SAP SE (SAP) 2010 Q1 法說會逐字稿

Welcome to SAP's financial analyst conference call.

For your information, today's conference is being recorded.

Today's call will be hosted by Jim Hagemann Snabe, Bill McDermott and Werner Brandt.

I will now hand the call over to Stephan Gruber.

Please go ahead, sir.

Good morning or good afternoon.

This is Stephan Gruber.

Thank you for joining us to discuss SAP's first quarter 2010 results.

I'm joined by Bill McDermott, Jim Snabe Jim and Werner Brandt.

Werner will discuss the Q1 financials, Bill will provide some color on our regional and industry performance and our go-to-market strategy, and Jim will comment on our product strategy.

Following the prepared remarks we will have time for Q&A.

I will now make a few remarks about forward-looking statements.

Any statements made during this call that are not historical facts are forward-looking statements as defined in the US Private Securities Litigation Reform Act of 1995.

Words such as anticipates, believes, estimates, expects, forecast, intends, may, plan, project, predict, should, outlook and will and similar expressions as they relate to SAP are intended to identify such forward-looking statements.

SAP undertakes no obligation to publicly update or revise any forward-looking statements.

All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations.

The factors that could affect SAP's future financial results are discussed more fully in SAP's filings with the US Securities and Exchange Commission, including SAP's annual report on Form 20-F for 2009 filed with the SEC on March 25, 2010.

Participants are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their date.

Before I turn the call over to Werner, I would like to remind everyone that we have SAPPHIRE NOW, our customer and we have sapphire now, our customer and user conference, coming up in May.

It will be co-located in Frankfurt and Orlando.

You will be able to get a first-hand impression of the new products and services we are bringing to the market, and we'll have a special focus on a memory technology and, of course, Business ByDesign.

Our financial analyst symposium will take place in Orlando on Tuesday, May 18.

And with that I would like to turn the call over to Werner.

Thank you, Stefan.

Before I begin, let me remind you that we are no longer reporting in US GAAP.

Therefore, I will only refer to IFRS and non-IFRS numbers with the focus on our non-IFRS figures, as they are more in line with how we internally look at our operational performance.

Also, these non-IFRS measures are the basis of our guidance.

We at pleased to report a strong top-line performance in which software and software-related services grew double digits in addition to reporting further margin expansion.

Let me give you the highlights of the first quarter.

Non-IFRS software and software-related services revenues for the first quarter of 2010 were EUR1.95 billion, which represented a year-over-year increase of 10% in constant currency.

It was driven by an increase in software revenue across all regions and a very strong support business.

In fact, support revenue increased sequentially by more than 2%, which demonstrates that we are well on track with the retention and adoption of enterprise support within our customer base and for new customers, respectively.

And we are also targeting effects from currency and lower sales allowances.

As a result of the strong top line, the SSRS gross margin increased by 0.7 percentage points year-over-year to 81.6%, resulting in an overall growth margin of 67.7%, which is up 3.3 percentage points year-over-year.

Looking at the expense side of the P&L, you can see that total operating expenses decreased 6% year-over-year.

In contrast to the first quarter in 2009, the first quarter 2010 was not impacted by restructuring expenses, which were EUR160 million in the first quarter of 2009.

However, reorganizations in the first quarter of 2010 resulted in severance expenses of EUR27 million and unused lease space expenses of EUR9 million.

The first quarter 2010 reorganization expenses negatively impacted the R&D expense to total revenue ratio by 40 basis points and (inaudible) the marketing and general and administration expense to total revenue ratios by 50 basis points each.

The strong top-line performance and the reduction in cost resulted in further margin expenses.

Non-IFRS operating margin in the first quarter of 2010 increased 8 percentage points to 24.4% year-over-year.

Of the 8 percentage point increase, 6.6 percentage points came from the negative impact of restructuring charges in the first quarter of 2009, with the remaining 1.4 percentage points off 60 basis points at constant currency, resulting from the additional margin growth that we managed to deliver despite severance and unused (inaudible) of EUR36 million in the first quarter of 2010.

This first quarter of 2010 EUR36 million expense negatively impacted the margin by 140 basis points in the third quarter of this year.

We are striving to increase the operating margin in each and every quarter, which we already demonstrated in Q1 despite the negative impact resulting from these reorganization expenses.

This is a tight restriction on expenses we maintained mostly in the first half of 2009.

We expect a stronger impact on our margin expenses in the second half of 2010.

We will continue to [fix] (inaudible) tight discipline on expenses and balance investment needs accordingly.

