I saw this post on Yahoo. Although I thought SAP was a great situation, this post brings up some very interesting points.
I read it carefully and thought you might want to also.:
A focused opinion
by: PAS9999
935 of 937
I think it is about time people start to see reality with SAP after their huge success over the years
in the enterprise market.
The ERP market spending growth is coming to a substantial slowdown which started in the summer
of 1998, lasting through at least year 2000. I think the growth rates will be well below
estimates, so everybody will be subject to a disappointment (you are seeing quite a few already).
Here are the underlying fundamentals of SAP that most people are ignoring for now.
- Paul Wahl, CEO of SAP America resigned 2 months ago to join a start-up.
- Jim Maikranz, Senior VP of Sales resigned to join JD Edwards recently.
- Mike Joya (might be misspelled), Head of Human Resources software, is resigned very recently
to join Peoplesoft.
-SAP admitted recently that they are losing a lot of key "sales closers" to competitors and
start-ups.
These are the people who knows SAP better than anybody and they are leaving the Co. These are the
initial signs you see in a company before you see a shortfall in their sales and earnings.
Recent fundamentals:
Goldman Sachs' analyst met with the management this week, and following are "his verbatim
comments":
There was not even any sort of positive news from his note even though the guy is trying hard to
find a reason to keep his "Recommended list" rating. But I think the guy is a follower as oppose to a
leader and he will downgrade when SAP disappoints.
- "SAP is NOW seeing some negative impact from Y2K"
- " Revenue growth could slow from either the 40% SAP officially expects and our 45% estimate"
- "We expect 7,000-7,200 new hires in 1998." As of 9/30/98 they hired 6,000 people this
year, so 1000-1200 new hires this quarter which is a sharp slowdown from previous quarters
which I don't think they will hire not even that many.
A recent Lehman report suggested that a poll among some of their
relatively top clients suggests 0% growth in 1999 in SAP related spending over 1998. This is
well below estimates.
Eventhough SAP has been a very well run Co, they will fall into problems in the US for the
following reason:
They are not compensating their top people enough, so the key people goes elsewhere and take their
connections with it. This is the same problem Oracle fell into and still trying to correct competing
Peoplesoft. The correction is a sizable hit on the operating margins which means lower
profitability. Look at Peoplesoft's and JD Edwards operating expense as a % of sales. They have the
highest in the industry. They pay more to the employees, but they keep the good employees and
that's why they have the lowest turnover in the industry. So when a experienced employee gets an
offer, PSFT pays higher than ORCL and SAP, so the good ones will go there and will stay there. It
will hurt PSFT's profitability in the short run, but good employees do good sales and it will mean
higher sales and market share gains in the long run. ORCL could pay similar to SYBS and IFMX
employees on the database side and keep and steal good employees from them because of their
mindshare and product, but they forgot one thing on the apps. side: they don't own the market like
they do in the database.
By the way, this is an important SAP problem as far as losing marketshare (which consistently
they have been to PSFT and JDEC). The bigger problem is the substantial slowdown in the industry
across the board which won't even let PSFT(already happened) and JDEC escape (best run
companies).
Last quarter SAP's license growth (excluding maintenance, unlike they report) was close to flat
which is a very bad sign.SAP trades around 56 times 1999 earning which will be too high in my
opinion. Estimates will be cut and guidance will be lowered going forward and stock will be down
substantilly.
You have been warned. |
