SAP SE (SAP - Free Report) concluded the acquisition of Callidus Software Inc. for $2.4 billion, in the past week. The company had entered into a definitive agreement to acquire Callidus on Jan 30, 2017.
The terms of the deal represent a purchase price of $36 per share. The buyout not only gives SAP access to new sales analytic and customer engagement tools but also bolsters its foothold in $46 billion cloud-based customer relationship management (“CRM”) market.
SAP anticipates the deal to be neutral to its non-IFRS earnings for 2018 and accretive to 2019 non-IFRS earnings.
The company plans to consolidate its vibrant SAP Hybris cloud portfolio, part of its Cloud Business Group with CallidusCloud product assets.
With the buyout of Callidus, SAP will boost its strength in front-office and back-office software, thereby increasing its operational efficiencies.
Callidus Buyout a Smart Move
SAP will gain from Callidus’s futuristic intelligent automation capabilities with dynamic data workflows. The company is likely to witness acceleration in quote-to-cash process and improvement in dynamic pricing. With Callidus’s new sales analytic and customer engagement tools, SAP’s sales intelligence offerings will also be bolstered.
Callidus’s “lead to money” (or “quote-to-cash” in general terms) applications which comprise configure-price-quote (“CPQ”) and sales performance management will now provide SAP a leading market edge over other CRM providers. Per Gartner, CallidusCloud was featured a “Leader in the 2018 Gartner Magic Quadrant for Sales Performance Management”, notably, for the fifth time in a row. Per a Forrester report, CallidusCloud, Oracle (ORCL - Free Report) and Apttus were the leading CPQ solution providers in the first quarter of fiscal 2017.
Briefing about SAP S/4HANA
SAP S/4HANA platform has witnessed continued strong market traction. It has proved to be a solid profit yielder, fueled by an increase in cloud subscriptions as well as support revenues in recent times. During its last reported fourth quarter of fiscal 2017, the company gained 1,000 additional customers, with more than 40% being new, propelling its revenues. S/4HANA, has established itself as a mission critical control center for businesses pursuing digital transformation.
Gigya Acquisition Deserves a Special Mention
SAP is striving to expand its CRM offerings. Notably, SAP had concluded the acquisition of Gigya, an established player in customer identity and access management, in the fourth quarter of fiscal 2017. The buyout was aimed to boost SAP’s Customer Engagement and Commerce solutions.
SAP Front Office Suite will now comprise Gigya solutions, CallidusCloud solutions and SAP Hybris capabilities.
SAP’s human capital management applications remain a key catalyst, with Success Factors Employee Central surpassing the 2,300-customer base at the end of the fiscal 2017. SAP’s resilient Cloud and Software business, an enviable business network spread and dominance over critical client demand areas continue to act as staple growth drivers. The company constantly upgrades the existing products and launches fresh ones to expand its customer base, consequently offering a competitive edge over peers.
However, dull prospects of the global IT industry in recent quarters and flat customer spending projections have affected the company’s performances. Also, over the past few quarters, many of the company’s emerging markets have faced fiscal imbalances besides general economic slowdowns, which have adversely affected consumers’ purchasing power. Currency fluctuations in many of the company’s key markets are also hurting its financial performance.
Zacks Rank & Stocks to Consider
SAP presently carries a Zacks Rank #3 (Hold).
A couple of better-ranked stocks in the broader technology sector are Mellanox Technologies, Ltd. (MLNX - Free Report) and NVDIA Corporation (NVDA - Free Report) , both currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The projected earnings growth rate (3-5 years) for Mellanox and NVIDIA are 15% and 10.25%, respectively.
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