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Why SAP's Executive Shuffle Is Another Good Sign

Stocks in this article: SAP WDAY CRM ORCL IT XRX

NEW YORK (TheStreet) -- SAP's  (SAP) stock is falling today on worries that a higher euro will hit revenue from the company's cloud-computing business and that Vishal Sikka, a key technology executive, is leaving.

But while U.S. analysts see a management in disarray, for Europeans, it's merely a management in transition.

Sikka -- who led development of HANA flagship database product -- is leaving for the dreaded "personal reasons" as American Bill McDermott is expected to be made sole CEO of the German software maker, pending a shareholder vote.

American depositary receipts of SAP were trading at $77.93, down 2.6%, at around 9:45 a.m. on Monday. The ADRs have fallen 10.5% so far this year, compared with a 1% rise for the S&P 500.

Last month, SAP reported first-quarter sales and earnings that both missed analysts' estimates, but in a technological sense, SAP is not doing badly. The shortfall came about because customers are switching to online, cloud-based software, represented by the HANA platform.

Although SAP planned for that, it's happening faster than expected, and rivals in the sector such as Workday (WDAY) and Salesforce.com (CRM) are growing much faster.

Meanwhile, SAP's big U.S. database rival, Oracle (ORCL), is also going through a generational management transition. McDermott, 51, is SAP's answer to Oracle co-president Mark Hurd, 57.

Hasso Plattner, SAP's co-founder who is now 70, is similar to Oracle co-founder Larry Ellison, who is 69. But while Ellison remains Oracle's CEO, Plattner has stepped down from active management, becoming chairman of SAP's supervisory board.

The departure of Sikka may be seen by analysts as a blow, but his key work is done.

HANA is no longer broken out of other SAP results, and the company is rapidly moving all its applications to the cloud-based platform. A blogger working at SAP expects Bernd Leukert, the head of applications, to move smoothly into Sikka's slot. Leukert was named this week to the company's executive board, alongside top marketer Robert Enslin.

McDermott, who is based in SAP's offices near Philadelphia, joined the company in 2002. Before that, he had run Gartner (IT), served as an executive with Seibel Systems and rose through the ranks at Xerox (XRX). He was previously co-CEO at SAP with Danish development head Jim Hagerman Snabe, and his move up was approved last year.

All of this shuffling means to me that SAP now has a deep executive team, based mainly in the U.S., with managers in their 40s or early 50s, and a clear product strategy based on cloud flexibility and HANA. By contrast, Oracle is still loaded with proprietary systems and has aging management.

Right now, I'd rather be SAP.

>>Read More: Europeans Stocks Slip on Lackluster Earnings, Ukraine Violence

>>Read More: Why Jeff Bezos, Amazon Are Now on the Hot Seat

At the time of publication, the author owned no shares in companies mentioned in this article.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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