SAP CEO exits: should investors cheer or worry?

FRANKFURT Mon Feb 8, 2010 1:16pm EST

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FRANKFURT (Reuters) - SAP (SAPG.DE) surprised markets with news Chief Executive Leo Apotheker had resigned and two board members -- Bill McDermott and Jim Hagemann Snabe -- were taking over as co-CEOs.

Some analysts see the new leadership team as well qualified, but others believe the abrupt change at the helm could slow down the world's largest business software firm's decision-making and reduce its focus on performance.

SELL

"We are concerned that the co-leadership might slow down the decision-taking process," Merck Finck analyst Theo Kitz wrote, rating the stock "sell."

BHF Bank analyst Jochen Klusmann forecast profitability might suffer under a potential shift in strategy under head of field organization McDermott and product development chief Hagemann Snabe.

"SAP's announcement that it aims at 'better aligning product innovation with customer needs' raises serious questions. We are worried about a stronger focus on innovation, possibly higher R&D costs and less focus on margins," he wrote, sticking to a "reduce" rating.

BUY

Other analysts see little risk to SAP's business focus.

DZ Bank analyst Oliver Finger said Apotheker's resignation would have a negative impact on the stock in the short term.

"However, two experienced managers are taking over," he wrote, keeping a "buy" rating and a fair value of 37 euros on the stock.

Credit Suisse analysts were also upbeat.

"Hagemann Snabe has been credited with improving the productivity of the Business ByDesign development team, while McDermott has headed one of the stronger sales forces in the software industry.

"Based on our confidence in the qualifications of both executives, the announced CEO shake-up does not alter our positive thesis on SAP," they wrote, keeping an "outperform" rating.

(editing by John Stonestreet)

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