By Ragnhild Kjetland Feb. 9 (Bloomberg) — SAP AG Co-Founder Hasso Plattner may have a bigger challenge as he picks up his rivalry with Oracle Corp. — again. The 66-year-old supervisory board chairman, who’s also the company’s biggest shareholder, is assuming a greater management role at the world’s largest business-management software maker, helming what he said yesterday was an effort to “re-establish trust inside and outside” the company. The Walldorf, Germany-based company’s chief executive officer, Leo Apotheker , unexpectedly resigned on Feb. 7 after SAP’s board decided not to renew his contract that was set to expire at the end of the year. He was replaced by two co-CEOs. The board asked Plattner to advice the new managers on technology and product development, giving him a hands-on role seven years after he stepped down as co-CEO to take on fellow- billionaire Larry Ellison’s Oracle, which says it’s taking business away from SAP. “SAP is still a major actor but it has lost its positive contact to customers,” said Frank Niemann , a SAP software consultant at Pierre Audoin Consultants in Munich. “Hasso is a software guru, a little like the Bill Gates of Europe. He’ll work more on developing technology. He has a very clear understanding of what’s going on in the market. But he can’t force the company in a new direction. That’ll be a challenge.” Apotheker, 56, resigned amid customer and employee discontent, and a failure to boost revenue. He was replaced by board members Bill McDermott and Jim Hagemann Snabe . Both Snabe and McDermott have decades of industry experience, “but neither has been a CEO before and the relationship between them will be interesting and challenging,” said Ross MacMillan , an analyst with Jefferies & Co. in New York. ‘Happy Company’ That may mean a more significant role for Plattner, who in 1972 joined Dietmar Hopp to create SAP with three former colleagues from International Business Machines Corp. “For a public company, profit is everything, but in order to be profitable it must be a happy company, and I will do everything in my power to make us a happy company again,” Plattner said yesterday on a conference call with analysts and journalists, his first in seven years. The management change means SAP is acknowledging the “depths” of its current issues, said JMP Securities analyst Patrick Walravens in San Francisco. “These issues include a convoluted product strategy, loss of market share to Oracle,” as well as trouble adapting to selling software as an online-service, Walravens said. He has an underperform rating on SAP. Product Innovation SAP shares , which reached an all-time high of 71.58 euros in March 2000 — on Plattner’s watch — have since halved. They traded yesterday at 32.56, giving the company a market value of about 40 billion euros ($54.7 billion). Redwood City, California-based Oracle , the world’s second-biggest software maker, has a market value more than double that at $116 billion. Plattner and his two new co-CEOs need to increase software license sales, which dropped 28 percent in 2009 after rising for years. They will also have to improve relationships with clients, which were hurt by an attempt to elbow in an increase in the price of maintenance contracts, said Saverio Papagno , an analyst at AZ Fund Management SA in Luxembourg. “SAP should bring its focus back on product innovation, to avoid losing market share to competitors, rather than cost cuts,” he said. SAP, whose customers include McDonald’s Corp., General Motors Co. and Wal-Mart Stores Inc., slashed more than 3,000 jobs last year, its first such major cut since its creation, helping it beat its own forecast for operating margin. ‘Trim Exposure’ In the near term, the management changes may create turmoil and may backfire, some analysts said. It may slow things down, rather than speed things up as Plattner wants, they said. “These organizational changes tend to freeze activity inside the company, as everyone tries to grab and defend turf,” said Thomas Otter , a Gartner Inc analyst in Ladenburg, Germany. Otter said SAP, whose strategy has been “murky” recently, needs to have a “more compelling technological vision.” “Can this board deliver that? I just don’t know.” On the call yesterday, Plattner said there will be a change in management style, to a “flat” structure; that management will strive to implement “radical changes” when opportunities present themselves; and that changes will be communicated better externally and internally. Michael Nemeroff , an analyst at Wedbush Securities Inc. in New York is not convinced. He said investors should “trim exposure” to SAP until it becomes clear that the potential problems don’t run deeper. ‘Fresh Air’ “Major changes to SAP’s senior leadership could create significant near-term operational risk,” Nemeroff said. To be sure, some analysts called the management shakeup a welcome change. Snabe, currently head of product development, has been credited with improving the productivity in development. McDermott was the head of one of the “stronger sales forces in the software industry,” said Credit Suisse analyst Philip Winslow , in New York. Robert Jakobsen , a Silkeborg, Denmark-based analyst at Jyske Bank A/S said the two new co-CEOs could turn out to be a breath of “fresh air.” He said they will need to build a momentum for SAP inside and outside the organization, through better customer satisfaction and a clearer vision. The company also needs to win market share from Oracle, Jakobsen, said. Battling Billionaires Plattner, who according to Forbes Magazine was the 110th richest person in 2009 with a net worth of $4.5 billion, will be taking on Oracle, whose CEO, Ellison, was ranked fourth-richest by Forbes with a net worth of $22.5 billion. Berlin-born Plattner started at IBM in Mannheim, Germany, after graduating from Karlsruhe University and left four years later with his colleagues. The SAP founders first worked in their homes and on the IBM computer of customer Imperial Chemical Industries Plc to make software to tie together business functions. “There’s lots of debate as to whether Hasso is the right person to bring the company back,” said Ray Wang , a partner at Altimeter Group in San Mateo, California said. “For the next three to six months he brings the vision and direction. To improve the treatment of employees and customers, Hasso is the right person. If there is no turnaround in the next 12-18 months, SAP will be in real trouble,” he said. To contact the reporter on this story: Ragnhild Kjetland in Frankfurt rkjetland@bloomberg.net
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SAP Management Upheaval Pits Plattner Against Ellison in Market Share Spat
