SAP Adds New Cloud IP With $3.4B Rescue of SuccessFactors

 
 
By Chris Preimesberger  |  Posted 2011-12-03 Email Print this article Print
 
 
 
 
 
 
 

SuccessFactors, which makes a progressive brand of human resources data management software provided via cloud service, lost $26 million last quarter but has promising IP.

SAP, the world's largest enterprise application maker and a well-known old-school-type IT provider, is looking to a relatively small San Mateo, Calif.-based company to lead it into the cloud application business of the future. It appears to be saving the bacon of that company at the same time.

Walldorf, Germany-based SAP announced Dec. 3 that it will pay $3.4 billion in cash, or about $40 per share, for publicly traded SuccessFactors, which makes a progressive brand of human resources data management software provided via cloud service.

The per share purchase price represents a whopping 52 percent premium over the Dec. 2 closing stock price of $26.25. SAP ended the Dec. 2 trading session at $59.54 per share.

SAP, which has been struggling with a cloud application strategy for several years and has fallen behind other competitors in the subscription-application-service market, needs a transfusion of new-generation IP. SAP, founded in 1972, has 54,500 employees globally.

"We have already spent a lot of efforts to try and build a next-generation platform for the cloud, and we feel comfortable around that. SuccessFactors has a proven track record of understanding the DNA it takes to be successful in the cloud," SAP CFO Dr. Werner Brandt said on a conference call to analysts and journalists.

Brandt said the combination of SAP and SuccessFactors will establish an "advanced end-to-end offering of cloud and on-premise solutions for managing all relevant business processes."

SuccessFactors will remain independent and be named "SuccessFactors, an SAP Company," Brandt said. SuccessFactors founder and CEO Lars Dalgaard will remain CEO of the company and join the SAP board of directors, Brandt said.

SuccessFactors' Business Execution Suite is used in 6 million deployed enterprise seats in about 4,000 companies around the globe. It competes directly against such cloud-application providers as Salesforce.com, Microsoft, and Google.

SF Yet to Experience Financial Success Factors

SuccessFactors, whose market capitalization value (total value of all its outstanding shares) is estimated at $2.21 billion, is not yet a profitable company. Although it brought in record total revenue of $91 million and gross profit of $58 million in the quarter ended Sept. 30, 2011, the company showed a net loss of $26 million on the books. The company spent $81 million on both sales and research and development during that quarter.

In the quarter ended June 30, 2011, SuccessFactors posted a $6 million net loss, so the company's financial fortunes were not exactly headed in the right direction. Thus, it appears that SuccessFactors needed a mentor as badly as SAP needed a new injection of IT innovation and talent.

Ten-year-old SuccessFactors, which has 1,447 employees worldwide, was founded by Dalgaard in 2001 and went public in 2007. Its software services are translated into 32 languages; the company currently has about 4,000 customers and 6 million users in 60 industries located in 185 countries.

 


 
 
 
 
Chris Preimesberger Chris Preimesberger was named Editor-in-Chief of Features & Analysis at eWEEK in November 2011. Previously he served eWEEK as Senior Writer, covering a range of IT sectors that include data center systems, cloud computing, storage, virtualization, green IT, e-discovery and IT governance. His blog, Storage Station, is considered a go-to information source. Chris won a national Folio Award for magazine writing in November 2011 for a cover story on Salesforce.com and CEO-founder Marc Benioff, and he has served as a judge for the SIIA Codie Awards since 2005. In previous IT journalism, Chris was a founding editor of both IT Manager's Journal and DevX.com and was managing editor of Software Development magazine. His diverse resume also includes: sportswriter for the Los Angeles Daily News, covering NCAA and NBA basketball, television critic for the Palo Alto Times Tribune, and Sports Information Director at Stanford University. He has served as a correspondent for The Associated Press, covering Stanford and NCAA tournament basketball, since 1983. He has covered a number of major events, including the 1984 Democratic National Convention, a Presidential press conference at the White House in 1993, the Emmy Awards (three times), two Rose Bowls, the Fiesta Bowl, several NCAA men's and women's basketball tournaments, a Formula One Grand Prix auto race, a heavyweight boxing championship bout (Ali vs. Spinks, 1978), and the 1985 Super Bowl. A 1975 graduate of Pepperdine University in Malibu, Calif., Chris has won more than a dozen regional and national awards for his work. He and his wife, Rebecca, have four children and reside in Redwood City, Calif.Follow on Twitter: editingwhiz
 
 
 
 
 
 
 

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