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SAP SEES CLOUD TIPPING POINT Featured

Luka Mucic, SAPSAP this week predicted that its cloud revenue will exceed software revenue by 2018. The company gave a long look at its prospects with several figures about the shape of its business in 2020 during an earnings webcast. Executives provided this view as they discussed the fourth quarter and year ended December 31.

CFO Luka Mucic said the company expects to expand cloud subscriptions by seven times within five years. But SAP also signaled that it is going to digest the large acquisitions of the last few years, including its most recent, Concur. There will be no large deals in the near future and SAP plans to use its cash to pay down debt. The second priority for cash is funding internal development and the third is increasing shareholder dividends. Results for last year were buoyed by support revenue, up 8 percent for 2014 in constant currencies while software revenue was down 5 percent. But making that analysis for 2015 will be difficult as SAP is combining service and support revenue in its financial reporting. “We will not differentiate between premium support and other professional services,” Mucic said.” We are moving forward to combine revenue on one common line. Mucic says the company expects cloud subscription and support revenue between roughly $8.7 billion and $9.3 billion by 2020 with total revenue hitting a range of $30.1 billion to roughly $32.4 billion. For 2014, revenue was about $6.3 billion a rise of 4 percent in constant currencies.

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