Oracle rival SAP to pay $6.8 billion for Business Objects

SAP, the big German software company that competes with Oracle, has agreed to buy Business Objects, a leader in the fast-growing market for business intelligence software, for $6.8 billion.

The move underlines the appeal of companies that make software used to cull through the huge stores of data that corporations accumulate on their own and over the Web to search for insights to help them cut costs, spot sales opportunities and outwit rivals.

Makers of business intelligence software have become takeover targets in recent months. The largest previous deal came in May when Redwood City software maker Oracle bought Hyperion Solutions, a Santa Clara business intelligence software company, for $3.3 billion.

The deal is a departure from SAP's longtime approach of shunning big acquisitions. But in a conference call Sunday, SAP Chief Executive Henning Kagermann said the purchase of Business Objects, which has dual headquarters in Paris and San Jose, was an exceptional case.

"It's a fast-growing market - business intelligence," Kagermann said.

Thomas Hofmann, an analyst at Landesbank Baden-Wuerttemberg in Stuttgart, Germany, said the deal is "a dramatic shift in strategy" for SAP. "They're really moving toward the direction of Oracle and maybe that's because they're feeling Oracle is coming closer."

Business Objects had been rumored to be a takeover target for more than a month. Its share price had risen about 15 percent in the last few weeks, as SAP, Oracle and IBM were all said to be interested in buying the company.

The SAP offer of 42 euros a share in cash is roughly 20 percent above last week's closing price for Business Objects and places a value of more than 4.8 billion euros ($6.8 billion) on the company.

In its most recent quarter, Business Objects reported a 23 percent increase in sales, to $363 million, while profit rose 68 percent to $66 million.

Business Objects CEO John Schwarz said in the conference call that 40 percent of his company's customers are SAP customers. "We have a tremendous opportunity to align and package solutions together," he said.

SAP, analysts say, needs to add more capabilities to its business software to increase sales and prompt customers to buy new versions. The promise that business intelligence software might be able to glean insights from the data flowing through SAP's enterprise software could justify the price of the Business Objects purchase, analysts say.

The goal, Kagermann said, was to put "better analytics" into "our end-to-end business process software." He said he did not anticipate cutting Business Objects' workforce.

The $18-billion-a-year business intelligence market is increasingly moving into the hands of larger companies. Microsoft has made a big push into business intelligence in the last two years.

Author: Steve Lohr @ New York Times

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