In the rapidly consolidating business software market, SAP (SAP) has taken a conservative tack, preferring to rely on growth through sales of its own meticulously engineered products. But on Oct. 7, Chief Executive Henning Kagermann ditched his playbook, announcing a $6.8 billion deal to acquire Business Objects that could signal the German software giant's willingness to buy its way into new areas of the corporate software market.
The deal would vault SAP, the world's third-largest software maker, squarely into one of the software industry's hottest sectors. Business Objects (BOBJ) competes in the fast-growing market for software that helps companies plan budgets, close their books, and divine their most profitable customers. Together with an aggressive push by SAP into selling software aimed at small and midsize companies, adding business intelligence to its portfolio could help SAP win new customers at a time when sales growth has slowed for its traditional manufacturing and supply-chain management software. "This is a space where we decided that, with acquisitions, we'll be more successful," Kagermann told reporters and analysts in a hastily arranged conference call from Germany on Oct. 7. "It accelerates significantly our growth potential."
The boards of Walldorf [Germany]-based SAP and Paris-based Business Objects approved the proposed deal after negotiations that ended on the night of Oct. 7 in Germany. SAP will offer 42, or $59.37, in cash per share of Business Objects, an 18% premium over the $50.27 closing price of the shares on Oct. 5, the last day of trading before the acquisition was announced. The deal is expected to close in the first quarter of 2008 and add to SAP's earnings by 2009. [Kagermann said SAP's 2008 earnings will dip by about 7% per share due to one-time costs of buying Business Objects.]
More Large Acquisitions Ahead?
Sales of data analysis software, which includes business intelligence programs, hit nearly $23 billion last year -- about half the size of the market for business applications [which form the core of SAP's business], according to AMR Research. But within the data analysis category, sales of business intelligence software grew 10%, to $6.35 billion, and sales of "scorecard" software that helps executives digest key numbers shot up 26% to $5.2 billion, according to AMR. SAP's bet: that it can combine Business Objects' technology with its own applications to create even more sales opportunities, Kagermann said.
Business Objects' software could help SAP customers extract more insight from their data to make better forecasts, says Joshua Greeenbaum, principal of Enterprise Applications. "They're saying this is going to be one of the key growth areas for SAP," says Greeenbaum. If SAP can make the deal work, it could look to buy growth in other areas, such as banking software, he adds. "This signifies that there is an appetite for very large acquisitions. That's something SAP said was not possible."
The proposed acquisition of Business Objects comes as competitors Oracle (ORCL), IBM (IBM), Hewlett-Packard (HPQ), and Microsoft (MSFT) have stepped up the pace of buyouts in the corporate software sector. Oracle has shelled out $25 billion the last three years to acquire about 30 software companies, and IBM has spent roughly $5 billion on software acquisitions since 2006.
A Target Oracle Dismissed
Oracle had already staked out ground in the business intelligence market, spending $3.3 billion to acquire Hyperion Solutions on Mar. 1 [BusinessWeek, 3/2/07]. That tieup was a particular jab at SAP -- more than half of Hyperion's customers also used software from SAP, according to AMR. Now, SAP has the chance to hit back.
Business Objects has been the subject of acquisition rumors for months. According to a source at Oracle, the company evaluated Business Objects as an acquisition target, but decided to pass. To make an acquisition work, the source said, Oracle would have liked to have kept Business Objects' U.S. engineering staff and cut administrative functions in France. But that would have been difficult given French labor laws.
Now with Business Objects off the market, Cognos (COGN), could be the next software company gobbled up. The business intelligence software maker booked $116 million in profit, on $979 million in revenues, for its fiscal year ended Feb. 28.
