SAP to acquire Qualtrics • Hacker News Board

Re: SAP to acquire Qualtrics

#41

Post by nylonstrung » Mon, Nov 12, 2018, 5:45 PM UTC

twtw wrote: post #15

adventured wrote: post #14

Earlier quoted context omitted.

> how does someone decide on a price 26x higher than earnings? That's 3,077x earnings. $2.6m vs $8b. 26x would be a great price in this market. For the same reason Facebook paid a billion dollars for Instagram, with zero revenue (or Google & YouTube). Aggressive speculation on the future outcome (growth) of what they're buying. They're plausibly betting Qualtrics might be a $3b sales division some day, yielding $500m…

> That's 3,077x earnings Whoops. Thanks, updated. Coming from experience with semiconductor companies years back, 3-4x earnings was a typical acquisition price. This speculation on growth is very interesting to me.

Recurring SaaS revenue with good retention is highly predictable with 80-90% gross margins and requires essentially no CapEx to scale, which is in stark contrast to the semi world.

You are also seeing YoY growth that can be orders of magnitude greater

Re: SAP to acquire Qualtrics

#42

Post by nylonstrung » Mon, Nov 12, 2018, 5:47 PM UTC

mrkstu wrote: post #26

Biggest exit by a Silicon Slopes (Utah) company (by far)? Ancestry.com was 1.6B, Omniture 1.8B. Plural sight and Domo maybe next?

Domo and Pluralsight are public. The other big outcomes would be Instructure and the sale of Digicert to Thoma Bravo

This is more liquidity than all the others put together

Re: SAP to acquire Qualtrics

#43

Post by AndyNemmity » Mon, Nov 12, 2018, 7:41 PM UTC

dmode wrote: post #39

majewsky wrote: post #33

Earlier quoted context omitted.

Acquisitions like Concur/Hybris/Successfactors are a big part of why SAP is currently doing quite well, and the board acknowledges as much. Disclosure: I work at SAP and hold a few shares.

I worked at one of those you mentioned. SAP let us run and grow for 2 years and then came down hard as SAP stock is a margin play and not a growth play. Our entire salesforce was gutted and SAP sales teams were now responsible for selling our products, although their incentive structure didn’t merit selling our product. They also stopped investing in product, moved most development teams offshore to India and China.…

I've been involved in all of those acquisitions in some form, and many others not mentioned.

The general strategy for acquisitions is you get 2 years to mostly grow and run on your own. The ones that do fine on their own, continue to be on their own while slowing integrating with the rest of the business.

The ones that don't do well, get taken over more aggressively.

The "problem" is that no one is told this is the plan. I don't even know if it's a plan, but an organic thing that occurs.

The leadership of the acquired companies need to realize, they are in the same situation, and need to aggressively continue to work towards improvement. What I've found is, several companies go, "Okay, we're bought.. let's keep our current customers happy"

Current customers, while valuable, are not what SAP is buying. They are buying the potential for expanding to their whole base. Aggressively attacking these problems at the beginning would have turned the "unsuccessful" or less successful acquisitions into successful ones.

But it isn't just made clear to you that you have 2-3 years to do this on your own, effectively, or SAP will take it over and do it for you.

--- These are just my opinions/experience, ymmv.