MSFT Microsoft Corporation

   By Sara Germano 
 

BERLIN--SAP SE (SAP.XE) on Monday unveiled a new partnership with competitor Microsoft Corp. (MSFT) and said that the alliance had already helped drive cloud services sales in the latest quarter, just over a week after the German business-software maker announced an abrupt leadership change.

The partnership makes Microsoft the preferred go-to-market partner through which SAP will help customers upgrade from on-premises enterprise software and transition to cloud--or remotely hosted--applications.

Financial terms of the deal weren't disclosed, but the new three-year agreement was finalized during the quarter ended Sept. 30 and contributed 18 percentage points to SAP's 39% growth in new cloud bookings for the period.

Shares of SAP at 0842 GMT were up 1.1% at 117.06 euros ($130.69).

The agreement underscores SAP's continuing work to transform itself from a traditional business software giant to a provider of cloud services.

Many professional software developers are turning themselves into services providers, moving from one-off sales of software licenses to rental or subscription models in an effort to both boost and smooth out once lumpy revenues and profits. Such transitions can result in a temporary hit to profits as investments and acquisition costs increase in the short term.

SAP's own transition led to restructuring at the beginning of the year and hastened an update to its long-term outlook as U.S.-based activist investor Elliott Management Corp. revealed in April a EUR1.2 billion ($1.3 billion) stake in SAP.

Earlier this month, the company said its longtime Chief Executive Bill McDermott would step down, effective immediately, and promoted two internal executives, Jennifer Morgan and Christian Klein, as his replacement without providing an explanation for the change.

Asked on Monday if she has had any communication with Elliott since her appointment, Ms. Morgan said she and Mr. Klein are "looking forward to speaking with all our customers and shareholders" at SAP's special capital markets day next month.

Ms. Morgan is the first female executive to lead a member of Germany's DAX-30, the Frankfurt stock exchange's blue-chip stock index.

"It's been quite an honor," she said of the milestone, "but there's certainly more we can do."

At the time of its leadership announcement earlier this month, SAP pre-released its third-quarter earnings report. Revenue rose 13% to EUR6.8 billion, while operating profit jumped 36% to EUR1.7 billion. Cloud-based revenue grew 37% to EUR1.8 billion.

As SAP continues to transition to cloud-based services it has taken on several partnerships and collaborations with competitors. In May, it launched its collaboration project, Embrace, with Microsoft, Google Cloud, and Amazon Web Services to facilitate software customers' move to the cloud. Both SAP and Microsoft have partnered on offering cloud-based services dating back to 2017.

Write to Sara Germano at sara.germano@wsj.com

(END) Dow Jones Newswires

October 21, 2019 05:00 ET (09:00 GMT)

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