The business software group SAP plans to spin off and float Qualtrics, an AOL customer sentiment assessment expert that acquired the company for $8 billion (approximately Rs 59,862 crore) less than two years ago.
The move to list Qualtrics in the United States will partially alleviate the last major acquisition of former CEO Bill McDermott and enable SAP to rebalance its German roots under the leadership of its successor, Christian Klein.
McDermott was criticized at the time for paying too much for Qualtrics. Under the leadership of founder Ryan Smith, SAP surpassed the valuation it hoped to obtain on the stock market, and the stock was four days away from listing.
However, since the transaction was concluded, the market has been rising hard. Jefferies analysts said that if Qualtrics’ valuation is consistent with the price of high-tech growth stocks currently trading at 30 times revenue, it will The valuation may be as high as 14 billion euros (about 12.2 billion rupees).
Investors’ reaction was that SAP’s stock price rose by 3.9% and the closing price hit a record high as Klein tried to end a wave of management turmoil triggered by the Qualtrics transaction.
Before SAP released its full second-quarter results on Monday, news of the divestiture confirmed that the leader of enterprise resource planning software in the second quarter had rebounded from the coronavirus pandemic.
At a constant exchange rate, non-IFRS operating profit increased by 7% to 1.96 billion euros (approximately Rs 17,150 crore), and total revenue increased by 1%. SAP reiterated its outlook for 2020, operating profit increased by 1% to 6%.
Qualtrics’ “experience management” platform collected real-time feedback from customers to help analyze the performance of the company’s products or services, and revenue increased by 32% in the quarter.
However, it is still the smallest of SAP’s four business units, with a profit of only 7 million euros (about 610 million rupees) during the reporting period.
Klein called the spin-off a “win-win situation,” which he said would give Qualtrics a chance to realize its potential with greater autonomy.
SAP will maintain the control and merger of Qualtrics, but still see it as a key part of the “smart enterprise” proposition, which covers all areas from finance to personnel, logistics and customer relationship management.
SAP Chief Financial Officer Luka Mucic said that the details of the issuance have yet to be determined, but he pointed out that technology companies usually issue 10%-15% of shares in the stock market.
He added that the goal is to use Qualtrics’ capital appropriately, while giving SAP greater freedom to invest in its own business or make smaller “merger” acquisitions.
© Thomson Reuters 2020