(Adds Context News) (The author is a Reuters Breakingviews
columnist. The opinions expressed are his own.)
By Olaf Storbeck
LONDON, June 6 (Reuters Breakingviews) - If you can't make
it, buy it. Europe's largest software maker SAP (SAPG.DE) has
been following this principle with the vigour of a late convert.
The German company ditched its longstanding penchant for organic
growth only a few years ago. Since then, it has been buying,
spending about $9 billion on acquisitions, about 10 percent of
its current market capitalisation, in the last 18 months.
So far, the deals have made strategic sense, mainly
strengthening SAP's market position in cloud computing. The
prices are another matter. This week's acquisition of Hybris, a
privately held Swiss peer, confirms both patterns.
Hybris offers a new generation of customer relationship
management software (CRM). It sells to such industry leaders as
Procter & Gamble (PG.N), Nespresso and Levi's. Hybris’ core
strength is the ability to provide a similar customer experience
on all distribution channels, from smartphones to websites.
The acquisition will cover up a hole in the SAP line. Parts
of its existing CRM software rank poorly with industry experts
such as Forrester Research, and have been losing ground.
According to research by consultants Gartner, SAP lost the top
position in CRM to Salesforce.com (CRM.N). That matters in an
$18 billion global market that grew by 12.5 percent last year.
SAP isn’t saying, but Reuters cites sources putting the
price at $1 billion or above. That would be a sky-high
valuation, at least 10 times annual revenue of about $110
million. Starmine data show the average sales multiple for
listed software companies is 3.5. Just this week IBM (IBM.N) and
Salesforce.com bought cloud computing companies at sales
multiples between 5 and 9.
SAP can point out that Hybris' revenue nearly doubled in
2012 and that other bidders were interested. In any case, now it
must integrate the acquisition and retain key staff. SAP has not
been particularly good at the latter, having lost the founders
of Sybase and SuccessFactors, two major recent acquisitions.
It looks like SAP has shown something like hubris -
overbearing arrogance - in the price it was willing to pay for
Hybris. It will take something more like humility to make the
SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS:
- European business software maker SAP has bought Swiss
software developer Hybris to expand its customer management
platform, both companies announced on June 6 without giving
- Two sources familiar with the matter told Reuters that SAP
paid at least $1 billion for the company.
- Hybris was founded in 1997 and is based in Zug,
Switzerland. It specialises in e-commerce software for customer
relationship management via different digital distribution
- In 2012, Hybris generated sales of around $110 million and
has about 500 customers worldwide. SAP last year spent almost $8
billion on acquisitions, buying the cloud computing firms
SucessFactors and Ariba.
- Reuters: SAP to buy Swiss firm hybris to boost cloud
(Editing by Edward Hadas and Sarah Bailey)
Keywords: BREAKINGVIEWS SAP/
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