Should SAP Go Shopping for Acquisitions?

I wonder if SAP AG (NYSE: SAP  ) isn't trying to copy IBM's (NYSE: IBM  ) best ideas these days.

SAP CEO Leo Apotheker, commenting on this morning's second-quarter earnings report, said that he was "excited about the new products that we are delivering to our customers, solutions that provide them more transparency and clarity into their businesses, which are especially crucial in times like these."

Remind you of anything? I'm thinking of how IBM is buying SPSS (Nasdaq: SPSS  ) in order to boost its predictive powers. SAP is a player in the data mining sector where SPSS makes its bread, as is archrival Oracle (Nasdaq: ORCL  ) , alongside a host of smaller operations.

Are Apotheker's musings a sign of the business intelligence and analysis market rising to prominence right now?

SAP's own business could sure use a catalyst of some sort right now -- sales in constant currencies fell 14% year-over-year to $3.6 billion, worse than Oracle's 5.5% decline or IBM's 13% fall over their closest comparable periods. Adjusted earnings per share fell 2% year over year, comparable to Oracle's performance but far behind Big Blue. The German enterprise software giant has about $4.8 billion of liquid assets on hand, so a sizable acquisition wouldn't be out of order.

Among the potentially available small-cap business intelligence specialists that could keep SAP apace with IBM's buyout-hungry ways, a couple of names deserve at least a passing glance:

  • SPSS rival Fair Isaac (NYSE: FIC  ) would raise SAP's public profile in North America, but the company's narrow financial focus may be too niche for SAP.
  • Teradata (NYSE: TDC  ) might be a more logical target for SAP, thanks to a wider range of products in the fields of data storage, information management, and deep analysis. But it's not the bite-sized tidbit that Fair Isaac is, and is too big for SAP to buy out of its own wallet.
  • But TIBCO Software (Nasdaq: TIBX  ) looks like the best of both worlds. The company is small enough to be affordable, yet innovative enough to provide SAP with a real edge on the business information battlefield. And if SAP won't bite, maybe Larry Ellison will. Even the Switzerland of enterprise computing must have a price.

Mergers and acquisitions are all the rage right now, and it would behoove SAP to get in while the getting is good. Ready to spend some Euros to make some Euros, Mr. Apotheker?

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Fool contributor Anders Bylund holds no position in any of the companies discussed here. You can check out Anders' holdings or a concise bio if you like, and The Motley Fool is investors writing for investors.


Read/Post Comments (3) | Recommend This Article (3)

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  • Report this Comment On July 29, 2009, at 5:48 PM, lhenkel wrote:

    Interesting article, except that SAP bought Business Objects last year. They have tons of BI, data-mining, predictive etc. Not to say some of the companies you listed wouldn't improve their offering..

  • Report this Comment On July 30, 2009, at 12:18 AM, david246 wrote:

    TIBCO Software may be good but not the ideal option. Check out one of the pioneers in data mining and predictive analytics, Angoss Software in Canada.

    www.angoss.com .

    Angoss been positioned by Gartner, Inc. in the challengers quadrant in the ‘Magic Quadrant for Customer Data Mining Applications'. Their predictive analytics is highly praised. They trade at <$1 with 5 cents a share operating profit last quarter.

  • Report this Comment On July 30, 2009, at 7:03 AM, dudemonkey wrote:

    Please God, no!!! SAP has the worst support and their products don't work well. Their purchase of Business Objects took a technically bad product and made it worse. No more SAP!

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