Probable merger of SAP and RedHat - a slim chance

Though there seemed to be quite a few rumors of a possible buyout plan being staged by SAP to takeover RedHat. Various industry executives believe otherwise; stating that the likelihood of such an acquisition to take place are quite slim.

There is not just one industry that SAP offers its services to, rather there exists an assortment of industries that encompass the clientele of SAP. In that, SAP does not believe in fabricating generic solutions to all industries, but develops industry specific solutions thereby solving problems in an effective and efficient manner. Keeping this into consideration, it doesn’t make much of business nous for SAP to get hold of Red Hat – a company that is into virtualization, middleware and Linux OS technologies.

It would rather build on the enterprise mobility strategy which apparently SAP is entirely engaged into through its recent acquisition of Sybase. And this comes across as a superior business idea. It is also essential to mention the fact that most or all of SAP’s client companies each belong to distinct IT fields or sectors and any intention of buying Red Hat which is primarily into open source technology and linux development would not bode well for the working of the organization.

Experts in the industry have also hinted that SAP does not acquire systems-level infrastructure vendors. Besides this, buying Red Hat would communicate mixed messages to its consumers creating perplexity on the prospects of a few technologies specifically SAP’s NetWeaver middleware platform; which represents SAP’s version of open source technologies. Previously SAP has been receptive to large deals like its recent takeover of BI (business intelligence) vendor Business Objects that costed $6.8 billion and also the Sybase deal that was worth $6 billion.

But buying RedHat, which has apparently earned $748 million in revenue for its fiscal 2010 requires SAP to spend a considerably large amount that could even be larger than its previous two behemoth deals. Common sense would prevail if an organization does not spend so much and pile up a stack that has already been mastered by SAP. Nevertheless it should bank on new trends and hence capitalize on fresh markets so as to sustain its endeavor of serving a wide array of industries.

Having said that, considering that it is a pretty crazy time in the technology industry & more so in the domain of acquisitions, wherein firms are bent upon the enlargement of their technological footprint & also diversification of risk; it is not that bad an idea for SAP to buy Red Hat. Also, since the time SAP has initiated open source technology solutions it has acquired quite a few relevant open source companies. Of all these the one that was amongst the top ranked and that was not acquired, was Red Hat. So buying it could prove fruitful.

Whether SAP decides to buy Red Hat or not, and if it does, whether the acquisition works or not; SAP can always do what it has always done and still succeed and that is to continue developing path breaking technological solutions.