Rejuvenated 2019: SAP Capital Markets Day
The SAP community is worried because of SAP's actionism. Besides Abap, NetWeaver, Hana and S/4, trust and consistency are the most important currency in the SAP community.
Being accountable once a year to the press when the balance sheet figures are published, once to the financial community at the Capital Markets Day on Wall Street, and once to the shareholders at the Annual General Meeting in the SAP Arena in Mannheim - that should be more than enough in a stable, long-lasting community built on trust.
CEO Bill McDermott and CFO Luka Mucic hosted the second SAP Capital Markets Day this year in New York City. Why? A very interesting report by Daniel Stelter in Manager Magazin* could provide an answer.
Stelter is the founder of Beyond the Obvious, a discussion forum specializing in strategy and macroeconomics, and a successful management consultant.
In Manager Magazin, Daniel Stelter asks the question: Will General Electric trigger the next financial crisis? When you read the text, parallels to SAP come up involuntarily.
"Under the leadership of the legendary Jack Welch, General Electric was the model for creating shareholder value in diversified companies."
Would it be wrong to write: Led by the legendary Bill McDermott, SAP is the model for creating shareholder value in cloud-based companies.
Under the leadership of Bill McDermott and Luka Mucic, the dividend has increased annually. Shareholders are satisfied - criticism at the Annual General Meeting has largely fallen silent.
Daniel Stelter warns in his Manager Magazin article:
"At least as significant were share buybacks, increased leverage and, finally, aggressive accounting. Arguably, no company thus reflects the age of 'financial engineering' more than GE."
The point is to determine the current state and not to condemn SAP! Daniel Stelter explains:
"Financial engineering can help to get the maximum out of a company. But it cannot permanently conceal strategic and operational problems in the company. Beneath the still shiny surface, the problems are growing."
Thus, under the shiny surface of SAP visible to all, things could look quite different. Qualtrics was expensive and the synergy effect will not materialize, as McDermott stated that Qualtrics will remain independent. What will become of C/4?
How does SAP profit from "Cloud First" when SAP's Embrace program sends existing customers to AWS, Google, and Microsoft? What about the real profits of SAP?
Daniel Stelter writes admonitively:
"Meanwhile, real profits don't look so good [...] U.S. corporate profits have been falling for some time and are below 2014 levels."
SAP is a successful and complex story that needs to be assessed in the long term and holistically. The hustle and bustle of two Capital Markets Days per year hardly makes sense.
"Financial engineering" for the benefit of shareholders can make perfect sense in good times, but in the SAP community, there are also existing customers and partners to consider. Stelter thus sums up:
"For years now, companies and analysts on Wall Street have been working with self-defined earnings. These have been pointing steadily upward - due in part to the wave of share buybacks on credit that are driving up earnings per share. While this is all legal and not criminal manipulation, it is already misleading investors."
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