SAP ?accumulate?

21.09.06 - AC Research

LONDON, September 21 (newratings.com) ? Analyst Henning Wagener of AC Research reiterates his "accumulate" rating on SAP (SAP).

According to AC Research?s research note dated September 20 and published this morning, SAP?s competitor, Oracle, released some rather favourable 1Q06/07 earnings results. In that period, Oracle was able to record a $2.77 billion increase in sales to $3.59 billion. At the same time, net profits rose from $519 million to $670 million, or $0.13 per share. Adjusted for nonrecurring items, earnings reached $0.18 per share. With the presented results, Oracle was able to top analysts? expectations in terms of sales and earnings.

Today, SAP?s stock benefited from the positive results declared by Oracle, coming in among the strongest winners on the DAX, the analyst says. Experts are speculating that, in view of Oracle?s rather positive business performance, SAP will be able to present some favourable results as well. AC Research points out, however, that SAP is pursuing a somewhat different growth strategy. While Oracle, through the PeopleSoft and Siebel deals, has been pursuing a very aggressive strategy of acquisition, the SAP management aims at organic growth, while planning certain specific strategic acquisitions. Such a strategy has a far more reduced risk potential and will pay off, especially in times of a weaker market environment, through a reduction in goodwill risks, the analyst mentions. At the same time, AC Research expects SAP to go on with the expansion of its excellent market position over the next few years. Against this background, at the current price level of ?151.23 and with a 2006 P/E ratio of about 25, the company?s stock still appears to enjoy a rather moderate rating.

AC Research reiterates its "accumulate" rating on SAP.