Sage: A Review of its Overall (Economic) Position
In our recently completed whitepaper from June 2014 titled, Market Analysis: A Review of the Overall (Economic) Position of the Top 6 ERP Vendors, we outlined the strengths and weaknesses of each of the top software vendors, including Infor, Sage, Epicor, Oracle, SAP and Microsoft.
As part of my new Market Analysis Series, I review each of these vendors independently (you can read my first post on Infor here). In this post, I will look at Sage.
Sage provides business management software to small and medium sized companies in 24 countries, with 60% of its revenue coming from Europe. Its major ERP products include Sage ERP MAS 90 and Sage 300 ERP, with a growing interest in the cloud computing market.
Based on our analysis conducted in 2014 (including of financials released by Sage on September 30, 2012), Sage is experiencing a number of financial stresses, and anyone considering investing in the company (i.e. through an enterprise level software purchase) should conduct thorough due diligence into the firm.
An evident example of these stresses is Sage’s cloud play, Sage One. Expected to yield $47 million in revenue over the last three years, Sage One fell short of this published expected growth which contributed to losses in its cloud business units. The European cloud market is growing quickly with independent ISVs leading the charge, and many, such as UK’s Xero, are applying significant pressure to traditional on-premise firms attempting to make the leap to the cloud. Whether Sage can successfully compete against these cloud players has certainly yet to be proven.
My perceived outlook on Sage’s ability to compete both in the cloud and on-premise markets is further strained when I look at the company’s waning contributions to research and development. The reality is that their R&D spend does not appear to be at a sufficient threshold to appropriately grow a business with 250 products on 70 platforms (for complete financial information, download the full report).
Ultimately, low Earnings per Share (EPS), flat profit margins and pressure on license revenues have given the company a generally cautious analyst sentiment. This coupled with a dividend cover rate at its lowest in five years and a heavy focus on the SaaS market – a market where they may be outmatched – and the need for potential customers to fully review Sage prior to engaging with the company becomes grossly apparent.
Stay tuned for my next installment.
– Software Delivered as Promised. No Surprises.