5 Reasons HP Should Acquire SAP

HP's Software Business: The Stars Could Be Aligned For An SAP Acquisition

Hewlett-Packard needs an enterprise software offering to spur its next round of growth and to better compete against its newest nemesis, Oracle. And with HP's new CEO Leo Apotheker, who until early this year was CEO of SAP, HP has an intimate view into the inner workings of that company.

If HP is as serious about growing its software business as it seems to be, the most logical choice would be to acquire SAP.

Here are five reasons HP should do just that.

1. Who Needs Software? HP Does

HP is currently the Earth's largest IT vendor thanks to its hardware and professional services strength. However, except for a smattering of storage and management offerings, HP has no serious software market presence.

Meanwhile, Oracle is racing to combine its software portfolio with its newly-acquired Sun server and storage products into appliance-like offerings that it hopes will eventually eliminate the need for customers to look outside the company for much of its enterprise hardware needs.

Apotheker has publically stated that software accounts for only about 3 percent of HP's total revenue, and that HP needs software not only as a revenue enhancer but also to differentiate the vendor across its hardware and services businesses.

2. Apotheker's Intimate Association With SAP

Before Apotheker took over as HP's CEO, he was a 20-year veteran at SAP who eventually rose to the position of CEO, only to leave less than nine months later during a period of rising customer discontent and his inability to boost the company's revenue.

That gives Apotheker an insider's insight into one of the world's largest software companies, and one of the few companies able to compete head-to-head against Oracle in the key enterprise markets served by HP's hardware business.

3. SAP Cheaper Than It Has Been, Thanks To Oracle

If HP were to acquire SAP now, it would be getting a relative bargain thanks to the Oracle lawsuit.

SAP's shares were trading at $48.83 on Dec. 6, a considerable drop from the $54-plus share price it saw in late October before the judgment phase of Oracle's SAP lawsuit began.

While that share price is up a bit off its lows, it still represents about a 12-percent discount over its recent high. And any price HP would pay for SAP would have to include some sort of discount to account for the $1.3 billion judgment against SAP, which might or might not be reduced in the future.

4. HP Would Get Ammo To Do Battle With Oracle

Revenge is sweet, and the sweetest way for HP to right a couple of perceived wrongs might be to acquire SAP.

After all, Oracle, after acquiring Sun Microsystems and optimizing its hardware and software to work together, suddenly does not seem to consider HP as one of its top-tier strategic partners.

Then Oracle Chairman and CEO Larry Ellison hired his good friend Mark Hurd as Oracle's new co-president. Hurd was HP's chairman, CEO, and president until fired by HP over violations of its code of conduct.

Then Oracle tried to show Apotheker in his first week on the job by getting a subpoena for him to testify in person at Oracle's SAP lawsuit judgment trial, a subpoena he avoided by staying out of the country.

5. The Deal Leverages HP's Strong Enterprise Channel

HP has one of the strongest enterprise channels in the computer business. The company’s top partners have experience either selling or working with Oracle software, and so would be a good base for igniting channel sales of the SAP software.

Getting those partners and their customers to switch from Oracle to SAP software would be difficult, but the deal still makes channel sense for both HP and SAP.