This is also reflected in the headcount number, which stayed essentially almost flat in the first quarter of 2010.

The IFRS effective tax rate in the first quarter was 25.7%, which is a decrease of 6 percentage points.

The decrease is mainly a result from tax effects from changes in foreign currency exchange rates.

We continue to project an expected tax rate under IFRS of 27.5% to 28.5% for the full year of 2010.

Free cash flow in the first quarter decreased by 46% year-over-year to EUR750 million.

The decrease is mainly due to delayed maintenance billing as a result of the introduction of our new [two-tiered support offering].

The customer was asked to make their initial choice between Enterprise Support or Standard Support by March 15.

During the quarter, we brought back 3.5 million shares for a total of approximately EUR120 million.

For the full year 2010 we continued to do expect to buy back shares in an amount of at least EUR250 million.

On the dividend, the Executive Board and the Supervisory Board has recommended that shareholders approve a dividend of EUR0.50 per share at the annual general meeting in June.

If the shareholders approved this recommendation, the total amount distributed in dividends would be approximately EUR594 million.

Another highlight in the quarter was the successful replacement of the euro bond with a two-tranche structure consisting of a EUR500 million four-year tranche and a EUR500 million, seven-year tranche.

The transaction was heavily oversubscribed and generated strong international demand with the majority being placed in Germany, Switzerland and the UK.

While we saw strong demand from retail and private banks, SAP also achieved [a very] diversified distribution among core institutional investors such as fund managers, insurance companies and pension funds.

Net proceeds for the transaction, which helped diversify our sources for financing for future [increase] our financial flexibility will be used for general (inaudible) purposes.

Let me finish up by saying that we have maintained our outlook for [2000].

Please refer to the press release issued today for the complete output.

I would now like to pass the call over to Bill.

Bill?

Thank you, Werner, and thank you, everybody, for taking the time to join the call with us today.

We see clear signs that the market environment is improving.

This is underscored by our return to double-digit software and software-related services growth in Q1.

We reported software and software-related services growth in all regions.

We also reported double-digit growth in our small and mid-sized enterprise businesses, in SAP Business Objects and in our focus industries.

I'm really pleased and so is Jim with execution in the first quarter.

Another positive sign is that volume has stabilized with strong deal volume across direct and indirect channels and there is a healthy mix of small to large transactions.

We also saw a return to some large transformational deals.

That's deals over EUR5 million, which accounted for 27% of order entry compared to 12% in last year's first quarter.

And the average deal size was up 36% year-over-year.

Most importantly, we captured the positive momentum and extended our leadership position in the fastest-growing segments of the business software market.

In the BRIC countries we doubled our business with particularly strong results in Brazil, Russia and India.

In our focus industries like financial services, high-tech and retail, we capitalized on the strong demand across all geographies for our industry-specific solutions such as our core banking solution.

All of these verticals were in double-digit growth and some high double-digit growth.

In business user we reported strong double-digit growth, good competitive wins in all areas of the product portfolio, and we extended our market leadership in BI, analytics and performance management.

This leadership position is highlighted in a recent Gartner study.

Business from new customers in the business user segment represented 37% of sales.

This is a positive sign and signals that we can expect continued strength in business user as we continue to successfully capture synergy from the Business Objects portfolio within the SAP customer base.

In our small and midsize enterprise business we saw a return to double-digit growth.

In fact, it was up 13%.

We're successfully evolving our go to market model to be more scalable and volume oriented, and this is in combination with our inside sales and our channel partners, all expanding nicely.

There's also strong anticipation for our new Business ByDesign solution across the world.

Let me now briefly touch on the regions.

In EMEA, we are seeing more optimism.

The strongest regions were UK, France, CIS and Iberia.

In Germany customers are once again talking more about investing in software, and the pipeline is building nicely as we brought back a proven leader to run the business.

Key wins included Gazprom, T.

Choithram and Sons and HLL Lifecare Limited.

In the Americas we are seeing a reemergence in the United States.

Latin America continued to report the fastest growth, primarily led by strong growth in Brazil.

And Canada's results were simply outstanding.

Key wins included Dawn Foods International, McKesson Corporation thank Banco del Bajio.

In APJ we are seeing a return to normalcy, meaning more traditional buyers are forming a pattern where customers are once again investing for growth, not just efficiency.

Moreover, the SME market has strengthened, which is important to us considering it's one of the largest SME markets in the world.

We're starting to see an improved business environment and an improved sentiment in Japan, too.

