Game Changer: SAP to Acquire Sybase

By  Susan Nunziata — May 12, 2010

In a deal that is testament to the accelerating demand for mobile business applications in the enterprise, Philadelphia, PA-based SAP Americas has signed a definitive merger agreement to acquire business database and mobile enterprise application platform vendor Sybase. The deal was announced May 12, 2010.
 
The Dublin, CA-based Sybase will operate as a standalone unit under the name "Sybase, an SAP Company." Sybase's management team will continue to run the business.
 
The news comes as SAP is about to kick off its annual Sapphire user conference in Orlando on May 17, 2010, which has an agenda laden with emphasis on mobility solutions and mobile strategies.
 
"The growth of mobile devices, such as the iPhone and BlackBerry Bold, has perpetuated end-user demand for access to crucial enterprise applications and information on the go," says Sheryl Kingston, Director of Yankee Group's Enterprise Research Group in Boston. "SAP has the capacity and innovation to create those desired mobile applications, complete with intelligently embedded functionality like unified communications, presence and location-based services and multimedia, but until now they had no way to support them.
 
"Sybase brings to the table a mobile platform that can help SAP transform their applications to be consumed anywhere, anytime on any device. This is crucial for SAP to stay competitive. Past Yankee Group reports have elaborated on the need for enterprise applications to adopt cloud computing, mobility and social media technologies -- this deal gives SAP two out of three in one purchase."
 
The deal brings many assets to the combined entity, notes Andrew Borg, Senior Research Analyst, Wireless & Mobility, Aberdeen Group. "Highly visible among them are in-memory computing and a robust mobile platform that together bring the 'real-time enterprise' one step closer to reality."
 
SAP customers have been "crying out for ways to extend applications" to mobile devices, says Stephen Drake, IDC's Program VP, Mobility & Telecom. "They may be able to improve their lot with Sybase, and get [its] components such as mobility management, database and security features that they may not have gotten elsewhere."
 
The deal could move SAP applications from "on-demand to on-device," adds Drake.

However, Drake notes that it will be critical for Sybase to reassure its non-SAP enterprise customers that it will maintain a "vendor agnostic" approach as a standalone division of SAP.

In a prepared statement, SAP said it will continue to support each organization's product road map while enhancing products to help customers derive additional value from existing investments. It also stated that both companies' development organizations would remain intact, with the opportunity to cross-collaborate to increase innovation for customers.
 
"SAP rightly understands that within the next two to three years, there will be more mobile platforms used in business than desktops, especially in emerging markets where many businesses are skipping the traditional PC device in favor of the many flavors of smart phones and other wireless devices (e.g., the emerging trend in tablets/slates)," says Jack Gold, Founder & Principal Analyst at J. Gold Associates. "Getting to this 'next billion users' is critical to SAP's long term success.
 
"With the acquisition of Sybase, SAP gets a proven technology player that has a major impact on mobilized solutions across a wide swath of capabilities. And while mobility may be the driving force behind this acquisition, SAP also gets a high quality analytics capability and mobile infrastructure play (Sybase 365) it can leverage to boot."
 
A Game-Changing Transaction
The deal is "a game-changing transaction" for SAP and Sybase customers, says Bill McDermott, co-CEO of SAP and member of the SAP Executive Board, in a prepared statement.
 
He adds that customers of the two companies "will be better able to connect their employees with key functionality and information from anywhere and make it easier for companies to make faster, more informed business decisions in real time."
 
Adds Jim Hagemann Snabe, co-CEO of SAP and member of the SAP Executive Board, "Mobile devices are becoming the preferred interaction point with business applications, whether the user is a factory supervisor, a retail manager or an entrepreneur in a developing nation. The combination of SAP and Sybase will give users the option of running their operations from leading mobile devices and will unleash the full power of mobility, including messaging interoperability, content delivery and mobile commerce services, across all companies and roles and in any location.
 
"In addition, innovation around Sybase's established database business will pave the way for 'real' real-time analytics and finally remove the decade-old barrier between business applications and business intelligence."
 
Calling the deal a "transformative event in the software industry," Sybase CEO John Chen says the resulting combination of the two companies will enable customers to "transform their businesses in an increasingly data-, consumer- and mobile-centric world."
  
Accelerated Reach
SAP aims to accelerate the reach of its solutions across mobile platforms and drive forward the realization of its in-memory computing vision. The goal: to drive higher user adoption of SAP software and unlock significant business value out of existing customer investments. SAP, Sybase and their customers will be able to tap into Sybase's messaging network to reach 4 billion mobile subscribers through 850+ operator relationships worldwide and engage their consumers via alerts, transactions and promotions on their mobile devices.
 
For Sybase, SAP in-memory technology will provide the opportunity for dramatic performance improvements to its analytic processing capabilities. Sybase will also be able to bring its complex event processing and analytics expertise, which was built in the financial sector, to customers in other industries, markets and product areas in which SAP has a complementary, strong presence.
 
Finally, Sybase's core database business will be enhanced by SAP in-memory technology to deliver integrated transactional and analytical capabilities.
 
At the same time, SAP reinforced its dedication to customer choice by stating that it will continue its commitment to supporting leading database vendors.
 
Over the past 18 months, SAP has been cultivating its relationships with mobility players including Sybase and MEAP vendor Syclo, workforce optimization app ClickSoftware, and BlackBerry maker Research In Motion.
 
The synergies between Sybase and SAP will also expand opportunities for the partner ecosystems of both vendors. Software and implementation partners can capture new opportunities by innovating on Sybase's mobile platform, which will make it easier to create, deliver and securely manage mobile enterprise applications across major device types.

Business Details
The SAP Executive Board plans to propose to the Supervisory Board to appoint the Chairman and CEO of Sybase to SAP's Executive Board.
 
Under the terms and conditions of the merger agreement, SAP America, Inc., will make an all cash tender offer for all of the outstanding shares of Sybase common stock at $65.00 per share, representing an enterprise value of approximately $5.8 billion.
 
The per-share purchase price represents a 44% premium over the three-month average stock price of Sybase. The transaction will be funded from SAP's cash on hand and a 2.75 billion Euro loan facility arranged and underwritten by Barclays Capital and Deutsche Bank.
 
The Sybase board of directors has unanimously approved the transaction. The closing of the tender offer is conditioned on the tender of a majority of the outstanding shares of Sybase's common stock on a fully diluted basis and clearance by the relevant antitrust authorities. 
 
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