SAP Barges Into The Cloud With $3.4 Billion Buy

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Last week, analyst Ray Wang said that German enterprise software giant SAP needed to make a big acquisition to boost its position in social networking and said he thought there would be news in the “next few weeks.”Speculation rose that maybe SAP would buy Jive Software.

Well, Wang was right that SAP was looking to make a big buy, but not for social — at least not yet.

Instead, the company announced yesterday that it will spend $3.4 billion in cash to buy SuccessFactors, which provides employee management software delivered as a service.

That’s about a 50% premium on SuccessFactors’ closing price on Friday. SuccessFactors is not profitable: it lost $24 million on revenue of $91 million last quarter, and has had operating losses of more than $40 million over the last nine months.

SAP is the third-largest pure software company in the world by market cap behind Microsoft and Oracle. But it’s been a bit of a laggard in moving its business model from on-premises software to cloud-based services. CEO Aaron Levie was one of the first to comment on the deal, noting via Twitter that “a million dollars isn’t cool. You know what’s cool? $3.4B cloud acquisitions. Take that consumer Internet!”

See also: What Microsoft, Oracle, IBM, And SAP Don’t Tell Customers