German Software Maker SAP Sees Benefits From Trump Tax Plans

Sarah McBride (Bloomberg) -- German software maker SAP SE plans to capitalize on the Trump administration’s efforts to encourage the repatriation of cash held by U.S. companies overseas, which could set the stage for spending by businesses on large-scale software upgrades.“If a large company repatriated cash and wanted to put it to work, software projects would be an obvious choice,” SAP Chief Executive Officer Bill McDermott said in an interview.

Business from the U.S. made up about 31 percent of SAP’s fourth-quarter revenue of 6.72 billion euros ($7.25 billion), and about one-quarter of its 84,000 employees are U.S. based. Coupled with any incentives that might emerge for infrastructure spending, a tax break for repatriation of overseas profits may offer sizeable benefits for SAP, McDermott said, along with other software companies.

Separately, the software sector could see stepped-up acquisitions if the cash repatriation tax break comes through. However, SAP, as a German company, would not benefit from that tax incentive. McDermott has said that after an acquisitions binge in recent years, SAP would likely be open to only smaller deals this year.

It is unclear what results might emerge from a repatriation of cash to the U.S. After a 2004 tax holiday, many businesses used the proceeds to buy back shares or increase dividends rather than to invest.

McDermott was in San Francisco last Wednesday for the announcement of SAP.iO, a fund to which the company has allocated an initial $35 million for early-stage investments in software companies. SAP also announced new incubator programs in San Francisco and Berlin.

“This is a chance to bring you right into the core business, to give you a shot at things entrepreneurs wouldn’t normally be able to do,” he told the startup founders gathered at the San Francisco incubator. Those selected will receive SAP mentoring and customer introductions.

SAP.iO is separate from Sapphire Ventures, an SAP-backed investment firm that generally invests at later stages.