SAP To Acquire Sybase

SAP will acquire database vendor Sybase Inc. for $5.8 billion in cash, a 44 percent premium in the company's closing price Wednesday.

The blockbuster deal will give SAP access to a variety of Sybase's technologies including its column-based analytical database architecture, complex-event processing engine and middleware for linking enterprise data to multiple mobile device platforms and operators. Sybase says it has 4 billion mobile messaging subscribers through relationships with 850 various providers.

SAP said it plans to maintain the Sybase brand and run it as a subsidiary. SAP said it will be able to marry Sybase's complex event processing technology with its own new in-memory database engine built into the SAP Business Warehouse as well as into its core business intelligence (BI) wares. SAP in 2008 acquired Business Objects, supplier of the popular Crystal Reports BI front-end platform.

"If we take the SAP in-memory core into the analytic column-based architecture, I think that's going to be very profound in terms of the performance," said Sybase CEO John Chen on a conference call this morning announcing the deal.

SAP Co-CEO Jim Hagemann Snabe said in-memory computing will impact not only analytical applications but other computational functions as well. "With in memory technology, the access to information is up to 10,000 times faster than if you have to read the data from a disk," Hagemann Snabe said. "This of course is not just a normal continuous improvement it is a true breakthrough."

Once a popular force among those in financial services, Sybase is now viewed by many as a legacy database platform. "I've talked to people who have worked with their database but they are not necessarily embracing it," said Boris Litvin, a principal with Livingston, N.J.-based Ortress, a consultancy who helps Wall Street firms develop risk management solutions.

There are numerous open-source in-memory database technologies available, Litvin noted and Microsoft is also adding components to SQL Server 2008R2 that will give it in-memory database functionality. Among those tools is the new PowerPivot add-on to Excel that can be enhanced by SQL Server 2008R2.

Chen said Sybase is forecasting database revenues this year of $800 million and an additional $400 million from its mobile middleware business, half of which comes from service providers processing SMS messages. "Over the last five years, we were able to grow our top line revenue by 9 percent on an annualized basis, and expanded our non-GAAP operating margin form 18 percent to 30 percent," Chen said.

Sybase played a large role in the development of Microsoft's SQL Server. Along with Ashton-Tate Corp., the three co-developed the first release issued in 1989. Years later, Microsoft wanted to take control of the code-base of SQL Server and parted ways with Sybase.

The deal is expected to close in the third quarter. It remains to be seen if any other players such as Oracle, IBM or even Microsoft make rival bids.

Sybase also is the supplier of PowerBuilder, still a popular development environment among a segment of .NET developers. It remains to be seen whether SAP will keep that tooling or sell or spin it off.

About the Author

Jeffrey Schwartz is editor of Redmond magazine and also covers cloud computing for Virtualization Review's Cloud Report. In addition, he writes the Channeling the Cloud column for Redmond Channel Partner. Follow him on Twitter @JeffreySchwartz.

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