Temenos Bid Makes Sense for SAP

Includes: SAP, TMNSF
by: Karthikeyan D S

A number of news agencies have reported that SAP (NYSE:SAP) is looking at a possible bid for Temenos (OTCPK:TMNSF). This is not the first time we have heard this rumor and it won't be the last time. But, there is no denying the fact that banking is one sector which took to automation quite early and SAP really missed a big bus, when it did not look at building a core banking application. Today, SAP has a marginal presence in the banking industry for apps like CRM, ERP etc. But lack of a core banking app has really hindered SAP's penetration of its new age applications like Netweaver into banks.

Temenos does make tremendous sense, but they really need to get valuation right. Oracle (NYSE:ORCL) is in the picture and competition really makes for higher valuation for whichever company SAP will bid. In the last one year or two, Oracle has outgrown SAP in terms of market cap, thanks to faster growth due to its $20 billion+ acquisition spree! However, SAP reasonably claimed that their strategy of organic growth makes tremendous sense, the stock markets thought otherwise. After all, markets react based on sentiments and Oracle's 20+% growth fuelled faster stock growth compared to SAP's 10% rates. SAP recently changed tracks and acquired Business Objects for 6 billion+ and the markets still have not reacted positively. But once the results are out, I am sure SAP stock will see some momentum

Disclosure: none