Key wins included Taiwan Fertilizer, China East Airlines and (inaudible) [Pharma].

I'd also like to address the trust that markets customers and partners are putting in the SAP brand and our business model.

Examples include an overwhelming number of customers choosing our enterprise support offer.

As Werner rightfully pointed out, our public bond offering in Q1 was significantly oversubscribed, and the continued strong relationships with our echo system and alliance partners prevailed as they continued to invest and believe in SAP.

In closing, the outlook for our business is very compelling.

We have put customer centricity and innovation at the center of our business.

All SAP people are engaged and passionate to make our customers best run businesses.

As growth is coming back on the agenda and business and IT interests are converging, SAP is uniquely positioned to help customers transform and grow.

SAP is the only company in the business software industry that combines integrated business process expertise, transactional integrity, industry best practices and a global delivery capability based on proven end-to-end solutions.

The in-process measures for our business underscore this point.

There is, in fact, a strong pipeline for Q2 and the remaining quarters.

There is strong momentum in key growth markets and categories.

We have a major upcoming milestone with a simultaneous SAPPHIRE NOW in Orlando and Frankfurt, where we will be making key partner and product announcements.

Let me stress that we are committed -- Jim, myself, the Executive Board, all management across the Company -- to accelerate SAP's resurgence in the coming quarters, and we see a clear path for doing so.

Jim, I'd like to now turn it over to you.

Thank you Bill, thank you Werner, and welcome, everyone, to today's conference call.

Q1 was indeed a very strong quarter, and we are very happy with the Company's performance.

While Bill and Werner provided details on this quarter's performance, I would like to take this opportunity to give you a brief update on our innovation pipeline and product strategy.

Innovation remains at the center of our growth strategy, and our customers appreciate this.

Bill and I have been visiting a lot of customers during Q1.

We see a clear change in the strategic agenda of our customers.

While tight cost control remains important to all companies in all industries, we see clear signs that growth is back on the agenda.

And the performance in Q1 demonstrates how SAP and our innovations in products are becoming more relevant than ever before.

SAP's innovations are focused around three main areas.

First of all, we are determined to continue to expand our leadership position in the on-premise market.

SAP is, today, the undisputed leader in on-promise business applications.

With Business Suite 7, we have delivered the most modern and consistent business suite in the market, supporting mission-critical software [system] in more than 25 different industries.

We will continue to deliver enhancements to the business suite.

And with the acquisition of Business Objects we have also taken the lead in analytics, as recently demonstrated by Gartner.

Our customers appreciate the power of consistent business processes and leading analytical applications to help them run their business better and cheaper.

Secondly, we're entering into the on-demand market.

While we expect the major parts of business education to remain on premise, we do believe that software as a service will be growing rapidly in the years ahead.

SAP Business ByDesign is, without doubt, the most important innovation from SAP for the on-demand market.

We have worked hard to ensure that the technology platform in SAP Business ByDesign is not just a me-too but, in fact, a next-generation on demand platform.

We believe that there is an opportunity for us to disrupt the on-demand market with this platform, and we continue to be confident that we will deliver SAP Business ByDesign in a value-ready version mid-this year.

The third innovation area is mobility, or on-device, as we call it.

Mobile devices are becoming the preferred interaction point with business applications.

We want to make sure that SAP solutions can be accessed from all leading mobile platforms like RIM, Nokia, Apple, Google Android, etc.

We are building and delivering mobile applications on these platforms, and in addition we will allow partners and customers to build unique mobile experiences on top of the SAP software going forward.

With the investments and innovations in all these three categories -- on-premise, on-demand and on-device -- SAP represents the most complete and consistent application and technology port folio in the industry, a portfolio that will deliver superior value to our customers and expand our addressable market and fuel our growth.

In addition, we continued to leverage in-memory computing power to achieve an unprecedented speed and simplification of applications going forward.

With this technology we plan to pave the way for real real-time analytics and finally remove the decade-old barrier between business education and business intelligence.

At the same time we are taking measures to improve efficiency and speed of innovation at SAP.

This will allow us to act more like an entrepreneur in terms of speed while keeping the power of scale and robustness we are known for today.

In closing, while a software company is all about innovation, products and efficient processes, we only deliver true innovation due to our people.

Realizing that people are our most important asset, Bill and I are very happy to announce the latest addition to the SAP Executive Board, Angelika Dammann.

Angelika will join SAP's executive board by mid-2010.

She will lead a newly created human resources order area and will also serve as SAP's labor relations director.

