May 23, 2012

p> WHERE'S THE MEAT?

SAP's offer values Ariba at eight times estimated 2012 sales, which is more than SAP paid for SuccessFactors and Oracle for Taleo.

SAP shareholders voiced some concerns at the company's annual general meeting on Wednesday about SAP's cloud strategy, saying they did not want a repeat of the dotcom era when huge multiples were paid for loss-making start-ups.

"Where is the meat?" one shareholder asked management.

SAP has so far not made any money with the cloud business, and has said it couldn't promise the business would be profitable next year. But even after the Ariba purchase, it expects to widen its operating margin to 35 percent by 2015, from 33 percent last year.

The Ariba deal comes just weeks before Oracle CEO Larry Ellison is due to announce the Silicon Valley company's latest cloud software strategy, on June 6.

It also comes a week after SAP said it planned to expand its cloud computing business without further major acquisitions, sparking concern that its cloud strategy might be less than fully formed.

After buying SuccessFactors, SAP appointed the U.S. company's founder and Chief Executive Lars Dalgard to its executive board and put him in charge of SAP's overall cloud business. Ariba, however, will be run as a standalone business, separate from SAP's other cloud assets.

Asked whether there were more big buys in the pipeline, SAP co-Chief Executive Jim Hagemann Snabe said acquisitions were not at the heart of SAP's strategy but would only be used to kick-start certain businesses.

Deutsche Bank and JP Morgan advised SAP on the Ariba deal and are also arranging financing.

SAP said the transaction would be funded from free cash and a 2.4 billion euro term loan facility.

Shares in SAP were down 1 percent at 47.33 euros in high trading volumes by 1324 GMT, outperforming the STOXX Europe 600 Technology index, which was down 2 percent.

Officials at eBay, IBM and Oracle could not be reached to comment on speculation they might consider rival bids. (Reporting by Harro ten Wolde and Maria Sheahan; Additional reporting by Noel Randewich and Jim Finkle; Editing by Will Waterman)

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