I will take a slight detour from Analytics and talk about SAP's acquisition of #1 cloud company SuccessFactors (SFSF). Announcement
The combination of SAP & SFSF will produce a cloud powerhouse in the cloud segment of the enterprise software market and that is just starting to take off…
Strong business rationale:
· Gartner - HCM to be a $10B by 2015, Talent Management alone will be a $4.5B with 75% of it coming from cloud based apps
· SFSF is:
o #1 HCM solution in the cloud
o has 15m users from company of all sizes (CRM has only 3m users) in diverse 60 industries from across the globe (Example: Siemens has 450K seats)
o 60% recurring revenues from existing customers
o 90% of the growth is organic as oppose to Salesforce
o Has just 14% overlap with SAP customers – a tremendous upside for both companies (with total addressable market of 500m employees of all SAP customers)
· For SAP, SFSF will be a top-line acquisition with less emphasis on cost-synergies…
· Deal will be slightly dilutive on EPS in 2012 but will be accretive in 2013 with significant upside to our revenues in 2013
Financials:
- SAP paid $3.4 B to acquire SFSF which is not profitable yet.
- SAP is paying ~10x for 2011 revenues, a multiple HP paid for Autonomy
- For SFSF, street expects $332M in 2011 revenues; SFSF had $230M YTD revenues for the first nine months with $91M coming in Q3’11
- As of Sep, 2011, SAP had $5.2B in cash. The SFSF deal is all cash with $2B coming off SAP's own war chest and ~$1.4B of debt.
Taleo with 2011 expected revenues of $324M is barely profitable. Workday is on track to $320 million in billings in 2011, and is nearing profitability. Workday is preparing for an IPO.
Now let us talk about SFSF’s amazing growth over the past 9 years:
SFSF – a company which delivered a PERFECT hockey stick growth since 2002:
A revenue growth story that is enviable:
Operating structure has shown substantive improvement over the past 5 years:
Net net for SAP, a solid acquisition and timing couldn’t have been right. The ride has just begun…
Source: Company Financials and Analyst Calls
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