Doesn't look like these guys ever made-up. Original Article on bloomberg.com
By Benedikt Kammel and Kenneth Wong
Sept. 20 (Bloomberg) -- SAP AG, under pressure from Oracle Corp. to maintain its top position in the business-management software market, said the U.S. company is ``misleading'' customers with comments about SAP's product strategy and acquisitions.
Remarks from Chief Executive Officer Larry Ellison yesterday ``continue to be inconsistent and misleading,'' Walldorf, Germany- based SAP said in a statement on PR Newswire. It's the first time SAP has directly responded to Oracle's comments on earnings.
Redwood City, California-based Oracle spent almost $20 billion in two years to peel away at SAP's dominance. The German company, the biggest producer of software for functions such as billing and human resources, said in July software sales in the second quarter missed expectations and conceded it lost market share to Oracle and Microsoft Corp.
``SAP seems to be getting slightly defensive,'' said John Segrich, an analyst at JPMorgan Chase & Co. in London, who rates SAP stock ``underweight.'' ``Investors just want SAP to put up the numbers. It seems Oracle is gaining more traction, and that SAP is falling a little bit behind.''
SAP shares gained as much as 3.07 euros, or 2 percent, to 154.3 euros in Frankfurt today, while Oracle shares jumped 13 percent in Europe from yesterday's closing price of $16.13 on the Nasdaq Stock Market. SAP stock has risen 5.2 percent over the past year, compared with a 30 percent increase in Oracle.
Battle for Share
Ellison, reporting fiscal first-quarter earnings yesterday that beat analysts' estimates, said Oracle will continue to gain market share from SAP ``year after year, quarter after quarter,'' and that SAP is in the process of ``rethinking their strategy as they lose application market share to Oracle.''
In 2005, SAP had a share of about 43 percent the global business-management software market, while Oracle had 19 percent, according to estimates by Boston-based AMR Research Inc. That's up from a 40 percent market share in 2004, AMR estimates.
Both SAP and Oracle run programs that aim to take orders from one another, and SAP says the plan resulted in an additional 300 orders since its introduction early last year. Board member Leo Apotheker in May said SAP had lost no orders to Oracle.
``In the context of what we said in the second quarter, SAP has very strong growth rates against Oracle and SAP reiterated it wins the majority of deals from Oracle,'' SAP spokesman Frank Hartmann said by telephone today. He declined to comment on SAP's market share for the third quarter. The German company reports earnings for the period on Oct. 19.
SAP is undertaking ``major changes in direction'' as SAP CEO Kagermann turns to acquisitions to ``augment SAP's slowing organic growth,'' Ellison said in a statement yesterday. He also said Kagermann delayed a new version of its main product until 2010, putting SAP two years behind Oracle's own schedule to release a new generation of software.
SAP won't put out new releases of its ERP2005 software, which was made commercially available earlier this year, over the next five years, Kagermann said at a conference in Leipzig yesterday. Michael Kleinemeier, head of the German unit, said in an interview that SAP will only introduce enhancements to the existing version.
SAP is in the middle of overhauling its software toward a so- called service-oriented architecture, or SOA, which allows companies to upgrade management software more easily. All of SAP's products will be able to run on the new platform by next year.
``The shift in the battleground to service-oriented infrastructure from the traditional packaged application favors Oracle and puts rival SAP in a position where they are playing from behind,'' said Credit Suisse Group analyst Jason Maynard in a note to investors. ``The company has a long way to go in earning their stripes in the standard middleware game.''
To contact the reporter on this story: Benedikt Kammel in Berlin at.