What's going on?
Shares of Europe’s biggest tech company, SAP, had their best day in a decade on Wednesday, rising 13% despite it reporting a quarterly loss.
What does this mean?
SAP’s swing into the red (from a $1.5 billion profit a year ago) wasn’t a big shock to investors. Onboarding its new $8 billion toy, American survey software maker Qualtrics, involved significant one-off costs – as did planned restructuring which cut (or repurposed) dead wood in SAP’s workforce. A glance at the sales figures, however, shows SAP’s key cloud computing unit doing almost 50% more business than a year ago – helping the company raise its profit forecast for 2019 overall.
SAP’s rise has attracted the attention of the same big-name activist investor that’s been instrumental in a number of major mergers recently. But it’s on SAP’s side (for now), backing the company’s plans to increase its profit margin over the next few years.
Why should I care?
For markets: Will April showers bring May flowers?
Last month’s renewed optimism among German businesses unexpectedly gave way to gloom in April, according to data released on Wednesday. Germany’s own government last week cut its growth projections for Europe’s largest economy for the second time this year, likely darkening companies’ dispositions. But that wasn’t enough to deter investors from buying European stocks on Wednesday. They were perhaps encouraged by SAP and others following US companies in lifting their outlooks more than expected.
Zooming out: Wirecard gets transferred $1 billion.
There was another silver lining in Germany on Wednesday as online payments firm Wirecard (a more valuable company than Deutsche Bank these days) received backing from none other than SoftBank. The Japanese conglomerate plans to invest $1 billion in “convertible” bonds, which will eventually turn into Wirecard shares, as the two work together on expansion in Asia. The high-profile show of confidence perhaps convinced investors who’d expected yet another accounting scandal to drag down Wirecard’s stock to reverse their positions, helping push it 9% higher instead.