SAP plans to remain independent, says chief

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Henning Kagermann, chief executive of SAP, a German business software maker, believes consolidation in the sector has peaked and that big IT groups from the US are not planning to buy the market leader.

In an interview with the FT and sister paper FT Deutschland, Mr Kagermann tried to quell the excitement caused by Hasso Plattner, SAP chairman, who said recently a takeover of the company was always possible.

“I think we’ve seen the main thrust of consolidation. The next steps are going to be marginal,” Mr Kagermann said. The sector has recently seen Oracle, the number two, shell out billions for rivals such as PeopleSoft and Siebel.

The Californian company last year trounced SAP in a brief bidding war for Retek, a US maker of software for retailers, which would have marked the biggest transaction for SAP, a company otherwise focused on organic growth.

Instead of trying to buy big chunks of market share, SAP is betting on a new generation of software, launched last year, which is meant to give customers the flexibility to combine programs made by other companies.

“Our strategy of growing organically has proved successful even as other big players have gone together,” Mr Kagermann said.

“It’ll be enough for us to enrich our current portfolio with one or two smaller acquisitions.”

SAP has bought small companies including Tomorrow Now, which services Oracle products. But it has not been drawn into making significant further acquisitions, in spite of recent strong profits and a doubling of market capitalisation to more than €50bn ($65bn) in the past three years.

In spite of record growth since Mr Kagermann steered SAP from the wreckage of the technology bubble in 2003, Mr Plattner, a member of the company’s founding trio, said last month that a purchase by Microsoft, Google or IBM was possible. The remarks led to a rally in SAP stock as investors speculated about takeover premiums.

But Mr Kagermann said Mr Plattner’s remarks had been misunderstood and that the company would remain independent.

“These were single remarks made by someone who was in a good mood,” Mr Kagermann said. Mr Plattner was “constantly under observation” by a media ready to interpret every remark for “the last little bit of news”, he said.

Asked if he thought recent speculation that rivals could bid for his company in the foreseeable future was overdone, he said: “Yes, of course – not least because our customers want a strong, independent SAP.”

Such confidence is at least in part based on a notion that Oracle’s spending spree will cause it problems. Oracle recently revealed plans to overhaul its business offerings in the next few years.

“I thought they were going to announce that they’d put all their products together,” Mr Kagermann said.

“Instead, they’ve told their clients they’re going to rewrite all programs from scratch. That’s a hell of a task.”

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