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SAP makes $2.4B cloud purchase as online orders climb

(Bloomberg) -- SAP SE agreed to buy Callidus Software Inc. for about $2.4 billion to bolster a cloud-based business that grew strongly in the fourth quarter.

SAP said it generated sales of 6.8 billion euros ($8.4 billion) in the period, in line with analysts’ expectations, on accelerating uptake of flagship business software S/4 Hana. New cloud bookings, a keenly watched metric because it is to provide future sales growth, grew 31 percent at constant currencies, the Walldorf, Germany-based company said Tuesday.

Chief Executive Officer Bill McDermott has been expanding cloud-based services to challenge rivals such as Salesforce.com Inc. and Oracle Corp. and serve clients using the software to run sales, manufacturing and human resources functions. SAP agreed to pay $36 a share for Dublin, California-based Callidus, known as CallidusCloud, to give Europe’s biggest software company access to new sales analytics and customer engagement tools.

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A sign sits on the wall of the SAP SE office in Budapest, Hungary, on Tuesday, Oct. 20, 2015. SAP shares rose 0.2 percent to 66.28 euros at 12:24 p.m. in Frankfurt, for a gain this year of 14 percent. Photographer: Akos Stiller/Bloomberg

“We did it because it’s the most innovative company in its space,” McDermott said on a call with reporters. “We want CRM, we’re going for it.”

S/4 Hana added 1,000 customers including Unilever NV and Puma SE in the fourth quarter to reach more than 7,900 users, a greater intake than in the previous three-month period. The software allows businesses to run tasks on their own machines or in a cloud-computing arrangement hosted by SAP or one of its partners.

Operating profit, excluding share-based compensation, amortization and other charges, was 2.36 billion euros, slightly missing the average estimate of 2.4 billion euros. The company sees non-IFRS operating profit in a range of 7.3 billion euros to 7.5 billion euros this year.

SAP said the deal will be “essentially neutral” to non-IFRS earnings-per-share for fiscal 2018 and accretive to EPS in fiscal 2019. The offer is a 21-percent premium to the 30 day volume weighted average price of the target. SAP will fund the acquisition by existing cash reserves and an acquisition loan and is expected to close in the second quarter of 2018, subject to approval from regulators and investors, SAP said in the statement.