SAP Shares Slide After 2020 Cloud Outlook and Mixed Q4 Earnings

SAP nudged its 2020 cloud revenue forecast lower as competition in the growing computing space intensifies and new CEOs Jenifer Morgan and Christian Klein enter their first full year at the helm of Europe's biggest tech company.
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SAP SE  (SAP) - Get Report shares slumped to the bottom of the German market Tuesday after the enterprise software group posted a mixed set of fourth quarter earnings and forecast 2020 sales from its burgeoning cloud business that were below analysts's forecasts.

SAP, Europe's biggest tech company by market value, said non-IFRS earnings for the three months ending in December rose 21% from last year to €1.81 per share, firmly ahead of the Street consensus forecast. Group revenues, while rising 8% from last year to €8.04 billion, fell just shy of analysts' estimates.

SAP said it expects 2020 cloud sales to rise between 24% and 28% from last year to between €8.7 billion and €9 billion, compared to a prior forecast of €8.6 billion to €9.1 billion. Overall revenues should rise 6% to a range of €29.2 billion to €29.7 billion, SAP said, while operating profits jump between 8% to 13%, putting the bottom line in the region of €8.9 billion to €9.3 billion.

“SAP’s strategy to be the experience company powered by the intelligent enterprise is resonating," said co-CEOs Jenifer Morgan and Christian Klein. "More and more customers are turning to SAP and Qualtrics to close their experience gap. At the same time, we continue to see strong adoption of S/4HANA as the core of the intelligent enterprise across all deployment models."

SAP shares were marked 1.8% lower in Frankfurt following the earnings release, and changing hands at €120.28 each at the bottom of the DAX performance index. The group's U.S.-listed shares were marked 2% lower in New York trading to change hands at $136.25 each. 

The American-born Morgan, as well as German national Klein, took over from Bill McDermott late last year after the high-profile CEO stepped down after nearly a decade at the helm of the he enterprise software group.

One of McDermott's key acquisitions -- the $8 billion purchase of Qualtrics International -- was designed to turb-charge the group's cloud business as it competes with U.S. rivals such as Salesforce Inc.  (CRM) - Get Report and Workday Inc.  (WDAY) - Get Report

Last year, activist investor Elliott Management unveiled a $1.3 billion stake in the software group on the same day McDermott published aggressive near-term profit targets for the group, although he later denied suggestions they had any impact on his decision to step down in October to ultimately take the helm at cloud rival ServiceNow Inc.  (NOW) - Get Report