SAP Ariba To Aid Microsoft's Hardware Business & Supply Chain

SAP SE (DE:SAPG) (NYSE:SAP) has been selected by Microsoft Corporation (NASDAQ:MSFT) to help create a scalable, modern platform in support of the efficient, cost-effective manufacturing of Microsoft’s products, including the Xbox and Surface.

Microsoft intends to build best-in-class systems and platforms, and productivity systems — a flexible, scalable platform — to support the complexity of the company’s hardware business.

Microsoft will leverage SAP’s Ariba Network and its cloud-based applications (including SAP Ariba Supply Chain Collaboration), which will help construct a modern platform that will enable it to collaborate with multiple tiers of contract manufacturers and suppliers, across key supply chain planning and execution processes.

In fact, Microsoft has already begun to see results. SAP Ariba, along with support from Intrigo Systems, has enabled multi-tier planning and collaboration with contract manufacturers and suppliers, and cut the supplier commit process from three days to just 30 minutes. It has also standardized vendor engagement through B2B, flat files and web-user interface, and reduced the on-boarding time for suppliers from four months to four days.

Ariba has proved to be a source of robust profit churner for SAP, managing the business of 3 million clients who purchase or sell goods and services worth more than $1 trillion. SAP has appreciated 36.9% over the past year, ahead of the industry’s average gain of 34.6%.

During the third quarter of 2017, new cloud bookings — a key indicator of sales success in cloud business — were significantly up 14% to €302 million ($351 million) and Ariba was a chief contributor to this growth. SAP’s business networks (which it manages through three main players, namely Ariba, Fieldglass and Concur) burgeoned 19% during the reported quarter.

Going forward, SAP remains optimistic that growing demand for simplified and automated business-to-business commerce solutions will fuel Ariba’s growth. SAP’s resilient Cloud and Software business, an enviable business network spread, and dominance over critical client demand areas continue to act as staple growth drivers.

SAP SE Price, Consensus and EPS Surprise

Furthermore, this Zacks Rank #2 (Buy) company has been witnessing solid activity on the earnings estimate revision front. Analysts have become increasingly bullish on the company over the past couple of months, as the Zacks Consensus Estimate for 2017 earnings has moved up from $4.84 to $4.92 during the same time frame.

Other Stocks to Consider

Some other top-ranked stocks in the broader space include Motorola Solutions, Inc. (NYSE:MSI) and Comtech Telecommunications Corp. (NASDAQ:CMTL) , both holding the same rank as SAP. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Motorola Solutions has an impressive earnings surprise history. The company recorded an average positive surprise of 13.2% over the trailing four quarters, beating estimates all through.

With four back-to-back, strong earnings beats, Comtech has a striking average positive surprise of 78.8%.

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