Buying into Fast-growing Markets
Other tech industry heavyweights have been attacking the data analysis software market as well. Microsoft acquired software vendor ProClarity in April, 2006, and has developed a new product called PerformancePoint Server based on the technology. A spokeswoman for IBM says the company has partnerships with key business intelligence vendors and will continue looking at acquisitions that add "higher-value middleware to our portfolio." IBM recently raised growth targets for its $18 billion software business to 7% to 10% through 2010 [BusinessWeek, 10/1/07]. Meanwhile, HP has been selling data analysis software called Neoview to customers including Wal-Mart (WMT) and is believed to have considered an acquisition in this area of the corporate software market.
Kagermann told reporters that SAP will stick to its strategy of growing organically in its traditional business applications markets. But the SAP CEO has shown a willingness to open the company's wallet to buy into fast-growing markets. SAP has some currency for acquisitions: It had $2.8 billion in cash and short-term investments on its balance sheet as of June 30. In May, it bought OutLookSoft, a Stamford [Conn.] maker of software for planning budgets and forecasting financial results. And it bought Virsa Systems, which made software to help companies comply with the Sarbanes-Oxley Act, in April, 2006. Kagermann indicated SAP wanted to move even quicker to grab sales of business intelligence software. "I never excluded acquisitions, but from a management point of view, we had so much on our plate," he said during the conference call.
That includes a new suite of low-cost applications delivered over the Internet that SAP launched in September for small and midsize customers [BusinessWeek, 9/19/07]. SAP has set a goal of increasing its customer base to 100,000 by 2010, from 42,000 today. Selling to smaller companies and expanding into new, fast-growing niche markets are pillars of the plan.
Software for the CFO
An SAP spokesman says the company plans to market Business Objects' software to chief financial officers who need to quickly keep track of costs and operational data around the world. SAP sells to about 40% of Business Objects' customers and the companies plan to exploit the overlap, said Business Objects CEO John Schwarz, who is expected to become a member of SAP's executive board. SAP Corporate Officer Doug Merritt, an executive in the company's Palo Alto [Calif.] office, will join the Business Objects unit and report to Schwarz.
After several years of encroachment into SAP's core market by Oracle and others, the Business Objects deal could be a sign that SAP is getting more aggressive about defending its turf.
Credited by: BusinessWeek.com
2007-10-10
Google's Orkut: A World of Ambition
If it's not about MySpace and Facebook, then the breathless buzz that surrounds online social networking often gravitates to names such as Bebo and CyWorld. Then there's Orkut. Though early to market, the Google-owned social network hasn't seemed to gain traction anywhere but Brazil. But that laggard status may be fading, thanks to a traffic surge in Asia. And now Google (GOOG) appears determined to eliminate its weakness in social networking, an Achilles' heel that detracts from its dominance in Web search and online ads.
Though MySpace still gets four times as much traffic globally, Orkut recently pushed past the News Corp. (NWS) subsidiary in the Asia Pacific region. Orkut's following in that market, which includes China and Japan, has nearly tripled, to roughly 11 million visitors a month, over the past year, according to the consultancy comScore (SCOR). MySpace, by contrast, has been drawing between 9 million and 10 million visitors in recent months.
Meanwhile, Orkut's usage in Latin America has continued to climb: In August, it received 12.4 million unique visitors from that region, double the Latin American traffic of MySpace and Facebook combined. "Now everybody's got Orkut, even people who don't have their own computer," says 15-year-old Ian Quinonez Gaspar, who lives in So Paulo, Brazil, and has more than 700 friends links.
Web Site Makeover
But that's where the high-fives end for Orkut. Beyond Asia and Latin America, which account for nearly all of Orkut's 24.6 million monthly users, the site's traffic remains simply anemic -- totaling just 600,000 in North America and about 1.2 million in Europe, and not growing very fast.
Still, while it's unclear whether its overseas momentum is the inspiration, Google is starting to throw more resources behind social networking. The company recently gave Orkut's site a makeover so it looks more Google-like. It's also launched the site in more languages, including Hindi and Bengali [Orkut is particularly popular in India and Bangladesh]. At the same time, Google has been incorporating more social networking features into Gmail and its online Calendar service. "The property has long been neglected. But now Google has recognized the social networking phenomenon is very profound and powerful," says Greg Sterling, the founding principal at consultancy Sterling Market Intelligence.
