SAP Slumps on Shock of CEO Departure

WALLDORF, Germany ( TheStreet) -- SAP's ( SAP) shares slumped in early trading on Monday as investors responded to the surprise resignation of CEO Leo Apotheker, which came less than a year after he took over the company's hotseat.
Leo Apotheker
SAP's CEO Leo Apotheker unexpectedly resigned.

The software maker has been struggling with falling sales and an increasingly competitive landscape, prompting the CEO reshuffle. SAP's stock slumped $1.44, or 3.13%, to $44.52 shortly after market open, outpacing the Nasdaq, which fell 0.34%.

Previously rumored as an acquisition target for Microsoft ( MSFT), SAP has also been cited as an attractive target for IBM ( IBM), which attempted to buy Sun ( JAVA) before Oracle ( ORCL) stepped in last year.

SAP has always maintained its desire to remain independent, although the company's recent financial performance may have made it more vulnerable to a possible takeover.

Apotheker had been the company's sole CEO since May 2009, and his shock departure underlines SAP's desire to rejuvenate its flagging business. The company is facing stiff competition from Oracle/Sun and IBM, and its profit slumped 12% in its recent fourth-quarter results.

Set against this backdrop, at least one analyst thinks that the company wants to draw a line under a tough period in its history.

"Our view is that by letting Apotheker go after only nine months as sole CEO, SAP is acknowledging the depths of its current issues," wrote Pat Walravens, an analyst at JMP Securities, in a note released on Monday. "These issues include a convoluted product strategy, loss of market share to Oracle, and trouble adapting to the cloud computing model."

The German software giant did not give a reason for Apotheker's departure in a statement it released on Sunday, saying only that it reached "a mutual agreement" with the executive not to extend his contract.

SAP will now be run by two co-CEOs who have been promoted internally: Bill McDermott, the company's head of field organization, and Jim Hagemann Snabe, head of product development.

Although not common, there are other examples of big-name tech firms using the co-CEO model. Jim Balsillie and Mike Lazaridis, for example, are co-CEOs at Research In Motion ( RIMM), while Greg Brown and Sanjay Kha share the Motorola ( MOT) hotseat.

SAP is also no stranger to this form of management. Apotheker served as co-CEO with Henning Kagermann from April 2008 until Kagermann's retirement last year.

Walravens, however, feels that there may been uncertainty within the SAP board about appointing a successor to Apotheker, particularly given that founder Hasso Plattner is assuming a more prominent role in the company.

In its statement, SAP said that Plattner, who is chairman of the firm's supervisory board, will continue to play a "strong role" in advising McDermott and Hagermann Snabe on technology and product development.

"The appointment of co-CEOs with a strong role by the co-founder suggests to us that the SAP Supervisory Board could not agree on a single person to lead this business," wrote Walravens.

-- Reported by James Rogers in New York

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