FT.com / Companies / Europe - SAP signals hunger for deals

FT.com / Companies / Europe - SAP signals hunger for deals

SAP signals hunger for deals
By Gerrit Wiesmann in Frankfurt and Pan Kwan Yuk in Paris

Published: October 8 2007 20:20 | Last updated: October 8 2007 20:20

Germany’s SAP, the world’s largest maker of business software, Monday signalled it could look at further acquisitions even as its departure from an avowed strategy of organic growth sent investors running for cover.

Outlining an agreed takeover offer worth €4.8bn ($6.7bn) for Franco-American software house Business Objects, SAP chief executive Henning Kagermann said SAP was on its “way to proving we can make larger acquisitions”.

The company’s announcement late Sunday that it was buying the market leader in programmes to collect and sift corporate data knocked 4 per cent of SAP stock in trading Monday.

The shares closed at €39.95 in Frankfurt.

Investors were rattled because Mr Kagermann had for years underlined SAP’s superiority to US rival Oracle by pointing out the German company was focused on organic growth – not dealmaking.

To catch SAP, Oracle has spent billions on buying rival makers of central business programmes as well as end-user suppliers such as Hyperion, a Business Objects rival, it bought for $3.3bn (€2.3bn) this spring.

But at a press conference in Frankfurt, Mr Kagermann said the largest acquisition in SAP’s history was not a reaction to Oracle.

“We have not seen … that Oracle is gaining market share,” he stressed.

He said the move was consistent with SAP’s strategy outlined as far back as 2003. Having “done our homework” in its two core sectors, which would still grow organically, SAP now had time to look at end-users’ needs.

As demand for traditional manufacturing and supply-chain management slows, SAP said that sales of business analysis software were growing at around 10 per cent per year from current annual sales of about €10bn.

In buying Business Objects, SAP would be able to offer its clients more integrated features, Mr Kagermann said, stressing that demand for such end-user features would likely continue to rise over the next years.

“There are other areas in which such a move would make sense,” Mr Kagermann said, noting that ever more companies wanted integrated software. “But [the acquisition of Business Objects] is by far the most important.”

SAP has spent the past years reinventing its so-called business process platform, the nervous systems of companies’ IT systems, and making a foray into the market for mid-sized companies, which critics argue came late.

Copyright The Financial Times Limited 2007