(Reuters) - SAP's $3.4 billion takeover of SuccessFactors will help it keep up with peers in the frenzied race for cloud-computing business, even if the price it paid is very high at first glance, analysts said on Monday.
We believe SuccessFactors could be a very good strategic fit for SAP in the cloud sector and we prefer the decision to grow externally in this booming area, DZ Bank analyst Oliver Finger said.
SAP said on Saturday it was buying U.S. web-based services company SuccessFactors for an agreed $40 per share, a 52 percent premium.
The deal helps SAP catch up with rivals in cloud computing, a fast-growing field where data and processes are hosted remotely on the Web. As part of the transaction, SuccessFactors founder and chief executive Lars Dalgaard will join SAP's executive board and will run its cloud business.
This marks implicit recognition by SAP that their cloud strategy is not working, Evolution Securities analyst Roger Phillips said.
Shares of SAP were down 2.4 percent at 43.635 euros by 1420 GMT, while Germany's blue-chip DAX index was up 0.7 percent.
Analysts had warned that SAP risked losing ground to Oracle in the field of cloud-computing. However, there are not many assets in the business available for it to buy.
Salesforce.com is seen as too big to acquire, rival Oracle bought RightNow Technologies in October, and NetSuite is majority owned by Oracle CEO Larry Ellison.
In fact, it is not clear who is next in line behind SuccessFactors. For this reason, despite the apparently rich price tag, we would not rule out the risk of a counter bid, WestLb analyst Jonathan Crozier said.
The price SAP is paying for SuccessFactors represents about eight times forecast 2012 revenues, analysts said, compared with the multiple of about 5.5 that Oracle paid for RightNow.
The valuation of this deal is high, but reasonable in our opinion, in light of the high-growth, strategic asset that is being acquired, Nomura analyst Rick Sherlund said.
SuccessFactors' operating margin jumped to 9 percent in the third quarter from zero a year earlier, and the company said it could not hire quickly enough to meet demand.
Its shares have gained 26 percent over the past three months, giving the company a market value of about $2.2 billion.
Heino Ruland, an analyst at Ruland Research, said he sees the acquisition as being way too expensive and said the race for cloud-computing technology was heating up to the point where it seemed market players were spending irrationally just to stay in the game, mirroring the dotcom bubble more than a decade ago.
SAP raised its top-line outlook on the deal, saying its revenue could easily reach 21 billion euros by 2015, about a billion euros more than expected.
The deal will hurt SAP's earnings in 2012 but will have a positive impact from 2013 onward, SAP has said, prompting analysts to revise down their 2012 estimates.
SuccessFactors, which first went public at $10 a share four years ago, makes human resources software used by companies to review employee performance. It competes with Taleo Corp and Kenexa Corp.
JPMorgan Chase advised SAP on the deal, while Morgan Stanley advised SuccessFactors.