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Alex Webb

SAP’s Sales Army Still Doesn’t Justify an $8 Billion Deal

The German software giant can turbocharge Qualtrics sales, but that still doesn’t explain why it had to pay so much to buy it. 

Bill McDermott has some explaining to do.

Bill McDermott has some explaining to do.

Photographer: Krisztian Bocsi/Bloomberg
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The numbers are staggering. SAP SE is paying $8 billion to acquire Qualtrics International Inc., a maker of data collection and analysis software which expects revenue of just $400 million this year. What’s more, the Utah-based startup reported a net profit margin of just 0.8 percent in the nine months through September.

SAP is attracted by Qualtrics’ 40 percent growth rate, but it’s ponying up a massive premium for a company that was already preparing an initial public offering. Qualtrics Chief Executive Officer Ryan Smith said in a conference call with investors on Monday that the IPO was already 13 times oversubscribed with the roadshow not yet complete, and would have valued the firm he founded with his father and brothers at between $5 billion and $6 billion. While we’ll probably never know if the public markets would have matched that goal, he’s certainly played his hand very well.