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Latin America and License Sales Weighed on SAP’s 1Q16 Results


Sep. 1 2020, Updated 11:52 a.m. ET

Software license sales fell 13% in fiscal 1Q16

Previously in the series, we discussed SAP’s recently announced fiscal 1Q16 results. The falling dollar and the delay in signing deals had a major impact on the company’s growth. The delay in signing deals in the US became more significant for SAP, as the Americas contributed 41% toward the company’s overall revenues, the most among all geographies in 2015.

SAP’s software license sales fell 13% in fiscal 1Q16 to 609 million euros after posting two years of growth. Software license sales are closely monitored by industry analysts, as they’re considered a good indicator of future revenue from maintenance fees.

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Lack of macroeconomic stability in Latin America contributed to the decline

SAP stated that the lack of political and economic stability in Latin America (ILF), “in particular in Brazil,” contributed to SAP’s “slower than anticipated” performance in fiscal 1Q16. IBM (IBM) also stated that Latin America continued to prove difficult for the company in fiscal 1Q16. Oracle (ORCL) also earns more than 50% of its revenue from North America and Latin America.

Brazil has been having economic trouble for a long time. That became very evident in 2015. Brazil’s (EWZ) challenges include spiraling unemployment, high inflation, political turmoil, stagnant economic growth, high fiscal deficit, deep recession, and downgrades from rating agencies. The country’s economy is continuing its downturn due to a slide in commodity prices and political and economic instability.

SAP reported that it saw “double-digit software revenue growth” in fiscal 1Q16 in China (FXI).

Fiscal 2016 expectations

In fiscal 2016, SAP expects cloud subscription and support revenue to be between 2.95 billion 3.05 billion euros while it expects operating profit to be in the 6.4 billion–6.7 billion range.


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