In a positive sign for business software makers, German-based giant SAP AG (NYSE:SAP) announced that its first look at Q3 numbers for software sales show revenues the same as last year and the prior quarter. Shares jumped as much as 13% in morning trading.
Yes, shares jumped even though SAP projects that Q3 sales of its mega-software for businesses -- enterprise software in industry parlance -- will be flat. It isn't "growth," but it beats year-over-year declines of -1.7%, -8.3%, and -7.9% for the last quarters in dollar terms.
Many have predicted that as computer software and hardware quarterly numbers show improvement over the prior year, stock prices will respond positively. Those investors that looked ahead with SAP have reaped rewards. The stock has destroyed the market averages since its $9.99 multi-year low last October, with a 270% gain through mid-day today.
Enterprise software competition is intense, with companies competing to install their products and lock customers in to licensing and service contracts. Corporate information technology managers have little flexibility to spend these days and must deliver return on investment (ROI). To achieve this, the giants -- SAP, Microsoft (NASDAQ:MSFT), and Oracle (NASDAQ:ORCL) -- offer not only their own huge systems, but integrate niche products from pure-play companies and promise that ROI. These include products from growing business intelligence software specialists Cognos (NASDAQ:COGN), Business Objects (NASDAQ:BOBJ) (which purchased competitor Crystal Decisions this summer), and MicroStrategy (NASDAQ:MSTR), who also market their products directly.
Predictions are that in order to boost growth, the big three will buy more and more of these and other niche players rather than invent or develop in-house competing products. Oracle's hostile bid for PeopleSoft (NASDAQ:PSFT), which itself swallowed JD Edwards, is but the harbinger.
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