I had no idea SAP
But when, in yesterday's earnings report, he characterized 2007 as a "good year" for his company and said his team delivered an "outstanding performance," investors fell for the mind trick. Forget that profits were down 6% in the fourth quarter. Nothing to see here, Mr. and Mrs. Oddlot. Buy, you must.
Or should you? Good news first: Revenue was up 10% in Q4 and 9% for the full year. And executives say that SAP's share of the Core Enterprise Applications market grew to 28.4% in 2007, up from 26.9% for the trailing 12 months ended in September.
Never mind that faster-growing Oracle
Even if those market-share estimates are correct, SAP paid dearly for growth. Operating margin declined from 27.4% in 2006 to 26.7% last year. Fourth-quarter operating margin dipped from 36.9% to -- gulp -- 34.3%.
To be fair, SAP said in its press release that operating margin will improve slightly -- 10 to 70 basis points -- after excluding charges from its $6.8 billion acquisition of Business Objects
Perhaps it will as time passes. Business Objects is no small fry, and SAP's primary rival (Oracle) isn't exactly a heavyweight in the increasingly important business-intelligence business.
For now, though, SAP is in the middle of a transition that, apparently, has its salespeople offering discounts on its core business software as its techies dabble with the software-as-a service concept in an effort to reignite hypergrowth.
"Outstanding performance"? Learn the ways of the Force, you must, Mr. Kagermann.
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Fool.com and Rule Breakers contributor Tim Beyers owned shares of IBM and Oracle at the time of publication. Find his portfolio here and his latest blog commentary here. The Motley Fool's disclosure policy says that you don't need to see its identification. You can go about your business. Move along.