Klein takes sole command of SAP as Q1 results show Covid impact

As Christian Klein becomes sole chief executive officer, SAP announces total revenue of €6.521bn for the first quarter, up 7% on Q1 2019

Christian Klein has become the sole CEO of SAP after fellow co-CEO Jennifer Morgan stepped aside. The news came on the eve of the supplier’s release of its full financial results for the first quarter 2020.

Morgan was appointed co-CEO, alongside Klein, in October 2019 to replace Bill McDermott, who had been co-CEO with Jim Hagemann Snabe between 2008 and 2013.

Before her co-CEO appointment, Morgan had been vice-president of SAP’s cloud business group and had been with the company since 2004. She is leaving the firm with effect from 30 April 2020.

SAP stated: “The current environment requires companies to take swift, determined action which is best supported by a very clear leadership structure. Therefore, the decision to transfer from co-CEO to sole CEO model was taken earlier than planned to ensure strong, unambiguous steering in times of an unprecedented crisis.”

Hasso Plattner, co-founder and chairman of the SAP supervisory board, said: “I am grateful to Jennifer for her leadership of SAP, including all she has done for the company, our people and our customers. This transition comes at a time of great uncertainty in the world, but I have full faith in Christian’s vision and capabilities in leading SAP forward.”

The company’s full first-quarter results confirm the negative impact of the Covid-19 public health crisis shown in the preliminary Q1 results, which were released just before Easter.

Total revenue was €6.521bn, up 7% on Q1 2019. Of that, €2.011bn was cloud revenue, representing 31%. Cloud revenue was up 29% on Q1 2019, said SAP.

The supplier’s flagship enterprise resource planning (ERP) system, S/4 Hana – built on its high-speed, in-memory, columnar database, Hana – attracted 300 new customers in the quarter, SAP confirmed. The total now stands at 14,100 customers, up by 23% on the same quarter last year. Some 6,700 of those are live – 48% of the total.

Of the new customers for S/4 Hana, SAP highlighted, among others, Danone and Brazil-based education company Cogna Educação. Among those that went live were Korean Southern Power and US pharmaceutical Bristol-Myers Squibb. Germany-based MTU Rolls-Royce is now live on a cloud version of  S/4 Hana, said SAP.

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Before the Covid-19 public health crisis began to take a grip on the global economy, SAP announced, at the beginning of February, a five-year stay of execution for its ECC6 ERP system, which was scheduled for end of life in 2025.

SAP’s eye-catching $8bn cash acquisition of 2018, Qualtrix, an “experience management” business, reported revenue of €161m, up 76%.

As noted in the preliminary results announced just before the Easter holiday in the UK and much of Europe, the Covid-19 pandemic took a toll in the third month of Q1. This was revealed, especially, in a significant year-on-year decrease in software licence revenue, as new business was postponed. Software licences and support revenue was down by 3% from €3.386bn to €3.489bn.

Projected total revenue for 2020 is now in a range of €27.8bn to €28.5bn. The original range was €29.2bn to €29.7bn.

New solo CEO Christian Klein (pictured left), 39, said: “Building on last year’s momentum, SAP started the first two months of the quarter with strong momentum and healthy growth… As the unprecedented global challenges presented by Covid-19 emerged, we benefited from the inherent resilience of our business model and sustainable relevance of our portfolio.

“Our emphasis on increasing our base of more predictable revenue and the geographic and sector diversity of our business has strongly positioned us to weather the period ahead and emerge stronger in the new normal that will follow.”

The supplier restated, with the full results, that business activity was “healthy” in the first two months of the quarter, but added: “As the impact of the Covid-19 crisis rapidly intensified towards the end of the quarter, a significant amount of new business was postponed.”

SAP confirmed it is offering free access to some of its products and services to help customers through the crisis, including free access to Remote Work Pulse by Qualtrics and to SAP Ariba Discovery on its procurement network.

It also stated that it is a partner and sponsor of the HPI [Hasso Plattner Institut] FutureSOC Labs, which is donating server power to a research initiative by Stanford University. This initiative simulates movement and folding of proteins that could be relevant for the development of vaccines.

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