SAP Could Hold Key to App Battle
thestreet.com
By James Rogers
05/12/09 - 05:39 PM EDT
Rumors that Microsoft(MSFT Quote) is planning to buy SAP(SAP Quote) may be wide of the mark, but the German software giant is still seen as a key player in a turbulent tech landscape.
Microsoft CEO Steve Ballmer dismissed recent speculation about a SAP purchase as "random rumor" on Tuesday, according to media reports. Ballmer poured water on the rumor just a day after Microsoft sold a $3.75 billion debt issue, which had added fuel to the M&A chatter.
With the tech sector in a state of flux, however, there is a great deal of interest in which firms will be next on the block. Oracle's(ORCL Quote) recent acquisition of Sun Microsystems(JAVA Quote), for example, was a surprise move that sent shockwaves though the software sector.
By adding its database software to Sun's Java, Solaris, MySQL and server technology, Oracle could pose a serious challenge, not just to SAP, but also to some of its key competitors.
"Our view is that the Oracle-Sun deal may be a net negative for both IBM and SAP," wrote Patrick Walravens, an analyst at JMP Securities, in a recent note. "For SAP, it is losing more and more of the [application software] stack."
The analyst explained the some SAP installations will now sit on a Sun server running the Solaris operating system and an Oracle database, meaning that Sun/Oracle owns a significant chunk of the software market.
IBM(IBM Quote), which had attempted to buy Sun before Oracle stepped in, could even fix its sights on SAP, according to Walravens.
"As Oracle opens more fronts against IBM, we believe IBM may eventually decide to move into the applications business in a big way, perhaps by acquiring SAP," he wrote. "Just as Oracle is actively converting PeopleSoft, JDE, and Siebel customers to the Oracle [application] stack, if IBM bought SAP it could try to move SAP customers to its stack."
SAP CEO Leo Apotheker refused to comment on the Microsoft chatter at a news conference earlier this week but said that it is in the company's best interest to stay independent, according to Reuters.
"Our customers believe an independent SAP is the best value they can get," he said.
Despite SAP's desire to remain a standalone company, at least one tech sector CEO would not be surprised if the company still becomes M&A bait.
"We think there's a big battle emerging in the tech field," said Sunny Gupta, CEO of Seattle, Wash.-based software company Apptio. "When you start looking at IBM, and you start looking at Microsoft, they need a very deep application stack to compete against the likes of Oracle."
Gupta explained that Microsoft has already made some investments in its application business such as its acquisition of Great Plains Software, but these efforts have mainly focused on mid-market.
"The number one [enterprise] player out there is SAP -- the only way for companies like IBM and Microsoft to compete with Oracle is to buy SAP," he added. "The way that the landscape is shaping up, it wouldn't surprise me, and I wouldn't even rule out H-P."
A long-standing Microsoft partner, SAP has not had the easiest time of it recently, and that has probably contributed to the M&A rumors. Last month the Waldorf, Germany-based firm reported a decline in first-quarter net income as software revenue fell 33%.
SAP's shares rose 7 cents, or 0.2%, to $40.02 on Tuesday, as the Nasdaq slipped 0.88%. |
