By Cornelius Rahn - Jan 10, 2012 7:38 PM GMT+0700
Software AG (SOW), Germany’s second- largest software maker, plunged after fourth-quarter profit and sales missed analysts’ estimates, making the stock cheaper for potential acquirers such as Hewlett-Packard Co (SOW).
The shares fell as much as 26 percent in Frankfurt, the steepest drop since April 2002, and traded 22 percent lower at 1:22 p.m., giving the company a market value of 2.04 billion euros ($2.6 billion). Josep Bori, an Exane analyst, said last week that the company may become a target for Hewlett-Packard or German peer SAP AG (SAP), as Hewlett-Packard’s $10.3 billion takeover of Autonomy Corp. last year may prompt interest in other European software companies.
Today’s miss is Software AG (SOW)’s second for the 2011 fiscal year. The Darmstadt-based company reported falling sales of process-optimization software in the U.S. and said it didn’t receive the “usual seasonal boost” in its enterprise transaction services as clients curbed spending amid uncertainty about economic growth. Software AG specializes in software consulting services and streamlining business processes.
With today’s decline, Software AG is trading at 6.4 times estimated 2012 earnings before interest, taxes, depreciation and amortization, according to Bloomberg data. In the past three years, deals involving western European software companies as takeover targets had a medium multiple of 9.23 times Ebitda.
Analyst Estimates
Norbert Gelse, a spokesman for HP in Germany, today declined to say whether the company is interested in buying Software AG. Christoph Liedtke, an SAP spokesman, declined to comment.
SAP, the largest maker of business-management software, announced in December it would buy SuccessFactors Inc. (SFSF), which makes software to manage employee performance, for $3.4 billion in cash.
Software AG Chief Executive Officer Karl-Heinz Streibich said Nov. 17 that the company wasn’t for sale and it would pursue a stand-alone strategy. The software maker, which is 29 percent owned by a foundation set up by co-founder Peter Schnell, has said it wants to double its sales at least every five to six years, including acquisitions.
Software AG’s fourth-quarter net income was 45 million euros to 50 million euros and revenue was 290 million euros to 295 million euros, the company said in a statement today. That compared with average estimates of 70.4 million euros for profit and 340 million euros for sales in a Bloomberg survey of analysts.
Cautious Spending
“We believe that customers have become more cautious toward spending toward the end of the quarter, given the situation in the macro-environment, and especially in the financial industry,” Streibich said on a conference call today.
Software AG (SOW) fell 6.82 euros to 23.55 euros at 1:24 p.m. SAP declined 1.25 euros, or 2.9 percent, to 41.53 euros.
Commenting on Software AG (SOW)’s results today, Exane’s Bori said in a note to clients: “Given that we believe this is macro-driven and not company-specific, long term investors may want to consider buying on this extreme weakness.”
To contact the reporter on this story: Cornelius Rahn in Frankfurt at crahn2@bloomberg.net
To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net
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