May 23, 2012

Software company SAP AG's deal to buy Ariba Inc opens a new front in its battle with Oracle for the internet-based cloud computing market, raising the possibility of a counterbid from its arch rival.

SAP, Europe's biggest business software maker, announced plans late on Tuesday to buy Ariba in a deal valuing the business and commerce network company at $4.3 billion.

Analysts said since many of Ariba's customers use Oracle services, there was good reason, and a precedent, to believe the U.S.-based Oracle might make a rival bid; in 2005, Oracle snatched retail software maker Retek away from SAP after a bidding war that reached $630 million.

International Business Machines, the world's largest technology services company, and e-commerce company eBay Inc could also be possible contenders.

"You never know. We will see. We think we paid a fair price, but you have to realize that there are few assets available in the world such as Ariba," SAP's co-Chief Executive Bill McDermott told journalists on Wednesday.

Though Ariba made a small loss last year, it boasts that more than 730,000 clients, including British Airways, Chevron and Tata Motors, use its services in activities such as procurement, contracts and cash management.

Arch rivals Oracle and SAP are both transforming themselves into major players in cloud computing - providing software, storage and other services from remote data centers over the Web - and reducing their reliance on traditional business software.

SAP announced the purchase of web-based software company SuccessFactors Inc late last year, while in February, Oracle agreed to buy Taleo corp, a maker of web-based software for recruiting employees, for about $1.9 billion.

Others said SAP's rivals might baulk at spending more than the $45 a share on offer, which was already a 20 percent premium to Ariba's closing price on Monday.

"That premium is not exactly small. The question is whether it is right to pay prices like that," a fund manager in Germany said, who holds SAP shares in his portfolio and who asked not to be named.

Ariba's shares closed at $44.87 on Tuesday, up 19.2 percent.

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