* Some analysts say price for SuccessFactors is too high
* Others say deal will pay off in long run
* SAP paying 8 times 2012 revenue, more than peers
* SAP shares fall 2.5 pct, underperform main index
* Acquisition boosts stocks of other cloud-computing firms
By Maria Sheahan and Harro Ten Wolde
FRANKFURT/NEW YORK, Dec 5 SAP AG's
$3.4 billion takeover of SuccessFactors will help it
keep up with peers in the frenzied race for cloud-computing
business, even if the price paid is very high at first glance,
analysts said on Monday.
"We believe SuccessFactors could be a very good strategic
fit for SAP in the cloud sector and we prefer the decision to
grow externally in this booming area," DZ Bank analyst Oliver
SAP said on Saturday it was buying U.S. web-based services
company SuccessFactors for an agreed $40 per share, a 52
The deal helps SAP catch up with rivals in cloud computing,
a fast-growing field where data and processes are hosted
remotely on the Web.
As part of the transaction, SuccessFactors founder and
chief executive Lars Dalgaard will join SAP's executive board
and will run its cloud business.
"This marks implicit recognition by SAP that their cloud
strategy is not working," Evolution Securities analyst Roger
SAP shares were down 2.5 percent at 43.60 euros at the
market close in Frankfurt, while Germany's blue-chip DAX index was up 0.4 percent. SuccessFactors shares climbed 51
percent on the New York Stock Exchange to $39.70, nearly
hitting the price being paid by SAP.
Analysts had warned that SAP risked losing ground to rival
Oracle in the field of cloud-computing. However, there are not
many assets in the business available for purchase.
Salesforce.com is seen as too big to acquire,
Oracle Corp bought RightNow Technologies in
October, and NetSuite is majority-owned by Oracle CEO
"In fact, it is not clear who is next in line behind
SuccessFactors. For this reason, despite the apparently rich
price tag, we would not rule out the risk of a counter bid,"
WestLb analyst Jonathan Crozier said.
Heino Ruland, an analyst at Ruland Research, said the price
is way too high, adding that the race for cloud-computing
technology was heating up to the point where it seems market
players are spending irrationally just to stay in the game,
mirroring the dotcom bubble more than a decade ago.
The price SAP is paying represents about eight times
forecast 2012 revenues for SuccessFactors, analysts said,
compared with a multiple of 5.5 that Oracle paid for RightNow.
"The valuation of this deal is high but reasonable in our
opinion, in light of the high-growth, strategic asset that is
being acquired," Nomura analyst Rick Sherlund said.
SAP now says it aims to become the world's No. 1 cloud
business and plans to get there without more major
"We're going to remain an organic growth company primarily,
but where there is an opportunity, a crown jewel in the market
like SuccessFactors, and where it can help us become the cloud
powerhouse we want to be, you make the move," co-CEO Bill
McDermott said on a conference call with analysts and
SuccessFactors' operating margin jumped to 9 percent in the
third quarter from zero a year earlier, and the company said it
could not hire quickly enough to meet demand.
SAP raised its sales outlook on the deal, saying its
revenue could easily reach 21 billion euros by 2015, about a
billion euros more than expected. Its 2012 earnings will be
hurt by the purchase, but there will be a positive impact from
SuccessFactors, which went public at $10 a share four years
ago, makes human resources software used by companies to review
Shares of Taleo Corp , SuccessFactors' closest
rival in the business of offering human resources software over
the web, soared 21 percent in Nasdaq trade, rising $6.96 to
Shares of other software-as-a-service companies, such as
Cornerstone OnDemand Inc , Kenexa Corp and
Ultimate Software Group Inc , also rose sharply in
reaction to the news.
E-commerce firm Ariba Inc and travel and expense
management software maker Concur Technologies Inc were
JPMorgan advised SAP on the deal, while Morgan Stanley