SAP to Boost Cloud Clout With $4.3 Billion Ariba Acquisition

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(Photo: Stock.xchng)
(Photo: Stock.xchng)

BUSINESS

  • SAP to pay $45 per share for Ariba – 20% higher than closing price
  • Bidding war predicted with main rival Oracle
  • Oracle responds with smaller acquisition

SAP AG, the world’s top business applications software company, is pushing further into cloud computing, with plans to secure a $4.3 billion acquisition deal for online commerce network group Ariba Inc.

The German company will pay $45 per share, a 20% increase on Ariba’s closing price on the previous day. The buyout is expected to be completed by the end of August.

The move from SAP is the latest in its cloud computing campaign, as it looks to outdo its main rival Oracle, the second-largest business management software maker. The California-based company has recently stolen a march on SAP in boosting its cloud-based services, thanks to a number of large purchases. 

Bidding Wars Still Ongoing

Ariba is the number-one player in online collaborative commerce applications and the second-largest cloud vendor in terms of revenue. SAP’s acquisition of the company will put it on a level playing field in the cloud computing sector, though other entities may still offer a higher bid.

"There is potential for other bidders to emerge. There is a history of bidding wars between SAP and Oracle, and this is exactly the kind of strategic company that would spark something like that,” says Richard Williams, an analyst from the Cross Research group.

A large proportion of Ariba’s customers also use Oracle’s cloud-based services, which Williams says makes it even more likely the US company will try to step in.

“Strategically it's a valuable asset and would disadvantage Oracle if SAP were to close the deal, so I can see a case for why Oracle would feel the need to enter into the bidding to protect its own potential growth opportunities," Williams said.

New Oracle Buyout

Oracle responded to SAP’s acquisition plans by announcing the takeover of a smaller cloud computing company Vitrue, a leader in cloud-based social marketing platforms. The deal is valued at $300 million.

SAP and Oracle have been leading the race to snap up online software companies to provide customers with a fully integrated cloud offering. Also referred to as software as a service, or SaaS, cloud software allows businesses to access online services via remote servers, freeing up their own servers and giving them access to a wider variety of portals such as mobile devices.

SAP’s last M&A activity in the cloud was its $3.4 billion takeover of San Mateo-based SuccessFactors last December. Oracle began its cloud-based buying frenzy in October, when it acquired RightNow Technologies for $1.5 billion, followed by the takeover of talent management solutions company Taleo Corporation in February.

Key Stats - Global Cloud Computing Market

  • The global enterprise mobile cloud computing sector is forecast to grow at an annual rate of 16.5% between 2011 and 2015. (source: TechNavio)
  • North America’s enterprise mobile cloud computing market is expected to show an annual growth rate of 18% between 2011 and 2015. (source: TechNavio)
  • China’s cloud computing market is expected to show a strong annual growth figure of 77.5% between 2010 and 2015. (source: NetScribes).

By James Mulholland for
James Mulholland is a Paris-based internet and broadcast journalist specializing in sports, current affairs and technology news, while also freelancing as a photographer.

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