SAP makes biggest deal since 2014 in hunt for cloud business

2018-01-30 11:38 - Stefan Nicola, Bloomberg
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Berlin - SAP agreed to buy Callidus Software for about $2.4bn, its biggest acquisition in more than three years, as it seeks to bolster a cloud-based business that grew in the fourth quarter.

SAP said it generated sales of $8.4bn in the period, in line with analysts’ expectations, due to uptake of its flagship business software S/4 Hana. New cloud bookings, a keenly watched metric for future sales growth, grew 31% at constant currencies, the Walldorf, Germany-based company said on Tuesday.

Chief executive officer Bill McDermott has been expanding cloud-based services to challenge rivals such as and Oracle and serve clients using the software to run sales, manufacturing and human resources functions. 

Yet after swallowing Ariba, Concur Technologies and SuccessFactors for a combined $15bn in acquisitions between 2012 and 2014, SAP has been relatively quiet in the business software arms race.

SAP said it will pay $36 a share for Dublin, California-based Callidus, known as CallidusCloud, to give Europe’s biggest software company access to new sales analytic and customer engagement tools. It’s the biggest acquisition since the $7.4bn Concur deal that was announced in September 2014. Shares of Callidus closed at $32.7 as of end-of-trading on Monday.

“We did it because it’s the most innovative company in its space,” McDermott, who sat next to US President Donald Trump during his meeting with business leaders at the World Economic Forum in Davos last week, said on a call with reporters. “We want CRM, we’re going for it.”

Meanwhile, SAP’s flagship S/4 Hana software added 1 000 customers including Unilever and Puma in the fourth quarter to reach more than 7 900 users, a greater intake than in the previous three-month period. The software allows businesses to run tasks on their own machines or in a cloud-computing arrangement hosted by SAP or one of its partners. 

Operating profit, excluding share-based compensation, amortisation and other charges, was €2.36bn, missing the average estimate of €2.4bn. The company sees non-IFRS operating profit in a range of €7.3bn to €7.5bn this year.

SAP’s results fell slightly short of consensus because of "weaker-than-expected" license order entry in the final three months of the year, said Knut Woller, an analyst at Baader Bank, a miss seen as a "cycle hiccup" rather than the beginning of a negative trend.

SAP said the deal will be “essentially neutral” to non-IFRS earnings-per-share for fiscal 2018 and accretive to EPS in fiscal 2019.

SAP will fund the acquisition with existing cash reserves and an acquisition loan. The deal is expected to close in the second quarter of 2018, subject to approval from regulators and investors, SAP said in the statement.

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