SAP to acquire Qualtrics(news.sap.com) |
SAP to acquire Qualtrics(news.sap.com) |
> We use open source software in our platform that may subject our platform to general release or require us to re-engineer our platform, which may harm our business.
> We use open source software in our XM™ Platform and expect to continue to use open source software in our platform in the future. There are uncertainties regarding the proper interpretation of and compliance with open source software licenses. Moreover, we cannot assure you that our processes for controlling our use of open source software in our XM™ Platform have been or will be effective. Consequently, any of these circumstances could result in reputational harm and harm to our business and results of operations. In addition, if the license terms for the open source software we utilize change, we may be forced to re-engineer our platform or incur additional costs to comply with the changed license terms or to replace the affected open source software. Although we have implemented policies and tools to regulate the use and incorporation of open source software into our XM™ Platform, we cannot be certain that we have not incorporated open source software in our platform in a manner that is inconsistent with such policies.
Can someone more familiar with these filings comment on whether this is typical, or is this corporate speak for "we are violating the GPL and hope no one can prove it?"
This is why companies care about OSS licenses and sudden changes in those licenses. It's not out of pettiness. Automattic dropped React just for this very reason.
I believe the blog post [0] by the Automattic CEO where he announced plans to drop React played a significant role in causing Facebook to re-evaluate [1] the React license terms, considering that at that time, WordPress powered more than 25% of all websites.
[0]: https://ma.tt/2017/09/on-react-and-wordpress/
[1]: https://code.fb.com/web/relicensing-react-jest-flow-and-immu...
> Our use of open-source software could subject us to possible litigation or cause us to subject our platform to unwanted open-source license conditions that could negatively impact our sales.
> A significant portion of our platform incorporates open-source software, and we will incorporate open-source software into other offerings or products in the future. Such open-source software is generally licensed by its authors or other third parties under open-source licenses. There is little legal precedent governing the interpretation of certain terms of these licenses, and therefore the potential impact of these terms on our business is unknown and may result in unanticipated obligations regarding our products and technologies. If an author or other third party that distributes such open-source software were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur significant legal expenses defending against such allegations. In addition, if we combine our proprietary software with open-source software in a certain manner, under some open-source licenses, we could be required to release the source code of our proprietary software, which could substantially help our competitors develop products that are similar to or better than ours.
> Our products are based in large part on open source provided under the Apache License 2.0. This license states that any work of authorship licensed under it, and any derivative work thereof, may be reproduced and distributed provided that certain conditions are met. It is possible that a court would hold this license to be unenforceable or that someone could assert a claim for proprietary rights in a program developed and distributed under it. Any ruling by a court that this license is not enforceable, or that open-source components of our products may not be reproduced or distributed, may negatively impact our distribution or development of all or a portion of our products. In addition, at some time in the future it is possible that the open-source cores of our products may be distributed under a different license or the Apache License 2.0 may be modified, which could, among other consequences, negatively impact our continuing development or distribution of the software code subject to the new or modified license.
2017 profit of $2.6M on revenue of $290M. Please ELI5, how does someone decide on a price 26x higher than earnings?
EDIT: 3077x earnings - thanks 'adventured.
Just FYI, nothing of value will be lost if you do.
(I left Qualtrics a year ago.)
Ancestry.com was 1.6B, Omniture 1.8B.
Plural sight and Domo maybe next?
This is more liquidity than all the others put together
Slightly more cynical answer: Big companies like SAP are bad at innovating, but their shareholders want to see growth. They have access to plenty of cheap capital, and buying companies that are actually innovating is one way to grow. Qualtrics and their bankers know this, and it means that they have all the leverage and can demand a premium. (Qualtrics's management may have also needed a premium to convince them to go work for SAP. I wouldn't blame them.) Also, there's a principal-agent problem: SAP's shareholders might be better off if SAP just returned the capital to them through dividends or buybacks and let them buy Qualtrics shares themselves, either in the private markets or after an eventual IPO. But SAP's management would rather manage a bigger company than a smaller one, and it doesn't look good for them to effectively throw up their hands and say they're all out of ideas.
I genuinely believe that there's some truth to both explanations, but your guess as to their relative importance is as good as mine.
[0] https://www.businessinsider.com/qualtrics-becomes-1-billion-...
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 in profit, or similar. They're willing to pay up now for those hopeful future profits, to take them off the market before a competitor does or Qualtrics gets far larger and more expensive in the future. Definitely a very rich premium they're paying (from SAP's side, it's equivalent to two years of their after-tax profit).
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.
It's 30x $266m in profit. They might need to get to $3b or $4b in sales to reach that kind of annual profit generation, if they spend like most SaaS companies do to pursue growth. They might have seen blips over the next five or six years where their valuation ran higher than $8b without the fundamentals to support it (assuming everything went according to plan in the business), however, averaged over time I find it hard to believe they could support an $8b market cap without a dramatic size increase. This party market won't last forever. Excellent sale by the owners (all cash at that, avoiding the downside risk in SAP's stock at 32x earnings; in any other market SAP gets a 20 PE or lower).
I also suspect that as a public company, assuming the time it takes to scale to justify an $8b-$10b style market cap (five or six years at least, likely more), and the dilution they'd suffer as a family when it comes to employee stock compensation over time, they might need something more like a $12b+ stable future outcome to match where they're already at with SAP. Introduce business risk, economic risk, stock market risk, and a lot of years to get from here to there - the $7b would seem to make great sense for the Smith family. The best reason to not take this deal, is to keep control of the company - as it is, the Smiths get to keep running it anyway post acquisition and don't have to deal with public shareholders et al.
You are also seeing YoY growth that can be orders of magnitude greater
Disclosure: I work at SAP and hold a few shares.
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.
It probably helps that my direct manager is shielding us from a lot of the bureaucracy and allowing us lots of individual freedom wrt technical decisions (our team sometimes feels more like a small startup embedded within the company). But people from other teams seem (mostly) happy with their positions as well.
The culture is very good here, part of it due to it being formerly a big Ariba office, but the benefits are good, work from home is fantastic. Honestly I don't love my work but the benefits keep me here.