SAP Surprises with Business Objects Buy

[Sunite]

SAP Surprises with Business Objects Buy
By Mark Long
October 8, 2007 10:48AM

   Digg It!   Bookmark to You are not allowed to view links. Register or Login
Following news of SAP's intended acquisition of Business Objects, analysts were quick to question the software-maker's abrupt U-turn from its previously stated goal of growing its software base "organically" rather than relying on outside additives. One analyst suggested that Oracle's recent acquisitions have forced SAP to change its game plan.

Related Topics
   SAP
   Software
   Oracle
   Acquisitions
   Analytics
   Business Intelligence
   Business Objects

Latest News
   AMD Intros Quad-Core Spider Platform
   Google Mulls Bid for Wireless Spectrum
   Amazon Unveils Kindle E-Book Reader
   Dell Launches Iconic All-in-One PC
   Recycling Electronics Boosts Pollution
Advertisement

Advertisement

   SAP has submitted a tender offer to purchase all outstanding shares of software maker Business Objects for approximately $6.8 billion. Noting that the deal already has received the support of Business Objects' board of directors, SAP said it expects the acquisition to close in the first quarter of 2008.

Having recently completed the launch of its SAP Business ByDesign platform for small to midsize businesses, "SAP can now take the opportunity to focus on the industry's next high-growth opportunity by accelerating and enhancing our efforts for the Business User category," explained SAP CEO Henning Kagermann.

Kagermann added that the company's acquisition of Paris-based Business Objects is "in keeping with SAP's stated strategy to double its addressable market by 2010 as announced in 2005."

An Abrupt U-Turn?

Some financial analysts were quick to question the software-maker's abrupt U-turn from its previously stated goal of growing its software code base "organically" rather than relying on outside additives. Noting that the Germany-based software giant's newly announced deal tracks Oracle's recent decision to buy Business Objects rival Hyperion for $3.3 billion, one industry observer suggested that Oracle had succeeded in forcing SAP to change its game plan.

Kagermann said SAP's organic growth strategy remains right on target with respect to the company's business process platform and SMB Relevant Products/Services offerings, augmented by "a few minor tuck-in acquisitions" to fuel growth and the addition of a new indirect channel for the company's Business ByDesign platform.

The business user segment represents a dynamic market in which companies are seeking solutions that can fit into nearly every I.T. environment and therefore requires a different strategy, noted Kagermann during his joint press conference with Business Objects chairman and founder Bernard Liautaud.

"It is more like a consumer market in that customers expect you to embrace the latest and coolest technology," SAP's chief executive said. "For this, we decided to go with an acquisition strategy, bringing both of the largest leaders together in order to accelerate growth in the business user segment -- the fastest growing of the three."

Accelerated Innovation

By acquiring Business Objects, SAP expects to gain technical know-how, accelerated innovation, and more vertical competence. "Our business processes will be enriched by analytics applications and in the end we will be able to bring more support to the analytic business process environment," Kagermann said.

Paris-based Business Objects, which earned $75.4 million and generated $1.25 billion in revenue last year, has more than 44,000 customers around the globe. Forty percent of SAP's 41,000 clients around the world are also Business Objects clients, Kagermann said during the press conference.

Contingent on shareholder approval and antitrust reviews in Europe and the U.S., the acquisition will take the form of a tender offer for all outstanding Business Objects shares at a price that represents a 20 percent premium over the stock's market value at the close of trading at the end of last week. After the deal closes, Business Objects will operate as a stand-alone business as part of the SAP Group.

The transaction, which will be financed through a combination of available cash and borrowed funds, is expected to boost SAP's earnings in 2009 and beyond, the company said. However, SAP said one-time acquisition-related effects would marginally dilute the software giant's 2008 earnings.