BURLINGAME, Calif. --
CEO Henning Kagermann says that his giant software company is on track to grow license revenue by as much as 17% this year, and he confidently predicted that SAP will dominate the largely untapped midmarket within a few years.
Kagermann, on a week-long visit to California's Silicon Valley along with his entire board of directors and 80 top executives, used a press conference to dismiss
$18 billion attempt to become the leading provider of business software applications, the crown now worn by SAP.
"We are the market leader. It's no surprise that a distant No. 2 player wants to catch up," he said.
SAP, the CEO said, has chosen to focus on organic growth, rather than buying other large players as Oracle has done. Also, Kagermann indicated that his strategy is unlikely to change.
"We are not growing organically because we had no other choice. We think it is a better strategy." Kagermann's remarks were seconded by board member Leo Apotheker, who said that organic growth results "in a higher return to shareholders."
The German software maker has made numerous smaller acquisitions, the most recent being privately held
, which sells business software for supply chain, customer relations, produce life-cycle, and supplier relations management.
Although its acquisition strategies are markedly different, Oracle's new strategic direction -- a focus on key industry segments such as financial services, retail and health care -- puts the two giants on a collision course.
Indeed, in an interview this week with
, Oracle co-President Charles Phillips said "SAP is largely an administrative systems company, that is, financial systems. We have an enormous head start in retail and banking."
Phillips also said that "Oracle is becoming the leading supplier of application software to many companies" and has begun to displace SAP from a significant number of accounts.
Not surprisingly, SAP sees it differently, and claims to have taken about 7 points of market share away from Oracle last year.
With SAP in the quiet period before earnings, Kagermann said little about his expectations for future growth, other than to reaffirm the company's early guidance that software revenue will grow by 15% to 17% this year and that pro forma operating margins should reach 30% by 2007.
By 2010, he expects his company to derive 40% to 45% of its software revenue from the midmarket, an important goal as new enterprise customers become harder to find.
"In the enterprise, it is about share of the wallet," or selling more to established customers, Kagermann said, adding that there weren't many more new accounts the company could get.