SAP A.G. Message Board - Msg: 5374491

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Technology Stocks : SAP A.G.

SAP 240.02

+0.9%

Nov 26 3:59 PM EST

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To: MulhollandDrive who wrote (1867)	7/31/1998 11:48:00 AM
From: Just_Observing	Read Replies (3) of 3424

PSFT's valuation relative to SAP's based on Revenues SAP will start trading in NY on monday. Today the stock is up to 1315 DM. SAP has 105 million shares. Converting into market cap, with a conversion rate of 1.8 DM to the dollar (since it fluctuates around 1.8 though today it's 1.77), the market cap of SAP works out to be about 76.7 billion. SAP's closest competitor in the ERP market is PSFT. Its current market cap is 8.7 billion. PSFT's revenues last quarter were 320.5 million versus 1200 million for SAP. But our friends in Germany have different accounting standards. The WSJ today mentions that SAP will have to reduce next years revenues by 5 to 6% to conform to US accounting standards.I am assuming that it is the deferred revenue concept. So if we include deferred revenue, PSFT's revenues last quarter were 320.5 + 37.5 = 358 million. PSFT's revenues are about 30% of SAP and PSFT's revenues are growing faster. So based on SAP's current valuation, PSFT's stock price works out to be an even 100. Even if we neglect deferred revenue, PSFT's price still works out to be 90. Please remember that we are not assigning a premium for PSFT's higher growth rate or for SAP's larger customer base. Either PSFT is a steal or SAP is way overpriced or both. BTW, I am long PSFT, partly on watching SAP going up. But PSFT has only gone down as SAP has soared. So I have been wrong in this matter. Any thoughts, contrary opinions or otherwise, are welcome.

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