With all eyes riveted on Oracle's ( ORCL) hostile bid to take over PeopleSoft ( PSFT), Germany's SAP ( SAP), a far less flamboyant company headed by a far less flamboyant CEO, is increasingly positioned to be the real winner. "SAP is sitting in the catbird seat," said Betsy Burton, an analyst with the influential Gartner research group. "They are sitting outside the fray and customers are going to view them as a safe choice," she said. Indeed, Wall Street is already casting that vote. Since Oracle announced its intention Friday morning to buy PeopleSoft for $5.1 billion, or $16 a share, SAP shares have appreciated by 11%, closing Tuesday at $32.73. Earlier Tuesday, SAP announced that it already has begun approaching customers of PeopleSoft and J.D. Edwards ( JDEC), urging them to defect. Although SAP, the world's largest supplier of enterprise application software, didn't supply details, a spokesman told reporters in Europe that financial incentives would be on the table. It's certainly worth a try. In the last few quarters, SAP has lost a number of major deals in head-to-head competition with both PeopleSoft and J.D. Edwards, said analyst Jamie Friedman of Fulcrum Partners, who raised his target price to $35 on Tuesday. Customers that got away, he said, included DaimlerChrysler ( DCX), Rand Refinery and Pharma Resources ( PRX). With the future of both software rivals in doubt, SAP is well-positioned to take deals from them next time, he said. (Fulcrum does not have a banking relationship with SAP.) Even Siebel Systems ( SEBL) CEO Thomas Siebel, who is not given to saying nice things about the competition, said "this (the merger bid) will certainly have a deleterious affect on PeopleSoft ... the companies that gain will be Siebel Systems (which he heads) and SAP." SAP is aided in no small measure by what industry veterans call the FUD factor -- that is the fear, uncertainty and doubt spread by the Oracle bid, and to a lesser extent by PeopleSoft's earlier (friendly) announced effort to acquire rival software maker J.D. Edwards.
In fact, his company launched more than 6,000 notes to customers less than two hours after Oracle announced its bid. "Our clear priority right now is the merger with PeopleSoft," said a company spokesman. "But we are, of course, remaining a great partner to our customers." JDEC has a bit more breathing room; its fiscal third quarter doesn't close until the end of July. Although Oracle appears to be on top of its game now, Rod Johnson, vice president of AMR Research, said the company will have to perform surgery on its image to keep the trust of customers. "SAP is looking like a saint now because Oracle's actions are far from being customer-centric," he said. SAP is doing more than just playing good cop, said Burton. "They have methodically, and now aggressively, moved on a broader infrastructure strategy, including middleware." And an SAP that could position itself as a platform player would be formidable competition for a combined Oracle/PeopleSoft and even IBM ( IBM), she said.
In fact, a note to customers by Gartner suggests that Siebel might be a good choice for companies that can't wait until the smoke clears to buy new software. Can Siebel stand alone? "We are entering an era of dramatic consolidation. The winners will be the companies who sell broad portfolios," said Rod Johnson, vice president of AMR Research. Siebel, he said, is too narrow. It doesn't have the applications. One solution: buy them. Companies like Lawson ( LWSN), a PeopleSoft competitor, or even JDEC, if the deal with PeopleSoft dies, would fit the bill, Johnson said. The other alternative is less to Schmaier's liking: be purchased. Oracle in the past reportedly talked to CEO Thomas Siebel, a former Oracle executive, about a merger. And some analysts think IBM would be a great parent. After all, in an era of top-to-bottom software stacks, Big Blue still lacks significant presence in the application market. It would be a major change, of course, because IBM now teams up with application companies like PeopleSoft. But if PeopleSoft disappears, why not buy Siebel. "In the long run,
IBM could be the biggest winner of all," says Kingstone.