Tide turns for enterprise apps vendors
Worst is over?
The quarterly business results are coming in and, for enterprise application vendors, it looks as if the worst is over, writes Fran Howarth of Bloor Research. Although we are not likely to be seeing the high growth rates common two to three years ago for some time, the business climate appears to be steadily improving.
SAP reported its results last week and, although its results were relatively flat, German-based SAP is one company that is particularly affected by currency variations. On a constant currency basis, its results actually showed a 7% increase over the period one year ago.
But what is more interesting is that software licence sales in the US market jumped 35 per cent in the quarter. Not all Europeans like to admit it, but the economies of Europe generally follow the fortunes of companies in the US, albeit with a lag. When the world economy started to falter in 2001, many Europeans initially took a "we can hold our own trousers up" attitude and thought that European economies were not necessarily likely to dip as well. How wrong that was. But, if European economies do tend to follow the general trends of the US, then there appears to be a fair amount of hope that the clampdown on enterprise technology budgets will ease over here as well. According to SAP, the better results in the US were owing to higher deal closure rates than previously.
Although business is still not exactly booming - and SAP will continue to be affected by the strength of the Euro for some time to come - the efforts that the vendor has taken, in common with most companies, to set its own house in order are allowing it to increase its operating margins to reach a good level at 25 per cent. These improvements will continue to be felt and, along with a more buoyant market for software sales, SAP has been able to increase its guidance for the coming months.
PeopleSoft has also released its results this week. Three months ago, when it last reported results, many were taken by surprise at the good results that it was able to achieve. Faced with a hostile takeover bid from rival Oracle, many industry watchers had expected its business to be adversely affected by the uncertainty caused as end-user organisations were expected to delay making decisions to purchase PeopleSoft products until the outcome of Oracle's bid became clear. But PeopleSoft was able to confound all expectations, leading some analysts to ponder on how it had been able to pull rabbits out of a hat.
But PeopleSoft has again surprised with the strength of its business results. For the quarter just gone, its overall revenue figures are more than 5.5 per cent higher than even the very top end of the guidance that they had previously issued. Overall, even with the acquisition of J.D. Edwards during the quarter and the charges related to that, third quarter GAAP results were considerably better than expected.
Although these two vendors do not represent the entire spectrum of the enterprise applications market, they are certainly companies that are watched to gain some idea of how the market is progressing in general. Other results are trickling in and many are showing improved performance, however slight. It looks as if we have turned the corner.