Angelika will join us from Unilever, where she was responsible for human resources and labor relations.

So, in summary, we are off to a good start and we have a very strong pipeline of innovation to come.

I want to thank you at this stage, and will now be happy to take your questions.

(Operator instructions) Philip Winslow, Credit Suisse.

Hi guys, great quarter.

Bill, just a question for you in terms of sales and marketing.

You mentioned the large deals were starting to come back into the pipeline and you saw great success earlier this quarter.

When you think about the leverage in the sales force and the sort of spending there, where do you think your utilization rates are on the sales force?

And can those trend higher, especially as the large deals come back?

Phil, thank you for the question I appreciate your nice comment regarding the quarter.

We feel good about it also, and the sales force right now is -- we look at how we've retooled the sales force.

We've built them for transaction volume.

As the market dynamics in 2009 were challenging, it also gave us a chance to change.

So the reps are now equipped to sell into line of business executives as well as CIOs.

As you see the convergence of business and IT taking hold in the market, it's clear that business executives and IT professionals are going to partner on being more agile and coming up with new ways to innovate and grow.

As that takes place, I expect the deal size to increase and I believe our sales force is known, very well known, in fact, for doing the larger transformational deals.

And yes, there is leverage there.

We absolutely have built a volume and a value machine in the organization, and I'm confident that we are ready for anything.

Gunnar Plagge, Nomura.

Thanks for taking my question and congratulations as well.

On the support revenue growth, 10%, as you commented, is a really strong number.

Could you maybe comment, were there any specific dynamics this quarter?

There are so many influences now.

So that would be very helpful.

I think what you're seeing is the power of giving our customers choice on this service offering.

We have given the customers the opportunity to choose between standards and support and the enterprise support, and we are seeing a vast majority of customers going for the enterprise support.

So I think that's a recognition that this support offering is, in fact, superior in the market and it's the right kind of service offering for mission-critical software like we are delivering to our customers.

(inaudible) the vast majority -- could you maybe quantify it a little bit?

And the question I had was support revenue growth going forward.

Is it possible to maintain this high year-on-year growth rate going forward?

I think we do not comment on growth rate regarding specific line items in the P&L, but I can give you some indication.

Globally, I think the adoption rate for enterprise support was close to 90%, and this is a strong signal from the installed base, but also from net new customers that they recognize the value of enterprise support.

[Joseph Bori], Deutsche Bank.

I would like to get a little bit more color on the consumer behavior in EMEA and the US.

I see in EMEA software sales were still relatively weak at 2%, but software and software-related services were very strong at 11%, whereas in the US it was the reverse.

Software was already 12% high.

Is it fair to say that EMEA was driven by maintenance upgrades and the Americas was more driven by new licenses?

If not, could you clarify a little bit?

I can undertake your question.

I think, if you look to the simple maturity of the two markets, when the support (inaudible) take a big, big share of the total revenue in these markets and -- but the opposite in the US -- number one.

Number two, if you look to the buying behavior of the customers in the United States, as soon as they see that the economy is coming back, they invest immediately.

And that's a big difference in Europe.

That's the second argument.

That's the reason why you see strong demand in the Americas for software.

That's the first thing they invest in.

And, by the way, that's also true for Asia-Pacific.

We see a clear investment path in Asia-Pacific here, and those are the two reasons why we have the situation as we have it.

And just, if I may, a short follow-up on the prior question.

To me, in terms of the actions of your customers on the maintenance decisions, there were clearly two things that could happen.

Some people might upgrade to the enterprise, but also you are giving the chance to for some customers to downgrade if they want to.

Can you give us, as well, some comments on how many of your customers actually have chosen to downgrade?

That's very simple.

That's a difference between roughly 90% and 100%.

Gerardus Vos, Citigroup.

Good afternoon, guys.

It's (inaudible) from Citigroup.

Thank you very much for taking my question.

I've got three questions, if I may.

On the pipeline, I'm just interested in how large this will impact the numbers, perhaps, later on this year.

And when will we perhaps see quarter-on-quarter acceleration in growth, if there are any indications there?

Secondly, just on the strategy of buy versus build, I just wonder if you guys have any kind of update on that topic.

Finally, on perhaps your aspirations for Business ByDesign in terms of how do (inaudible) against the competition and how it will change the landscape.

I'll comment on the pipe buy versus build, and then Jim will take on Business ByDesign.

First, on the pipeline, we see an ever increasing pipeline building.

