Hewlett-Packard's surprise decision last week to appoint ex-SAP CEO Léo Apotheker to its top job has stirred up speculation that HP will acquire the enterprise applications giant to compete more effectively against rival Oracle, but some analysts say the notion is mere piffle.
That's not to say there aren't obvious upsides to such a move. By purchasing SAP, HP would gain a vast ERP (enterprise resource planning) application installed base and lucrative streams of annual maintenance revenue.
But it would in turn harm HP's application services organization, said Forrester Research analyst Paul Hamerman. "It would taint the advice they give customers. They have to be vendor-agnostic on the services side."
Another observer said much the same.
"SAP is better off partnering with both HP and IBM," said Altimeter Group analyst Ray Wang. Together, the vendors can go after Oracle, with IBM and HP providing the services and sales channels for SAP's software, he said. "All of Oracle's competitors are now SAP's friends and soon to be HP's friends."
Even if HP wished to buy SAP, the cost would likely be stratospheric, given SAP's current market capitalization of roughly US$59 billion.
Therefore, any HP-SAP deal that materializes would more likely be a "merger of equals" than a straight purchase, Wang predicted.
Meanwhile, there's the question of how open SAP's leadership would be to an offer from HP.
"I get the feeling SAP would be a little lukewarm to the idea right now," said Jon Reed, an independent analyst who closely tracks SAP. The recent Sybase acquisition and subsequent launch of an enterprise mobility strategy has provided SAP with a "morale boost and clarification of direction," he said.
"They seem like a much more focused and energized company. Prior to Sybase, I would say maybe they would look at it. Now it seems like they're feeling their oats a little more."
Although they would not have final say, there would also likely be internal resistance to an HP merger from SAP co-CEOs Jim Hagemann Snabe and Bill McDermott. The pair succeeded Apotheker, who left SAP earlier this year following a fairly short and tumultuous run as CEO. "If they can succeed in this transformation, that's going to be a big notch in their belt, whereas to be HP employees? Not so much," Reed said.
Spokespeople for SAP and HP said the companies do not comment on market rumors and speculation.
Analysts do expect HP to make a series of software acquisitions now that Apotheker is aboard.
Overall, it would make more sense for HP to purchase a vendor more keenly oriented toward cloud-based software, such as Salesforce.com, Wang said.
To that end, HP could also buy a middleware company like Progress Software or Software AG, which would boost its ability to develop cloud services on its own, Wang said.
Another possible strategy would see HP scoop up specialized software vendors that target verticals such as health care or public sector organizations, he said.
Indeed, it seems inevitable that HP will go on a software shopping spree on Apotheker's watch, if only because "having a good software portfolio helps drive so much else," namely hardware sales and services revenue, said Redmonk analyst Michael Coté.
There are important gaps for HP to fill, according to Coté.
"Most everyone I talk to agrees that HP needs to get their software act together." HP has some excellent software assets, such as its testing products, but "there isn't a sense of a unified software strategy like you have with, say, IBM," he said.
To this end, Apotheker faces a broader challenge, according to Coté.
While HP generates north of $100 billion in revenue each year, they aren't known for much more than expensive printer ink, "decent servers, and niche software products that seem to work in isolation," he said. "If you wanted to be an 'HP CIO,' there's not much of an ethos, road map, or sort of 'brand' to sign up for."
But in choosing Apotheker to lead the company, HP could be hoping his many long-standing relationships dealing with SAP CIOs at enterprises around the world will help change that dynamic.