SAP's agreement to buy Sybase for $5.8 billion should help the software company stay competitive with Oracle through new revenue streams and a larger technology portfolio. Analysts agree that the acquisition also gives SAP the ability to capitalize on former strategic partner Sybase's mobile technology at a time when businesses seem to be gravitating strongly toward smartphones and tablets. One analyst suggests that SAP has not been successful with mobilizing its own suite of back-office applications, and that the acquisition can rectify this.
SAP's $5.8 billion acquisition of Sybase,
announced on May 12, marks a major shift in the enterprise-software landscape.
First and foremost, it will likely allow SAP
to stay competitive with Oracle, through new revenue streams and a larger
technology portfolio. But the acquisition of Sybase, one of its strategic
partners, also allows SAP to consolidate and
expand upon its mobile offerings, where some analysts have seen the company as
"On first glance, this is clearly a strength-to-weakness deal. SAP's
annual sales and its market cap are both [more than 10] times the size of
Sybase's," Pund-IT Research analyst Charles King wrote in a May 13
research note. "While SAP develops and
delivers a wide range of enterprise business software solutions, Sybase's
offerings are skewed towards the global mobile market, where the company's
database solutions support SMS [Short Message Service] messaging chores for [more
than 4] billion mobile phones."
Furthermore, King added, "Sybase's strong presence in global mobile
telephony offers intriguing opportunities for SAP
to further leverage and extend its business solutions." That could become
essential as the mobile market continues to evolve: "Given the exploding
interest in smartphones, tablets and other handheld computing devices, this
qualifies as a classic no-brainer."
SAP clearly sees mobile computing, cloud
computing and on-premises enterprise resource management applications as the
primary underpinnings of its business in both the short and long term. The deal itself was negotiated,
apparently, as part of a merger agreement signed by SAP
American, the organization's U.S. subsidiary, with Sybase selling at $65 per
share-a 44 percent premium over the company's average stock price last quarter.
The largest SAP acquisition since its
$6.7 billion purchase of business intelligence software producer
BusinessObjects in 2008, it only highlights the increasing premium placed on
mobile technology in the enterprise.
"Mobile devices are becoming the preferred interaction point with
business applications, whether the user is a factory supervisor, a retail
manager or an entrepreneur in a development nation," Jim Hagemann Snabe,
co-CEO of SAP
and a member of the SAP executive board,
wrote in a statement announcing the acquisition.
Other analysts concur on the mobile focus of the acquisition.
"SAP rightly understands that within
the next two to three years there will be more mobile platforms used in
business than desktops, especially in emerging markets where many businesses
are skipping the traditional PC device in favor of the many flavors of
smartphones and other wireless devices (e.g., the emerging trend [of]
tablets/slates)," Jack Gold, principal analyst at J. Gold Associates,
wrote in a May 12 research note.
"With the acquisition of Sybase," Gold wrote, "SAP
gets a proven technology player that has a major impact on mobilized solutions
across a wide swath of capabilities. And while mobility may be the driving
force behind this acquisition, SAP also gets
a high-quality analytics capability and mobile infrastructure play (Sybase 365)
it can leverage to boot."
Gold added that SAP has not been
"terribly successful in the past with mobilizing its suite of back-office
applications on its own, despite years of trying." The Sybase acquisition
gives SAP access to the former's mobile
middleware Unwired Platform, in addition to a host of mobile management,
security and smartphone secure-client technologies. In addition, Sybase comes
with capabilities in large-scale, real-time data analytics and a track record
in mobilizing enterprise apps.
"While Sybase owns a nice niche, especially in the financial industry,
it cannot compete head-to-head with Oracle in applications suites. This has put
them at a disadvantage, and a combination with SAP
can rectify this," Gold wrote. "Finally, buying Sybase takes the
leading platform vendor for mobile out of the market and away from ... possible
capture by a competitor of SAP, so this is a
strategic business acquisition as well as a strategic technology one."
SAP has indicated a willingness to
examine other possible acquisitions, but company executives have not said the
company means to embark on an Oracle-style spending spree.
"You can easily buy yourself growth in this industry," Snabe
during an April 14 news conference. The industry, he added,
is "seeing lots of acquisition to build revenue growth, but very little
innovation. We have done the opposite. We have tried to innovate."
Bill McDermott, however, acknowledged that the company would be open to any
acquisitions that "made sense."