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SAP reports strong quarter, plans to launch hosted CRM

SAP continues to widen the market share gap between it and its rival Oracle Corp. CEO Henning Kagermann also confirmed plans to launch a hosted CRM product.

SAP reported strong second quarter license sales indicating it continues to take market share away from rival Oracle Corp.

We will do smart acquisitions focused on product innovation.
Henning Kagermann,

Software license sales rose to $695 million in the second quarter, a 16% increase over the same period last year. SAP reported a 27% increase in sales in the United States. In Europe, license sales grew 8%.

"The enterprise service architecture we think is the next big thing for IT," said SAP CEO Henning Kagermann. "SAP is in very strong position, because we're delivering first to the market."

In comments to financial analysts Thursday, Kagermann also indicated the company plans to launch a hosted CRM product later this year.

Sales of SAP's mySAP CRM software were down in the second quarter and some financial analysts believe it could have been the result of pressure from hosted CRM provider, But Kagermann disputed the assertion, saying a lag in CRM software sales in one quarter does not indicate a trend.

"We are in preparation," Kagermann said of SAP's hosted CRM plans. "You'll see something soon. We're making our business models right at this time."

SAP said it signed about 2,000 contracts in the quarter. Its major deals were with Home Depot, Procter & Gamble, Amgen, and Fuji Photo film.

The company said it had won more market share in the quarter from Oracle, Siebel and Microsoft. SAP's market share in the U.S. remained steady at 41%. Its global market share stands at 58%.

SAP's new Safe Passage Program, launched this year to win companies over to SAP from Oracle Corp., has been slowly gaining traction since January, according to Leo Apotheker, a member of SAP's executive board who oversees global sales,

Apotheker said 21 safe passage deals were signed in first half of year, including luggage manufacturer Samsonite and drug maker Amgen, which have both signed deals to migrate over to SAP. The program targets retailers, small and medium sized businesses and JDE and PeopleSoft customers with incentives and credits toward a mySAP ERP license.

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Compare SAP's second quarter results to its first quarter

SAP reorganization also key to market share growth

Mid size and smaller deals also accounted for larger share of overall revenue, Apotheker said. SAP signed 2,400 new customers to licenses in the SMB segment in first half of 2005.

The increase in market share comes despite Oracle's buying spree. Oracle spent $10.6 billion in December to acquire PeopleSoft and in March outbid SAP with a $670 million offer for Retek Inc, which makes business software for the retail industry.

SAP also said it plans to grow organically meaning it will hire new staff rather than acquire large businesses. The company plans to increase its target for new hires this year by 50% to 4,500 more employees.

But Kagermann did not rule out any future acquisitions.

"We will continue to do acquisitions," he said. "We will do smart acquisitions focused on product innovation."

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