Is SAP Getting an Edge on Oracle?
SAP has lagged Oracle for some time. But the company is finding ways to get traction, as seen with the upbeat fourth-quarter earnings report.

The heated battle over enterprise software between Oracle (NASDAQ:ORCL) and SAP (NYSE:SAP) just got cranked up a notch.

A few weeks ago, Oracle announced a dismal earnings report. It was Oracle’s biggest miss in a decade, and the stock plunged 13%. Oracle indicated that it was seeing delays on software purchases. The culprit? Yes, the uncertainty in the global economy, especially in Europe. Do CEOs really want to make big commitments on info-tech spending right now?

Apparently they do. Just look at SAP’s earnings report, which came out today. Its fourth-quarter pretax earnings climbed 10% to $2.28 billion, and sales rose by 12%. In all, SAP beat its 2011 guidance.

True, the company won’t announce its full report until Jan. 25, when we’ll also get its 2012 guidance. Yet investors seem upbeat: SAP’s stock rose nearly 3% early Friday on the earnings news.

It certainly helps that the company provides mission-critical software, known as enterprise resource planning (ERP) applications. These help with business operations such as human resources, payroll, inventory and so on.

SAP has also gotten traction with other products, like Hana. It provides real-time analytics, which is becoming a key for competitiveness.

And yes, SAP has been getting aggressive with acquisitions. In fact, it recently agreed to shell out $3.4 billion for SuccessFactors (NASDAQ:SFSF). That company is a leading provider of cloud applications, which is transforming the software industry.

The deal brings more than just strong technology, though. It’s also a way to help change SAP’s corporate culture — to get more focused on innovation. This will be critical as SAP competes with companies like NetSuite (NYSE:N) and Salesforce.com (NYSE:CRM).

Oracle is also making moves into the cloud, such as its $1.5 billion deal for RightNow. And other transactions are likely.

However, Oracle may be suffering from its investment in the hardware business. After all, its 2009 acquisition of Sun Microsystems for $7.4 billion now looks like a dud. Those servers appear to be just another low-price commodity.

So while SAP has lagged Oracle over the years, this may be changing. SAP is definitely showing that it can find ways to grow — and more important, its seriousness about cloud computing should help keep up the momentum.

Tom Taulli runs the InvestorPlace blog “IPOPlaybook,” a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli. As of this writing, he did not own a position in any of the aforementioned stocks.


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