The next big step, expected in November, will be to open Orkut's software code to outside programmers, a plan first disclosed by Michael Arrington on his TechCrunch blog. BusinessWeek.com has learned that third-party developers based in India have been told that the code, known to developers as an Application Programming Interface [API], would be made available around Nov. 5. While Google declined to confirm or deny these reports, the company did confirm earlier this year it was considering opening up Orkut's code [BusinessWeek, 2/13/07].
A Step Further than Facebook
Once the code is available, independent developers will be able to create a plethora of new applications for Orkut that could boost its usage, judging from the experience at Facebook. Developers have already written more than 3,000 applications for Facebook's pages since that site released its code in May. These "widgets," including a hit called Slide that lets Facebook users embed slide shows in their profiles, are considered key drivers behind a 28% jump in the site's user base from May to August. "Facebook created this tremendous momentum and energy around this idea," says John Musser, who runs ProgrammableWeb.com, a developer news and API aggregation site. "Other players can't stand by." That includes Orkut.
In a move that goes a step further than Facebook, Google may make Orkut's code available with fewer conditions in a bid to motivate developers, especially the thousands who already write applications for services such as Google Maps. For starters, Google may allow developers to host their Orkut applications on their own servers rather than the site's. It's noteworthy that a lot of third-party programmers for other Google sites live in the U.S., a weak market for Orkut. As such, easier restrictions may "go toward creating more awareness [of Orkut] from U.S.-based developers, and that may lead to U.S. user-base growth," says Alex Fletcher, an analyst with software consultancy Entiva Group.
If the plan succeeds, users might begin to see applications combining Orkut with Google Maps that would show where friends are located. Earlier this year, a Google-funded student group at Carnegie Mellon University created a prototype of a messaging tool that can enable users of Gmail, Calendar, and even Orkut to arrange impromptu meetings with friends. Google hasn't said how or when it might deploy the application.
Toward Multiple Network Access?
But there are grander possibilities: If developers can host their Orkut applications elsewhere, that means they can create Orkut widgets to embed in other social networks. For example, an Orkut widget for Facebook might enable Facebook users to see whether their Orkut friends are online through their Facebook pages.
Or, Orkut itself could conceivably become a hub for accessing multiple social networks in one place, a concept demonstrated by another Google-funded Carnegie Mellon group last year in a project called Socialstream. "We don't know what they will use," cautions Brad Myers, project adviser and a professor of human-computer interaction at Carnegie Mellon.
But there are signs Google sees wisdom in a concept like Socialstream. In September, Orkut introduced an array of new features, some similar to those offered by other social networks. One addition was Updates from Your Friends, a box that alerts users to new photos or links to YouTube videos their friends have posted. Another was Feeds, which enables Orkut's pages to display information posted on other sites -- such as a blog from Google's Blogger or Six Apart's LiveJournal, or photos from Google's Picasa and Yahoo's (YHOO) Flickr -- albeit only those that allow syndication of their content.
Other new features may be forthcoming: In the past year, Google has hired several experts who focus on making Web sites easier to use, and they've been plugging away at Orkut. One is Jeffrey Veen, co-founder of the consultancy Adaptive Path, who helped with the design of the sites Blogger, Six Apart's TypePad, and Flickr. People familiar with the matter tell BusinessWeek.com that Veen is also working on adding more social networking features to other Google sites.
Revenue Growth Questions
It also may be with Orkut in mind that Google acquired a mobile social network called Zingku in September. Zingku allows users to share photos snapped with mobile phones and to set up gatherings via text messaging. "Mobility is very popular in the Philippines and India," says Trip Chowdhry, an analyst with Global Equities Research. "For that customer base, a mobile [extension of Orkut] makes sense." Chowdhry also notes Orkut could prove useful in driving users to Google Apps, the online word processing and spreadsheet programs that compete with Microsoft's (MSFT) business software.
