SAP and Microsoft results illustrate the difference between leading and lagging in the Future Economy

Summary

SAP and Microsoft both announced quarterly results this week. SAP’s results were largely down across the board—overall revenue, operating profit and even cloud. Its forecast was also revised downward. The German giant’s shares fell significantly since the announcement as a result.

Meanwhile, Microsoft’s growth continued on the back of Azure and its commercial cloud business as it once again beat estimates. Quarterly revenue was up 12%, operating income increased 25% and net income increased 30%.

Report

Analysis

The two technology giants could have both been well-positioned to reap the rewards of the great digital acceleration. But their trajectories couldn’t be more different as only one, Microsoft, is riding the wave.

The prime reason is simple. SAP’s business is still transitioning away from traditional IT infrastructure and fighting to catch up in the cloud game while Microsoft is an undisputed leader. Microsoft’s customers are rapidly transitioning to Azure and expanding their presence there, while many of SAP’s customers appear hesitant to migrate to the German company’s cloud offering which is still being developed.

The Conclusion: Good digital transformation is a difference maker now more than ever. And as we have highlighted before, leading on cloud and digital transformation is not just a ‘technology company’ issue, but a universal one. Home Depot has demonstrated this as a retailer. And an industrial player like Cyberhedge 5-Star-rated Ferguson continues to prove that a well-managed digital transformation pays dividends in both market outperformance and financials. Ferguson’s year-end results in July showed that it weathered the downturn better than most industrial and broader-based European and UK peers, and its share price is in a stronger position than at any point in the past five years. As we predicted in May, strong cyber governance and a well-executed digital strategy has positioned Ferguson to take advantage of the market recovery better than worse-rated peers.

SAP and Microsoft tell a very clear cloud story, but the broader ‘good versus bad’ digital transformation story is playing out across every sector in every major market globally.

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Denis Bolshakov

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