SAP acquires Sybase for $5.8 billion, but why?

SAP acquires Sybase for $5.8 billion, but why?

Summary: SAP makes a land grab acquisition with Sybase at $5.8 billion. Does it make sense and if so how?

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Rumors have been circulating the last days that SAP would announce a significant acquisition. There had to be something in the wind since Vishal Sikka, CTO SAP was a no-show at TIBCO's TUCON second day keynote. Today, we learn the target is Sybase.

The deal is expected to close at $5.8 billion via a tender offer, a 44% premium on the average last three months' Sybase share price. The deal is financed from SAP's existing cash resources plus a $2.75 billion loan facility. SAP believes the acquisition will be immediately accretive and Sybase will operate as a stand alone brand.

Also see:

SAP announces $5.8 billion acquisition of Sybase SAP to acquire again? Dana Gardner: SAP buys Sybase, gets back in the race SAP acquires Sybase: Mobility and database options SAP: More company news and full coverage

John Chen, CEO of Sybase said: "We see potential in the combination of the leader in business applications and the leader in mobile...I firmly believe this transaction is about growth. " Vishal Sikka said: "This will dramatically increase our presence in mobile...supporting all platforms, Blackberry...Windows...Google...Apple"

The last couple of years, SAP has talked implicitly about proliferating SAP via devices so at one level this acquisition fits into a strategy that's been infolding for a while. However, as Ray Wang notes:

SAP has broken its promise of no more big acquisitions after the BusinessObjects deal.  However, these acquisitions make sense toward the path of next generation applications.

During the analyst call, much was made of the in-memory database core that SAP has developed and Sybase column stores as an enhanced baseline requirement for analytics in large scale environments. One short term problem will be a perceived confusion over database selection and the future of the relational database in SAP environments. Vishal Sikka disputes that, describing the market as both mature but diverse. Sybase has a significant market share in financial services, a market around which SAP sees huge potential despite the recent financial services sector meltdown. But how real is the likelihood of SAP emerging as a key FSI player?

Co-incidentally, earlier in the week, I heard a presentation from Deutsche Bank which showed SAP at the core of the bank's applications strategy as part of a complete applications overhaul. SAP is only providing back office and even then a pared back version with emphasis elsewhere. It is others that are providing the applications and services that will make an operational and value led difference. Deutsche Bank is a marquee SAP customer in its own back yard. If this is representative of the extent of SAP's ability to develop profitable relationships in this market then that is anything but a done deal.

On the mobile side, questions must be raised about what this means for applications - again in the financial and telco utility space. Most applications in these markets are driven by opportunistic marketing campaigns requiring the development of new offers. That in turn often means custom development. Does SAP think that Sybase and in-memory gives them an entree to this massive market? If so how does it plan to manage all the integrations required? Where is the rapid apps development environment that would make SAP a natural choice? It has no real ownership in these markets such that the new combination makes direct sense.

One analyst on the call asked about a middleware acquisition. That's a necessary pre-requisite in my opinion for this acquisition to make genuine sense for the declared joint markets. SAP management was quick to discount the 'stack ownership' question. I don't see this as a defensible position for the long term - whatever they may say about technical synergies.

If SAP really wants to capitalise on all these opportunities it has to make a middleware and integration play or - as seems increasingly the case - deepen its relationships with integration and technology providers like TIBCO and SAG. This has the curious effect of creating a perverse dependency on smaller players who do this kind of heavy lifting. Or...it creates the circumstances under which another acquisition is inevitable.

See also Dana Gardner's assessment of this deal as a shotgun wedding and Sam Diaz earlier report of rumors around this deal.

Topics: Data Management, Data Centers, Enterprise Software, SAP, Software

Dennis Howlett

About Dennis Howlett

Dennis Howlett is a 40 year veteran in enterprise IT, working with companies large and small across many industries. He endeavors to inform buyers in a no-nonsense manner and spares no vendor that comes under his microscope.

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19 comments
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  • SAP should have acquired MS

    Get the database, middleware, decent portal and business productivity apps all in one.
    Sybase is rubbish.
    hubivedder
    • RE: SAP acquires Sybase for $5.8 billion, but why?

      @hubivedder
      Sybase is not rubbish, Sybase is just rusty, also SAP is rusty and outdated.
      magallanes
    • RE: SAP acquires Sybase for $5.8 billion, but why?

      double post.
      magallanes
    • RE: SAP acquires Sybase for $5.8 billion, but why?

      @hubivedder So SAP with a market cap of 40Bln Euros should have bought Microsoft with market cap of $258Bln? Using what? Its good looks? If that merger would take place, MS would have acquired SAP.
      hawks5999
  • RE: SAP acquires Sybase for $5.8 billion, but why?

    Rubbish? What have you been smoking?
    CyberGuerilla
  • RE: SAP acquires Sybase for $5.8 billion, but why?

    Don't know what Sybase was asking for licenses to their DBs but from what I've heard and read Oracle's pricing is way out there. I'm suspecting SAP will build right on top of Sybase's db and offer a cheaper solution to most companies.
    TxM2xTx
    • RE: SAP acquires Sybase for $5.8 billion, but why?

      @TxM2xTx has no idea what he's talking about... SAP has tried to convince its customers to go off Oracle by announcing deals with every other database vendor (sans Sybase) and has been unable to get people to move. Why? Because Oracle just works. No one in their right mind is going to switch to a Sybase-based version of SAP ever. Why? Because SAP users are the most risk-averse people on the planet. they stick with their old SAP versions and they trust Oracle.
      rbonvani@...
      • RE: SAP acquires Sybase for $5.8 billion, but why?

