SAP paid a big premium for Sybase and there may be a good reason for that hefty price tag: Hewlett-Packard could also bid for the database and mobility software company.
One of the dangling questions about the SAP's Sybase purchase revolves around why the enterprise application giant paid so much. At a price of $65 a share, SAP paid a 56 percent premium to Sybase's closing price of $41.57 on May 11.
Cowen & Co. analyst Peter Goldmacher makes a compelling case that HP could make an offer for Sybase. In fact, Goldmacher argues that HP may have no choice.
SAP's acquisition of Sybase was positioned as a way to become a leading player in mobile enterprise applications. Although most of Sybase's business revolves around relational databases, CEO John Chen has remade the company as a leading mobile enterprise company.
Now here's where things get interesting. Goldmacher connects a few dots. First, HP bought Palm as a way to get a mobile OS and ultimately offer it as part of the overall business IT stack of stuff. Goldmacher's bottom line:
We believe that Hewlett Packard could emerge as a buyer for Sybase. Sybase's core offerings revolve around data, analytics and mobile, three critical holes in HP's current software strategy. HP has $12.4B (incl Palm) in cash on the balance sheet and the deal is $0.03 accretive to earnings at a 10% premium to SAP's purchase price of $65. If HP doesn't buy Sybase, it loses its last chance to be a relevant standalone competitor in data management and risks falling further behind enterprise data management titans Oracle and IBM.
The case is compelling for sure. Oracle ditched HP as a partner when it bought Sun. HP responded with a big Microsoft partnership that Goldmacher argues "still doesn't make HP an enterprise data player."
If HP owned Sybase, it would have a standalone database and be able to compete with Oracle's Exadata machines. On the software side of the house, Sybase would bring its IQ Analytics application and give HP a more credible business intelligence offering. Goldmacher thinks that HP's Neoview is sucking wind. Buying Sybase would be cheaper for HP than acquiring Teradata, a leading data warehouse and business intelligence player.
In other words, the argument for HP and Sybase is almost flipped compared to the SAP case. SAP talked mobility and the database business is something that will ride along as a separate entity. For HP, Sybase's database business would be more critical.
Goldmacher gets at a key point. HP's portfolio is dominated by hardware. HP Software is sizeable in its own right, but it doesn't have nearly the software weapons that IBM and Oracle have.
Now there's also a HP-Sybase mobility case too. Goldmacher notes:
We love the Palm acquisition because it enables HP to create a mobile platform that is not just Windows on yet another form factor. The ability to leverage the Sybase Unwired Platform on its own hardware and OS as well as any and all third party platforms immediately makes HP a massive competitor in the mobile space. We believe that having an open hardware and software solution will catalyze the arrival of broad-based enterprise mobile apps by offering customers an enterprise class, platform agnostic, standards-based solution.
Is HP the only other potential bidder here? Maybe not. Oppenheimer analyst Shaul Eyal said there could be a bidding war for Sybase and perhaps even Oracle steps in. SAP may still win the Sybase deal on strategic fit, but closing the acquisition may not be the lock it seems.
With HP and maybe even Oracle potentially waiting in the wings we now know why SAP didn't scrimp on the premium.
More news and analysis on the deal:
- Krigsman: SAP acquires Sybase: Mobility and database options
- McKendrick: SAP becomes Oracle East
- Howlett: SAP acquires Sybase for $5.8 billion, but why? SAP to acquire again?
- Gardner: SAP buys Sybase, gets back in the race
- Diaz: SAP announces $5.8 billion acquisition of Sybase