SAP snaps up Business Objects

Our Corporate Bureau
08 October 2007

Investors in SAP were not so friendly. The company''s share price registered its sharpest decline in eight months in German trading today. The reason: the Business Objects acquisition is expected to reduce SAP''s earnings next year.

SAP will make a cash offer of €42.00 per ordinary share and for American Depositary Shares (ADS) at the US$ equivalent based on the EUR/US$ exchange rate as of the settlement of the tender offers. The Business Objects board of directors has approved the tender offer agreement between the two companies, and expects to recommend the offer to its shareholders subject to fulfillment of certain regulatory requirements.

Henning Kagermann

The German company is constantly at war in the enterprise marketplace with American IT major Oracle, which has been aggressively buying up companies to build a dominant share in the enterprise resource planning, or ERP, space. Oracle, which acquired PeopleSoft in 2005 and Siebel in 2006, grabbed business intelligence software provider Hyperion Solutions in April 2007 for $3.3 billion. Since 2005 Oracle has spent more than $25 billion on acquisitions, which include I-Flex in India.

Hyperion is in the same space as Business Objects, with a focus on financial management and reporting. The problem with its being swallowed by Oracle was that many Hyperion customers were also SAP customers. The German company had reason to feel threatened.

The Business Objects buy is the biggest acquisition so far by SAP, which has maintained an explicit strategy of growing by the organic route. But, as the business intelligence market showed signs of rapid growth (the BI market is said to be worth $10 billion, and growing at 10 per cent a year), SAP needed to pick up a company with strengths in this area. Oracle''s acquisition of Hyperion may or may not have pushed SAP into deviating from its strategy, but it certainly was an omen of the times.

SAP plans to sell Business Objects'' software to finance departments and executives who need to track costs and operational data around the world. The German company reportedly sells to two out of every five Business Objects customers, and hopes to leverage this overlap to expand business.