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Nothing to do with Berkshire other than a possible whiff of value. Has anybody looked at SAP SE? Trades as SAP in the US, and also as SAP in euros in Germany.

Europe's largest software firm, perhaps the world's largest enterprise software provider. Trading at $176.41 down from a high of $313.28 last July. Down 27% just year-to-date, a prime victim of the SaaSpocalypse.

Because, well, obviously nobody will ever need to buy or lease software again, they'll just vibe it into existence with their favourite LLMs because AI is going to take over everything. Yet of course their clients won't ever buy any of SAP's own AI products and there will be no productivity gain for SAP's in-house programmers because obviously all the AI stuff is just hype.

As with many software firms they're in the late stages of a switch from lumpy perpetual license sales to subscription-only, which causes a one time hit to revenues and profits but can lead to very nice things after that, witness Adobe: revenues flattish 2010-2015 which is I think when they were in the midst of the transition, but growth on most metrics of 20-25%/year since, and net margins have doubled.

FWIW, median trailing P/E in the last decade about 27. Current price is 21 times consensus EPS for 2026, and 17.8 times consensus for next year. Barring an actual SaaSpocalypse (rather that merely the fear of it), growth expectations have been good. It might count as a good business at a fair price. (I would have said "very good business", which may be true, except I don't like the level of stock based comp)

Jim

Threads from late January on Falling Knives https://www.shrewdm.com/MB?pid=200327279&wholeThre...
...and on Non-US Stocks https://www.shrewdm.com/MB?pid=346204085&wholeThre...

Just an anecdote. Large 50K employee enterprise has had SAP for about 20 years. I didn't think it was possible that large enterprises would switch from SAP. I mean the headaches involved with implementing ERPs are legendary. But they are moving (5 year process) to Workday ERP.

Not sure how indicative this is, but SAP cloud offerings have lagged behind ERP competitors for years.

And yet, my organization is moving from 22 separate Oracle, AS400!, and other legacy ERP systems to SAP. This plan has been going for years and will continue for at least the next 5-7 (already in the plan).

SAP sucks
ERP sucks

When companies commit to doing it right, they make business suck less.

What is of a primary INVESTMENT concern are products and professional services. Much of SAP's model depends on paying some $400/hr person to do the thing. With the advent of modern data platforms and systems, much of this integration and enablement work can be insourced or minimized or provided by yet a different group of consultants.

SAP are doing all the right things, but their moat is crumbling and the sign of that hinge on rise and fall of professional services.

SAP are doing all the right things, but their moat is crumbling and the sign of that hinge on rise and fall of professional services.

This may be so, perhaps implementations will be much faster and cheaper meaning much less gravy from overpriced consultants. But I don't see how that (by itself) would affect the revenue from license sales and leasing nor cloud charges. If anything, cheaper implementations might drive more sales at the margin, offsetting things a bit?

The point being that they are not primarily a consultancy. From what I can determine, the gross profit on the services segment is a smallish piece of the pie. Less than 10% of operating profit according to my wholly unreliable AI friend, though I don't trust that. It notes that services revenue is ~13% of the total and has a high expense profile relative to license/cloud, so it may account for a lower fraction of operating profit.

Jim

<<Because, well, obviously nobody will ever need to buy or lease software again, they'll just vibe it into existence with their favourite LLMs because AI is going to take over everything. Yet of course their clients won't ever buy any of SAP's own AI products and there will be no productivity gain for SAP's in-house programmers because obviously all the AI stuff is just hype.
>>

It takes years for news papers to shrink significantly after widely recognized danger of demise because of the Internet. Software business could in fact face the same fate.

It takes years for news papers to shrink significantly after widely recognized danger of demise because of the Internet. Software business could in fact face the same fate.

The newspaper mention is an interesting one. You could argue they never lost their moat of good, local reporting. But they lost their advertising money to a different platform.

moving 'ot' back to falling knives...

https://www.shrewdm.com/MB?pid=850775825

If there's even a halfway decent chance of a return to previous 30x cash flow valuation getting $450 at end of 2026, or even end of 2027, it could be *huge*.

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