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For the most part, SAP (SAP) sells sophisticated and expensive business software. Needless to say, such offerings are often deferred as budgets get squeezed.
However, after a tough 2009, it looks like SAP is seeing some improvement. In fact, the company expects revenue growth of 4% to 8% in 2010. Moreover, it looks like operating margins will improve because of the cost-cutting efforts. How much? The expectation is for 30% to 31%. Last year's margin was at 27.4%.
But in the latest quarter, SAP did post a 12% decline in profits to $1.02 billion and revenues were off by 9%.
OK, so where will SAP find growth? As should be no surprise, the company likes the prospects in the BRIC countries, which include Brazil, Russia, India and China. There is also expected to be stronger demand in the Middle East and even Africa.
SAP is also taking steps to improve its software. Some of the initiatives involve enhancing the installation process; finding ways to increase return on investment (ROI); and adding mobile capabilities. It also looks like SAP will expand its portfolio by engaging in acquisitions.
Yet, the fact remains that SAP must fend off competition from rivals like Microsoft (MSFT) and Oracle (ORCL). There is also pressure from upstart operators, like NetSuite (N) and Intaact, which offer cloud-computing approaches.
In other words, even if SAP can find growth in 2010, the big problems may be over the next few years as fundamental changes continue to impact the business software space.
Tom Taulli advises on business tax preparation and resolving tax problems. He is also the author of a variety of books, including The Complete M&A Handbook
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