Morningstar | SGE Updated Forecasts and Estimates from 01 Nov 2018
Sage has a large footprint in the global small and medium business software industry. However, a changing competitive and technological environment has seen the company struggle to keep up with peers because of a muddled cloud strategy, decentralized organizational structure, and inability to leverage common technology across geographies. Still, new management has focused on addressing these issues.While the shift to online rivals poses a significant long-term risk, over the midterm we believe Sage will continue to perform well thanks to a trove of loyal existing customers and a plan aimed at refocusing the business on a centralized customer-centric model that leverages the firm’s global scale. The company will become more centralized, invest more in emerging cloud, hybrid, and mobile technologies, and deploy new pricing models in order to reinvigorate revenue growth. These initiatives have the potential to improve Sage's performance and, to some extent, this has proven true with improved client renewal rates and top-line growth. However, continued execution will be critical, and competition from product specialists such as NetSuite, Workday, and Salesforce remains fierce.We think execution is critical to Sage's multiyear growth strategy as the firm refocuses the business and aims to reaccelerate organic revenue growth. To support this endeavor, key products that will be the backbone of its go-to-market strategy include: Sage One, Sage Live, Sage X3 Cloud, Sage People, and Sage Intacct. Also, key to Sage’s future success will be how the firm is able to attract customers to these new global platforms, which will help to support the firm’s goal of shifting its user base to more subscription-based products and services. To that end, the company will not force its users to cloud products and will look to gradually migrate them by illustrating the added value that comes with cloud-based products and subscription services, we think Sage Business Cloud holds some value here. Over the midterm, we will monitor new customer acquisition, annualized recurring revenue, and annualized software subscriber base to gauge how the company is tracking.Sage Group is a technology provider that assists to manage businesses of all sizes. Co. provides a suite of cloud business management solutions and services including accounting, financials, enterprise management, people, payroll, payments and banking, as well as marketplace apps that can be provisioned to match the exact needs of any business. Co. has three reportable segments in which it operates, being Northern Europe (the U.K. and Ireland), Central and Southern Europe (Germany, Switzerland, Poland, France and Portugal) and NorthAmerica (the U.S., Canada and North America Intacct).
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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