But even if Orkut continues to grow in popularity, it may be hard for Google to translate that into significant new revenue growth. Advertisers in developing markets, where Orkut is strongest, remain cautious about social networks. In Brazil, Orkut was recently forced to pull ads that some users found offensive. So while Google may benefit from showing more ads to Orkut members who are driven to Google Search or Google Apps, direct revenue from Orkut may total just $50 million a year, estimates Chowdhry.
There's no doubt, though, Orkut is showing it can compete with MySpace and Facebook overseas. Now Google needs to show whether it can ride that momentum into the U.S. and Europe, where the real marketing dollars are.
Credited by: BusinessWeek.com
Though MySpace still gets four times as much traffic globally, Orkut recently pushed past the News Corp. (NWS) subsidiary in the Asia Pacific region. Orkut's following in that market, which includes China and Japan, has nearly tripled, to roughly 11 million visitors a month, over the past year, according to the consultancy comScore (SCOR). MySpace, by contrast, has been drawing between 9 million and 10 million visitors in recent months.
Meanwhile, Orkut's usage in Latin America has continued to climb: In August, it received 12.4 million unique visitors from that region, double the Latin American traffic of MySpace and Facebook combined. "Now everybody's got Orkut, even people who don't have their own computer," says 15-year-old Ian Quinonez Gaspar, who lives in So Paulo, Brazil, and has more than 700 friends links.
Web Site Makeover
But that's where the high-fives end for Orkut. Beyond Asia and Latin America, which account for nearly all of Orkut's 24.6 million monthly users, the site's traffic remains simply anemic -- totaling just 600,000 in North America and about 1.2 million in Europe, and not growing very fast.
Still, while it's unclear whether its overseas momentum is the inspiration, Google is starting to throw more resources behind social networking. The company recently gave Orkut's site a makeover so it looks more Google-like. It's also launched the site in more languages, including Hindi and Bengali [Orkut is particularly popular in India and Bangladesh]. At the same time, Google has been incorporating more social networking features into Gmail and its online Calendar service. "The property has long been neglected. But now Google has recognized the social networking phenomenon is very profound and powerful," says Greg Sterling, the founding principal at consultancy Sterling Market Intelligence.
The next big step, expected in November, will be to open Orkut's software code to outside programmers, a plan first disclosed by Michael Arrington on his TechCrunch blog. BusinessWeek.com has learned that third-party developers based in India have been told that the code, known to developers as an Application Programming Interface [API], would be made available around Nov. 5. While Google declined to confirm or deny these reports, the company did confirm earlier this year it was considering opening up Orkut's code [BusinessWeek, 2/13/07].
A Step Further than Facebook
Once the code is available, independent developers will be able to create a plethora of new applications for Orkut that could boost its usage, judging from the experience at Facebook. Developers have already written more than 3,000 applications for Facebook's pages since that site released its code in May. These "widgets," including a hit called Slide that lets Facebook users embed slide shows in their profiles, are considered key drivers behind a 28% jump in the site's user base from May to August. "Facebook created this tremendous momentum and energy around this idea," says John Musser, who runs ProgrammableWeb.com, a developer news and API aggregation site. "Other players can't stand by." That includes Orkut.
In a move that goes a step further than Facebook, Google may make Orkut's code available with fewer conditions in a bid to motivate developers, especially the thousands who already write applications for services such as Google Maps. For starters, Google may allow developers to host their Orkut applications on their own servers rather than the site's. It's noteworthy that a lot of third-party programmers for other Google sites live in the U.S., a weak market for Orkut. As such, easier restrictions may "go toward creating more awareness [of Orkut] from U.S.-based developers, and that may lead to U.S. user-base growth," says Alex Fletcher, an analyst with software consultancy Entiva Group.
