This morning SAP announced the acquisition of privately-held Khimetrics for an undisclosed sum. Khimetrics provides demand-driven price optimization software and services and touts Petsmart and Albertson's as reference accounts.
Anyone who attended the SAP Investor Symposium likely isn't surprised to see SAP make another retail-centric acquisition, particularly in the area of price optimization. The company spent a lot of time discussing the retail opportunity and the strength of SAP's current offering. While I've long been a fan (and investor) of SAP, its retail message has been inconsistent and I'm not sure this does much to change that. Whether it be the representation of Triversity as a best-in-class POS vendor or the talking down of Retek/Oracle [when SAP was in a bidding war to acquire Retek earlier this year], the message to the Street and customers has been inconsistent.
Khimetrics is, by most accounts, a fine company [it's my understanding they are running at approximately $30mm annually and growing], but as an investor I have to wonder what this means for DemandTec? DemandTec has been SAP's partner in demand-driven price optimization and its solutions are already integrated into NetWeaver [unlike KhiDEMAND]. Furthermore, DemandTec is considered the market leader both in terms of revenue market share and technology footprint. So what led to SAP acquiring Khimetrics instead? Was DemandTec unwilling to sell? Was their asking price too high? Were there issues with the partnership that are beyond our purview?
Whether or not the Khimetrics acquisition was the better strategic decision or not [I'm not equipped to answer that question currently], as a shareholder I certainly hope this wasn't a case of being penny -wise and pound-foolish.
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UPDATE [11/29]: SAP's VP of North American Retail, Jim McMurray, was quoted in the latest issue of InformationWeek saying that the DemandTec partnership "didn't drive deals." This could well answer my question, and as an SAP shareholder I hope that's the truth. But unless my understanding of DemandTec and Khimetrics is flawed (always a possibility), their execution as stand alone companies paints a different picture.
Note: At the time of this writing I and/or funds I maintain discretionary control over, had long equity positions in both SAP and ORCL.
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