We obviously have learned from Werner's comment that Asia-Pacific and the Americas is showing the more robust pipeline.

But Europe, too, is growing.

And in Germany, in particular, we see the fastest movement in the pipeline with new leadership and a focus on the customer.

So the pipeline is building.

We are actually feeling very good about our business, very good.

And, we are also feeling very good about the customers' endorsement of our on-premise, on-demand, on-device strategy.

It makes a lot of sense.

The buy versus build -- it wasn't too long ago when the retail industry did more building versus buying packaged applications.

And we now see that that has become a tipping point where packaged software and the idea of buying as opposed to building themselves is taking off.

We see this, as well, in banking and insurance.

And in terms of our philosophy, if that was part of your question as well, buy versus build, we've always been an organic growth company, and we build our own technology and integrated technology because that gives the customer the best end-to-end business process execution.

We'll continue to do that, but in areas where the Company can move forward such as Business Intelligence with Business Objects, you can see that we know how to buy and we know how to integrate and we know how to grow.

Business Objects portfolio is the fastest-growing segment of our business.

So if there was a property that could extend our lead in category and extend our reach, we would look at that very favorably.

Let me take the ByDesign question.

Today, just to make sure we have the facts straight, we have today approximately 100 customers running ByDesign productively.

And what we are bringing out mid this year is what we call a volume-ready product.

As you all know, we have been working hard on the ByDesign software.

And as I mentioned in my introduction, we really wanted to make sure that the infrastructure of ByDesign is a next-generation infrastructure for a cloud-based delivery model and not a current generation.

With that, we believe we can [disrupt] market.

So we will be bringing out, mid this year, the ByDesign, the next version.

And with that we will go more aggressively into the market.

However, if you look at the financial numbers for this year, be aware that this is a subscription-based model in an (inaudible) market.

So we have not factored in lots of revenue for this product this year.

Michael Briest, UBS.

There was a question on the subscription revenues.

I think was it Q4 is you gave guidance for the year of EUR360 million to EUR380 million.

If I look at the Q1 run rate you are not far off of that level.

Can you talk a little bit about subscription adoption plans?

Were there any GEAs or flexible license agreements in the quarter, also whether you are seeing a switch back to license purchasing and whether you are still comfortable with that guidance, the EUR360 million to EUR380 million?

First, on the EUR360 million to EUR380 million, that guidance remains the same.

There is no change.

There was a few FLA's in the quarter.

But you are also right; the customers now are investing again in business software.

And there's less of an issue with the CapEx versus the OpEx to be because business software is regarded as a key investment.

And at times where things are improving we are noticing that the wallets are opening up again toward investing in this as a capital expense.

So that issue has really gone the other way, in a certain sense.

As you know, we only have about 14 GEAs and pretty much the same on an FLA basis globally.

So there's no reason for anybody to think that this is going to be any different than our EUR360 million to EUR380 million guidance.

And maybe if I could add something in terms of the buying pattern of our customers, those customers who have a chance to make a strategic decision on their future infrastructure, the vast majority of them choose SAP, also in very competitive situations.

And I strongly believe that the they do that because of the consistency in the portfolio.

The pieces fit together, and they cover both the efficiency, the growth opportunity from a process point of view as well as the analytics for getting the necessary insight to run their business.

I think that's the strength that we see and that's why we see large transactions coming back again because companies are making strategic moves.

If I could just follow up with one on the guidance, you've obviously had a very strong start to the year, 10% SSRS growth.

The guidance is 4 to 8, but the tone seems very positive.

Do you think the scope to maybe raise the guidance at some point as visibility improves?

I think on the first call I heard you say maybe in July you would revisit it.

Yes, of course.

Now it's too early based on one quarter to change our guidance.

We already said, and said it at the January press conference, that we see potential external factors which could impact the buying behavior of our customers and prospects, and this is the case, unchanged.

We'll just see how the second quarter goes and then, based on half-year results we might look into our guidance again and we may revise it at that point in time.

But today it's really too early to do so.

Ross MacMillan, Jefferies.

So you made an interesting comment around I think you said 37% of sales from new customers in the business user segment.

Can you just do two things -- one, clarify what you mean by that 37%?

Is that order entry, is that new licenses?

And then how has that trended?

How should we think about that, for example, relative to last year?

And what does it tell you about where the dollars are being spent within the customer base?

The main thing it tells us is that Business Objects and the portfolio of Business Objects solutions is every bit as relevant to customers that are non-SAP as customers that are SAP.