If the plan succeeds, users might begin to see applications combining Orkut with Google Maps that would show where friends are located. Earlier this year, a Google-funded student group at Carnegie Mellon University created a prototype of a messaging tool that can enable users of Gmail, Calendar, and even Orkut to arrange impromptu meetings with friends. Google hasn't said how or when it might deploy the application.
Toward Multiple Network Access?
But there are grander possibilities: If developers can host their Orkut applications elsewhere, that means they can create Orkut widgets to embed in other social networks. For example, an Orkut widget for Facebook might enable Facebook users to see whether their Orkut friends are online through their Facebook pages.
Or, Orkut itself could conceivably become a hub for accessing multiple social networks in one place, a concept demonstrated by another Google-funded Carnegie Mellon group last year in a project called Socialstream. "We don't know what they will use," cautions Brad Myers, project adviser and a professor of human-computer interaction at Carnegie Mellon.
But there are signs Google sees wisdom in a concept like Socialstream. In September, Orkut introduced an array of new features, some similar to those offered by other social networks. One addition was Updates from Your Friends, a box that alerts users to new photos or links to YouTube videos their friends have posted. Another was Feeds, which enables Orkut's pages to display information posted on other sites -- such as a blog from Google's Blogger or Six Apart's LiveJournal, or photos from Google's Picasa and Yahoo's (YHOO) Flickr -- albeit only those that allow syndication of their content.
Other new features may be forthcoming: In the past year, Google has hired several experts who focus on making Web sites easier to use, and they've been plugging away at Orkut. One is Jeffrey Veen, co-founder of the consultancy Adaptive Path, who helped with the design of the sites Blogger, Six Apart's TypePad, and Flickr. People familiar with the matter tell BusinessWeek.com that Veen is also working on adding more social networking features to other Google sites.
Revenue Growth Questions
It also may be with Orkut in mind that Google acquired a mobile social network called Zingku in September. Zingku allows users to share photos snapped with mobile phones and to set up gatherings via text messaging. "Mobility is very popular in the Philippines and India," says Trip Chowdhry, an analyst with Global Equities Research. "For that customer base, a mobile [extension of Orkut] makes sense." Chowdhry also notes Orkut could prove useful in driving users to Google Apps, the online word processing and spreadsheet programs that compete with Microsoft's (MSFT) business software.
But even if Orkut continues to grow in popularity, it may be hard for Google to translate that into significant new revenue growth. Advertisers in developing markets, where Orkut is strongest, remain cautious about social networks. In Brazil, Orkut was recently forced to pull ads that some users found offensive. So while Google may benefit from showing more ads to Orkut members who are driven to Google Search or Google Apps, direct revenue from Orkut may total just $50 million a year, estimates Chowdhry.
There's no doubt, though, Orkut is showing it can compete with MySpace and Facebook overseas. Now Google needs to show whether it can ride that momentum into the U.S. and Europe, where the real marketing dollars are.
Credited by: BusinessWeek.com
Work starts on Makiki 'boutique' condo
Developers of a new 42-unit "boutique" condominium in Makiki broke ground on the project Tuesday.
The Chelsea will be a five-story condominium near the corner of Pensacola and Kinau Streets. The project, which is scheduled to be completed in December 2008, will have one- and two-bedroom apartments, with prices starting at $335,000.
Sales began in March. Falah Shams of Pensacola Chelsea Building, LLC, is the developer.
Credited by: bizjournals.com
The Chelsea will be a five-story condominium near the corner of Pensacola and Kinau Streets. The project, which is scheduled to be completed in December 2008, will have one- and two-bedroom apartments, with prices starting at $335,000.
Sales began in March. Falah Shams of Pensacola Chelsea Building, LLC, is the developer.
