SAP (NYSE:SAP) is set to release its Q1 2012 earnings on April 25th. In its preliminary earnings release, it announced that software-related services revenues were up 12% y-o-y to Euro 2.63 billion ($3.43 billion) this quarter and operating profit was was up 7% y-o-y at Euro 834 million.^[1] SAP competes with players such as Oracle NASDAQ:ORCL), Salesforce.com (NYSE:CRM), IBM (NYSE:IBM), and Microsoft (NASDAQ:MSFT).

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Outlook for 2012

The company has provided an outlook for a strong first half of 2012. It expects software revenues to grow by 15-20% and services by 14-16%. It has maintained its outlook for 2012 with services revenue up 10-13% and an operating profit on the range of 5.05 to 5.25 billion Euros.

In the preliminary earnings release, it stated that revenues were lower than expected due to software revenue from U.S, which was down 4% y-o-y. A robust pipeline of contracts and agreements is expected to provide a strong Q2 as well with growth of 15-20% over Q2 2011, which stood at Euro 838 million. It has long touted its high hopes for HANA – High-Performance Analytic Appliance which processes large quantities of real time data using In-Memory Computing, mobile and cloud ERP as well as core applications – and we expect some updates here.

Trends To Watch

SAP maintains its outlook for 2012 and expects revenue to be 10-12% above 2011 revenues of Euro 11.35 billion. We expect cloud and mobile services to play an important role in the near future. As resource planning and customer relationship software moves to the cloud, we expect competition from Oracle and Salesforce to make for a competitive pricing environment. However, big data analytics with HANA will be competitive advantage for SAP going forward.

Resource Planning Software constitutes 37.2% of SAP’s stock price and is the most valuable division. We expect it to maintain market share in the ERP market and decline to about 28% at the end of our forecast period.

We currently have a $62.05 Trefis Price Estimate for SAP which is about 5% below the market estimate.

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