SAP pushes back profit goal to fund cloud growth

SAP says cloud investment delays profitability goal

German business software maker SAP has pushed back its profit target as it makes further investments in its cloud business to keep up with a fast-growing market.

SAP said on Tuesday its operating margin goal of 35 percent would now be reached in 2017 instead of 2015. Its shares were indicated down 1.1 percent before the market open, while Germany's blue-chip DAX index was seen 0.4 percent higher.

SAP and rivals such as IBM and Oracle are racing to meet surging demand for web-based software products, which allow clients to reduce costs by ditching bulky local servers for network-based software and storage in remote data centres.

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The fast-growing cloud business would would create a more predictable stream of revenue, SAP said, but additional investments were needed.

The global cloud market is currently estimated to be worth $131 billion by research firm Gartner.

SAP in recent years has splashed out $7.7 billion to buy internet-based computing companies Ariba and SuccessFactors.

SAP's co-Chief Executive Bill McDermott told reporters he did not exclude more acquisitions to reach the firm's goals. "When an acquisition makes sense, we will do it," he said, declining to elaborate.

The company expects total revenues to reach at least 22 billion euros ($29.8 billion) by 2017, of which 3-3.5 billion is expected to come from the cloud business.

SAP published preliminary results on Jan. 10.