Credited by: bizjournals.com
Tribe sues former lawyer, advisor
The Rumsey Band of Wintun Indians, the tribe that owns Cache Creek Casino Resort in Brooks, has sued its former legal counsel and a financial advisor, accusing them of unjustly enriching themselves with tribal money.
The suit, filed Tuesday in Yolo County Superior Court, names as defendants Howard Dickstein and his law partner Jane Zerbi, as well as Arlen Opper, a former tribal investment advisor.
The filing alleges the attorneys and advisors took advantage of their trusted positions to enrich themselves.
"This is a press event. There is nothing to do with the truth in this. It is meant to ruin my reputation," Dickstein said late Tuesday. "There is not a shred of truth in the allegations."
He said the suit was a "vendetta" by the new tribal management and their new advisors.
Marshall McKay was elected to tribal chairman early last year. Shortly after taking control of the tribal government, McKay terminated Dickstein's contract with the tribe and hired a much larger legal firm. McKay also hired an forensic accounting company to investigate the tribe's businesses.
That investigation, the tribe's suit states, found that many of the tribe's business dealings "were fraught with self-dealing and conflicts of interest," according to the suit.
The suit seeks compensation and restitution for tribal assets "wrongfully obtained or held."
Dickstein said he is angered by the suit.
"We will be filing counter-suits," Dickstein said. "We will fight it and we will fight it hard. We've been libeled and we are going to do what we can about it."
Dickstein was attorney for the tribe for 20 years, back when the tribe first launched its bingo hall.
"When we started with them, they had assets of $100,000 and tilt-up bingo hall, and over 20 years they have assets well over $1 billion," he said. "We played a crucial role in all of that."
The tribe is just starting the process of expanding its 200-room hotel, spa and casino in Brooks, with a new 467-suite hotel tower, bungalows and pools in what is expected to take several years and cost about $300 million.
Dickstein has long been an attorney specialized in Native American and sovereignty issues. He represents many tribes, including the United Auburn Indian Community, which owns Thunder Valley Casino outside of Roseville, now one of the most profitable casinos in the country.
Credited by: bizjournals.com
The suit, filed Tuesday in Yolo County Superior Court, names as defendants Howard Dickstein and his law partner Jane Zerbi, as well as Arlen Opper, a former tribal investment advisor.
The filing alleges the attorneys and advisors took advantage of their trusted positions to enrich themselves.
"This is a press event. There is nothing to do with the truth in this. It is meant to ruin my reputation," Dickstein said late Tuesday. "There is not a shred of truth in the allegations."
He said the suit was a "vendetta" by the new tribal management and their new advisors.
Marshall McKay was elected to tribal chairman early last year. Shortly after taking control of the tribal government, McKay terminated Dickstein's contract with the tribe and hired a much larger legal firm. McKay also hired an forensic accounting company to investigate the tribe's businesses.
That investigation, the tribe's suit states, found that many of the tribe's business dealings "were fraught with self-dealing and conflicts of interest," according to the suit.
The suit seeks compensation and restitution for tribal assets "wrongfully obtained or held."
Dickstein said he is angered by the suit.
"We will be filing counter-suits," Dickstein said. "We will fight it and we will fight it hard. We've been libeled and we are going to do what we can about it."
Dickstein was attorney for the tribe for 20 years, back when the tribe first launched its bingo hall.
"When we started with them, they had assets of $100,000 and tilt-up bingo hall, and over 20 years they have assets well over $1 billion," he said. "We played a crucial role in all of that."
The tribe is just starting the process of expanding its 200-room hotel, spa and casino in Brooks, with a new 467-suite hotel tower, bungalows and pools in what is expected to take several years and cost about $300 million.
Dickstein has long been an attorney specialized in Native American and sovereignty issues. He represents many tribes, including the United Auburn Indian Community, which owns Thunder Valley Casino outside of Roseville, now one of the most profitable casinos in the country.
Credited by: bizjournals.com
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