SuccessFactors bought by SAP for US$3.4bn

SAP AG, the largest maker of business-management software, agreed to buy SuccessFactors Inc for US$3.4 billion in cash, stepping up competition with archrival Oracle Corp in the cloud--computing market.

The deal extends SAP's reach in the market for cloud-computing, which lets clients rent software delivered over the Web in other words than install it on their own machines. The company is promoting the idea as a safe way to outsource data centers and reduce the need for hardware. The SuccessFactors acquisition comes six weeks afterwards Oracle agreed to buy another cloud competitor, RightNow Technologies Inc, for US$1.5 billion.

Much-needed move

"This is a much-needed move by SAP," said Ray Wang, head of San Francisco-based Constellation Innovation, a innovation and advisory firm focused on innovation. "What SAP had in human resources - basic transactional software just as payroll - was good enough for the old era. In the new era, performance reviews and talent management will be important."

SuccessFactors has more than 3,500 clients, with more than 15 million subscribers in 168 countries. The company is predicted to have US$502 million in revenue in 2013, up from US$332 million this year, according to analyst estimates compiled by a Bloomberg.

Couple of weeks ago at 5

"We saw Oracle buy RightNow Technologies just a couple of weeks ago at 5.5 times that company's at once year revenue, and SAP is going to pay nearly eight times 2012 revenue," said Brendan Barnicle, an analyst at Pacific Crest Securities, "Nevertheless these guys are growing much faster than other people in software on demand, this is a marvelous addition for SAP."

SAP co-chief executive officer Bill McDermott said on a conference call on Saturday that the SuccessFactors deal would help SAP achieve its goal of exceeding 20 billion euros in sales in 2015. SuccessFactors founder Lars Dalgaard will join SAP's board and head up the company's cloud business.

The deal will "slightly" dilute revenues per share straightway year, previously adding to profit in subsequent years, the company said. SAP would for all that reach a 35 percent profit margin by 2015 - although companies that sell software in other words accessed over the Internet have a lower margin than other software, SAP chief financial officer Werner Brandt said.

The beginning of 2005

While Oracle Corp has spent more than US$42 billion on takeovers since the beginning of 2005, SAP had only made only two large acquisitions in its 39-year history earlier SuccessFactors: Sybase, a maker of mobile-device applications, for US$5.8 billion in May of last year and business-intelligence company Business Objects for 4.8 billion euros in 2007.