high school and college students. It is designed for both rookies and accomplished players to expose them to real-world cybersecurity scenarios to see how their skills stack up. This offensive and defensive, Capture the Flag (CTF)-like, virtual competition uses relevant tools and real scenarios to test participants’ cybersecurity talents. NCL does not teach skills but forces players to teach themselves how to solve challenges. The game has revolutionized how cybersecurity is learned. By the end of the competition, players receive Scouting Reports to assess their strengths and weaknesses in order to continue developing their skills.

NCL is unique because it offers events in “seasons” so that players can build their skillsets through gym training, a preseason and individual and team game events. The individual game allows students to face-off but still learn and have fun while the team game allows players to combine strengths and weaknesses and learn from each other to complete challenges. NCL is a standout arena for students to grow while pursuing a career in cybersecurity.

“If you are curious about cybersecurity, I highly recommend participating in an NCL season. It was through my first season with the NCL that I discovered a career path I am truly passionate about. What I discovered was a community that has a vested interest in teaching and supporting one another. This is also evident in the manner in which it designed their CTF events,” said Whitney Kahn, an NCL participant. “Unlike other CTF’s that can throw you immediately into some very difficult challenges, the NCL has gone to exceptional lengths to provide a ‘gym’ that emulates the competition itself and serves as a place to practice prior to the event start. The gym provides introductory materials and challenges, ample explanations and serves to build confidence for the impending competition. This design also contributes to building your confidence and capability in each of the areas that you are tasked with over the course of each stage of the competition from season to season.”

For more information, visit http://www.nationalcyberleague.org.

About National Cyber League

The National Cyber League (NCL) provides a cybersecurity training ground in a high-fidelity simulation environment that requires participants to work individually in the Regular Season and in teams during the Postseason events. The NCL events are designed for participants to solve real problems with actual deadlines under time, technical and resource constraints. The NCL assists higher education institutions across the country in student preparation for its events and also for professional certifications. Companies seeking qualified talent can access the NCL’s Scouting Reports to evaluate potential cybersecurity professionals who have demonstrated skills in the NCL events. The NCL is where cybersecurity is a passion for students, faculty and the workforce. To learn more, visit nationalcyberleague.org.

Microsoft Again Beats Street On Cloud Computing Strength (NASDAQ:MSFT)

Microsoft Corporation (NASDAQ: MSFT) reported a strong third-quarter earnings beat Wednesday on the back of continuing strength in its cloud computing business, coming in at $1.14 per share to top analysts’ estimates by 14 cents. The company also reported quarterly sales of $30.6 billion, beating the Street estimate of $29.84 billion by more than 2.5 percent.

Earnings per share were up 20 percent over the quarter a year ago, while revenue beat last year’s second quarter number by 14.1 percent.

Microsoft’s cloud business, known as Azure, again drove the company’s success and CEO Satya Nadella acknowledged the company’s present is now reliant on cloud computing – much different than its software-based past.

“We are accelerating our innovation across the cloud and edge so our customers can build the digital capability increasingly required to compete and grow,” Nadella said in a press release.

“Demand for our cloud offerings drove commercial cloud revenue to $9.6 billion this quarter, up 41 percent year-over-year,” added Amy Hood, executive vice president and chief financial officer of Microsoft.

Highlights

  • Operating income was $10.3 billion and increased 25 percent.
  • Net income was $8.8 billion and increased 19 percent.
  • Diluted earnings per share was $1.14 and increased 20 percent.
  • The company returned $7.4 billion to shareholders in the form of share repurchases and dividends in the quarter

Microsoft started this week as the second biggest company in total market capitalization at about $950 billion behind Apple (NASDAQ: AAPL) at $965 billion.

Price Action

Microsoft’s stock closed at $125.01 Wednesday but shares were trading up nearly 2 percent at $127.53 after hours.

Related Links

Clouds Part: Amazon And Microsoft Cloud Businesses In Focus Ahead Of Earnings

Microsoft Reports Slight Q2 Earnings Beat