And we plan to make a lot of inroads this year in selling to non-SAP.

And as evidenced by the 37%, we know that that could be a very, very good growth story for us.

It's trending up.

What you have to understand about Business Objects and the whole portfolio is that it grew in every region of the world in double digits.

And every single product in the Business Objects portfolio also grew in double digits.

So it's helping us penetrate non-SAP.

It's also helping us up-sell and cross-sell SAP.

So it's really a very, very positive story within our portfolio.

And it's more and more becoming a larger part of our overall business, proving once again that if SAP puts its mind to something that makes sense for customers we can do an acquisition, we can integrate it well and grow it.

And maybe just to follow up, if we do see more transformational deals, I guess going back to the bread and butter of core ERP and so forth, put it this way -- do you have the capacity to do that, and keep the pedal to the metal on the Business Objects and business user front?

In other words, would you get the leverage from core ERP on top of what's happening with the business user strength?

Yes.

The answer is definitively yes.

There is tremendous opportunity for us to leverage our infrastructure, our sales and marketing force on core ERP.

And to the extent we are able to do that on the transformational side, the Business Objects will simply be a force multiplier on top because all of these large transformational deals almost always include the Business Intelligence conversation.

And similarly, if transformational deals do come back on the table, which we expect they will, as we looked at this past quarter we replaced the competition in 70 very key wins, 24 of them with a well-known competitor.

And what we're seeing is the Business Objects or the line of business conversation is in many cases now the precursor for the ERP conversation.

So no matter how to look at it this is a very powerful product category to be the market leader in.

Thanks a lot, good quarter.

Knut Woller, UniCredit.

You were just elaborating on Business Intelligence, that it was a major driver of your success in this quarter and growth across all regions.

Can you give us some idea of what drove besides the high demand of customers?

Second, on Business ByDesign for Jim, in former comments when you had the first launch of the product you were targeting these margins that would not dilute the margin of your core business.

Can you give us an update about that and the mix you expect to achieve these targets?

Let me start with the highlights from a product perspective, definitely (inaudible) NetWeaver, direct to component on NetWeaver and also a customer development project which contributed to the growth on the product side.

I think it's very important just to underline that if you look at the quarter it's a solid quarter were growth comes from all regions, but also all product categories.

And that means that we have companies looking at their infrastructure both from a cost and an analytics point of view and the strategic views of them combining the two, and that's where we're very strong.

So coming back to your questions around ByDesign and the margin in that business, with the key technological improvements that we have done on ByDesign were to get the TCO of running ByDesign significantly down.

And when I say significantly, I mean significantly.

And this means that we are able to go in and offer with the ByDesign a solution at a competitive price, which also has a cost for us that makes it a viable business to be in.

That is why we decided not to go for volume before we had that version of the platform.

And that is the version that we will have ready by mid-this year.

Sarah Friar, Goldman Sachs.

You've just walked through how successful you guys have been with the Business Objects acquisition, which clearly begs the question -- how are you thinking strategically right now about acquisitions as a vector for growth?

So, on the M&A front, we are really proud of Business Objects, and we have a strategy in our Company and Jim talked about that in his opening comments around on-premise, on-demand and on-device and how we orchestrate between these levels of technologies for our customers.

We will look in our strategy to expand our addressable market and will address strategic choices with regard to the on-premise, on-device and things that can move our company forward.

It makes great sense for the customers, we're open too, and we'll be strategic in our moves.

So I think you should know that this is an ambitious management team, a team that understands customers and a team that knows how to win and we also make sure the shareholders are well rewarded for the moves we make.

If I could follow up on DVD, as you think about a year from launch, what are you thinking about as the key metrics you will use to define success?

Is it number of customers on the platform, is it margin like you just got asked?

Is it the revenue generated?

What are really the key things that you as a senior management team will look at to say, okay, now this has been a successful launch?

So Business ByDesign offers us an entry into an on-demand market which is today relatively unmature.

And we believe that there is a new play to be played there.

So this is in addition to the current business that we have.

We are targeting a very specific customer segment, and the way we will be measuring the success of this product is very simple.

This is a volume-oriented product for an SMB market in very large countries.

So we will be measuring the number of customers; that's the key metrics of success.

Got it, great, thank you very much.

Thank you.

This closes our conference call today.

Thank you all for joining and we look forward to seeing you at the upcoming SAPPHIRE NOW conference in May.

Thank you very much and goodbye.

Ladies and gentlemen, that concludes this conference call.

Thank you for your participation today.

You may now disconnect.