Ariba Is Latest Acquisition In SAP's Move Into Cloud
05/22/2012| 06:58pm US/Eastern
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--SAP sees "game-changing opportunity" in deal
--Adds commerce platform to SAP cloud suite
--Ariba clients may invigorate demand for other SAP software
By Steven D. Jones
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German enterprise software maker SAP AG (SAP, SAP.XE) said Tuesday it will acquire cloud-based business commerce network Ariba Inc. (ARBA) for $4.3 billion in cash, a deal that will significantly expand SAP's cloud offerings.
SAP will pay $45 for each share of Ariba, a 20% premium to the stock's closing price Monday. Walldorf, Germany-based SAP will finance the deal with cash on hand and a term loan. Ariba's board unanimously approved the deal, which is expected to close in the third quarter.
Calling the deal a "game-changing opportunity," SAP co-Chief Executive Jim Hagemann Snabe said acquiring Ariba gave SAP a global network to track and manage purchases. He said Ariba's network would be combined with SAP's resource-planning and back-office software suite to create a network that was "more powerful, innovative and agile than any single entity."
The acquisition comes as more enterprises turn to the cloud for software that is either installed behind corporate firewalls or streamed into their businesses from remote servers. Cloud proponents say the software is less costly and easier to update and maintain than programs that customers install at their own data centers.
SAP has found it difficult to deliver cloud software as a service. It launched its Business ByDesign cloud service in 2007 with the goal of signing up 10,000 customers and had attracted about 1,000 customers by the end of last year. The company acquired U.S.-based SuccessFactors for $3.4 billion in February in an effort to boost its presence in the cloud. It indicated last month that the company needed to grow its cloud business even faster.
Other enterprise software companies have also turned to acquisitions to jump-start their cloud strategies. Competitor Oracle Corp. (ORCL) purchased Taleo, a maker of Web-based talent management tools, and RightNow Technologies, which makes customer-service applications delivered via the cloud.
Sunnyvale, Calif.-based Ariba also was on the acquisition track. Last year it acquired privately held Quadrem Inc. for its broad customer base in South America and Asia Pacific. Added to Ariba's core business in North America and Europe, the deal expanded Ariba's reach to more than 65 countries.
Ariba built a cloud-based trading community to help companies collaborate with suppliers. It had $444 million in total revenue in 2011. SAP said it plans to consolidate all cloud-related supplier assets of SAP under Ariba.
Besides expanding its cloud offerings, Ariba customers may boost demand for other SAP software. William McDermott, co-CEO of SAP, said he expected the addition of Ariba customers to "clearly invigorate the on-premise business of SAP."
Last month, SAP reiterated its outlook for double-digit revenue growth in the second quarter and full year as the world's largest business management software maker reported a rise in net profit despite weak sales in North America and some European markets.
SAP's American depositary shares were down 0.1% to $58.64 in after-hours trading. Ariba closed up 19% at $44.87.
-By Steven D. Jones, Dow Jones Newswires, 360-834-1865, steve-d.jones@dowjones.com.
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