        @rbonvani@...
        Maybe Sybase will replace MaxDB
        hawks5999
    • RE: SAP acquires Sybase for $5.8 billion, but why?

      This is not about the DB systems, but about the mobile, the modeling and the managing products and services of Sybase. SAP business apps are moving to Web and to mobile devices. SAP need the knowledge asap.
      adam.tarcsi
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  • RE: SAP acquires Sybase for $5.8 billion, but why?

    The only thing I like about Sybase is it's data modeling tools.
    FlNightWizard
  • RE: SAP acquires Sybase for $5.8 billion, but why?

    To those who is telling "Sybase rubbish" - really what have you been smoking?<br><br>Sybase = superior Sybase IQ for datawarehousing, that tens and hundreds time faster than Ora, MS, IBM<br>Sybase = perfect PowerDesigner, may be one who can combine all modeling starting from phisical ending enterprise architecture<br>Sybase = ReplicationServer superior thing for heterogeneous and ordinary replication<br>Sybase= ASA - small and cheap db server giving most of enterprise class db superior replication and platform independence<br>Sybase= history and first client-server db, first replicas, best mobility,etc<br><br>Stop smoking, live more and study more, before telling who is rubbish. Sad, that Sybase will disappear now in big SAP machine.
    An01
  • Oracle?

    Doesn't anyone see this as a strategy to survive? They may be possibly stronger in combination than as independant.
    pikeman666
  • Sybase has great products

    I remember using Sybase Adaptive Server (system 10) running on NT4 when I was an intership CompSci student at the Bank of Montreal in Toronto. We used Active Server Pages (ASP) to with Sybase to create intranet apps for the bank's 30,000 employees.
    No complaints back then...I wonder how their db stuff compares to SQL Server 2008, the latest PostgresSQL, MySQL with InnoDB, and "the overpriced Oracle" lol!.
    maxtheitpro
  • RE: SAP acquires Sybase for $5.8 billion, but why?

    It's quite simple really...<br><br>With Oracle's acquisition of Sun, they inadvertently got MySQL which had acquired SAP DB from SAP.<br><br>So that gave Oracle a three tier approach, with Oracle DB at the top, Max DB (which probably replace Oracle XE or be renamed 12g XE) at the middle and MySQL at the bottom.<br><br>Microsoft also has a similar strategy with SQL Server Azure at the top (cloud), SQL Server 2008 R2 at the middle and SQL Server Express at the bottom.<br><br>At the SAP side, at this moment, they don't have any top, middle or low end. This is where things get interesting. SAP will never target the low end, so they only need to choose Sybase to either be at the top or at the middle.<br><br>If they choose Sybase at the top, they can funnel resources to optimize SAP under Sysbase and target the cloud. Oracle will be left at the middle and bottom, with MySQL. SAP could create hosted services and Corporate will have no objection on them using an unknown database. That would also create a SQL Server Azure compatible offering in the cloud, since they both share the TSQL language (Azure SQL doesn't offer the extensions that MS has created with time that has diverted from the Sysbase standard).<br><br>Also the mixed branding of cloud offering will avoid confusion. So a SAP Sybase Enterprise Cloud will not be confused with a SAP Enterprise One product.<br><br>Just my two cents.
    cosuna
  • RE: SAP acquires Sybase for $5.8 billion, but why?

    It's quite simple really...<br><br>With Oracle's acquisition of Sun, they inadvertently got MySQL which had acquired SAP DB from SAP.<br><br>So that gave Oracle a three tier approach, with Oracle DB at the top, Max DB (which probably replace Oracle XE or be renamed 12g XE) at the middle and MySQL at the bottom.<br><br>Microsoft also has a similar strategy with SQL Server Azure at the top (cloud), SQL Server 2008 R2 at the middle and SQL Server Express at the bottom.<br><br>At the SAP side, at this moment, they don't have any top, middle or low end. This is where things get interesting. SAP will never target the low end, so they only need to choose Sybase to either be at the top or at the middle.<br><br>If they choose Sybase at the top, they can funnel resources to optimize SAP under Sysbase and target the cloud. Oracle will be left at the middle and bottom, with MySQL. SAP could create hosted services and Corporate will have no objection on them using an unknown database. That would also create a SQL Server Azure compatible offering in the cloud, since they both share the TSQL language (Azure SQL doesn't offer the extensions that MS has created with time that has diverted from the Sysbase standard).<br><br>Also the mixed branding of cloud offering will avoid confusion. So a SAP Sybase Enterprise Cloud will not be confused with a SAP Enterprise One product.<br><br>Just my two cents.
    cosuna
  • RE: SAP acquires Sybase for $5.8 billion, but why?

    do you remember the acquisition of Terra.com by Telefonica worth 12 billion ? where is Terra now ? this deal smeals bad.
    marco.casalino@...
  • RE: SAP acquires Sybase for $5.8 billion, but why?

    SAP should have acquired MS?? HAHAHAHA..This is the best comment I have ever heard...Market cap of MS is huge and they r a big shark...SAP acquiring MS is close to Mission Impossible but the other way is possible (MS acquiring SAP). Infact, they tried doing it abt 2 years back. Discussions were on...
    anonymous
  • SAP Next Generation Applications?

    Buying up old tired software companies will not lead to next generation applications. It may bring new customers, recurring revenue and short term benefits but next generation applications? I do not think so.
    The move to one tool that covers all business logic in any sector that removes custom hard coding to build to the exact requirement of users at a price that decimates current models is what the future holds - does not quite fit the SAP model?
    David Chassels