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U.S. software sales boost SAP earnings, says CEO

SAP America CEO Bill McDermott said his company's strong 1Q earnings were due in large part to a spike in U.S. software sales -- a clear indication that its attempt to focus on specific market segments has paid off.

SAP's first quarter earnings surged 23%, bolstered by a 45% increase in software sales in the U.S., the company...

reported Thursday.

In an interview with, SAP America president and CEO Bill McDermott attributed the strong sales growth to a reorganization within the company that helped SAP focus on specific market segments.

Bill McDermott, CEO, SAP America

"We've been going to market in 23 distinct industry verticals and I think that's some of our secret sauce," McDermott said. "We've also invested in human capital and changed about 35% of our workforce, which helped us regain our market leadership position."

McDermott said sales of its CRM software continue to rise, helping it to garner the number one position in the U.S. market.

"We have many customers that are switching from their previous best of breed customer to SAP," McDermott said. "Customers want a business process that includes CRM but is not limited to CRM and SAP provides that."

SAP also has been carefully treading water with Microsoft, which it considers a partner, as it continues to pick up share of SMBs with its mySAP Business One and All-in-One software suites.

We've been going to market in 23 distinct industry verticals and I think that's some of our secret sauce.
Bill McDermott
CEOSAP America

"Microsoft has been very supportive of our NetWeaver strategy," McDermott said. "There is plenty of available room for both of us and we understand that there's about 10% of our business where we compete."

During a press conference this morning, the Waldorf, Germany-based software maker said net income rose from $220 million last year to $279 million this year. Software revenue, a closely watched indicator of company performance, increased 5% to $438 million, in line with expectations.

SAP's mySAP ERP software accounted for a large share of software revenue, generating $185 million, or 42% of SAP's total software revenue. In the U.S., a surge in sales of mySAP Business One and All-in-One software suites aimed at small and mid-sized businesses (SMB), also helped bolster revenue.

"We reported another excellent quarter from our U.S. organization, which is demonstrating strong sales execution," SAP chairman and CEO Executive Henning Kagermann said during the press conference. "Many of our SMB customers are new customers who recognize our efficiencies."

One third of orders placed in the first quarter came from new customers, the highest in three years, Kagermann said.

Globally, SAP said it expanded its market share against its four largest competitorscompetitors -- Microsoft, Oracle, PeopleSoft and Siebel Systems -- based on software license sales. SAP's share rose from 51% at the end of March 2003 to 54% at the end of the first quarter this year, the company said.

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The outlook for 2004 remains unchanged, SAP said. Software revenue is expected to increase by around 10%, compared to 2003.

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