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SAS, Microsoft a possible pairing after Broadcom talks end

Acquisition talks between SAS and Broadcom broke down a day after they were reported, but SAS may have hoped all along to attract another potential buyer.

SAS Institute might have its sights set on Microsoft.

Just a day after acquisition talks between SAS and Broadcom were made public, TechTarget confirmed that those negotiations have ended without the companies reaching an agreement for Broadcom to acquire SAS.

Instead, SAS, a longtime independent analytics vendor, is hoping tech giant Microsoft becomes its parent company, according to R "Ray" Wang, founder, chairman and principal analyst at Constellation Research.

"They are trying to get Microsoft to be part of the deal and bid," he said.

The Wall Street Journal first reported on July 12 that SAS and Broadcom were discussing an acquisition that would value SAS at $15 billion to $20 billion, and then reported on July 13 that those talks had broken down.

Had the deal gone through, at $15 billion it would have approached the size of Salesforce's $15.7 billion acquisition of Tableau in 2019, and at $20 billion would have far exceeded it and been the biggest analytics sector acquisition ever.

Those talks with Broadcom, however, were likely a ploy to let Microsoft know that SAS is looking for a buyer, according to Wang.

"The deal was leaked to see if Microsoft would take the bait," he said.

While Wang said SAS is hoping Microsoft emerges as a buyer, SAS co-founder and CEO James Goodnight -- widely known as Dr. Goodnight because of his PhD in statistics from North Carolina State University -- told employees on July 13 that the company is not for sale, according to SAS spokesperson Shannon Heath.

They are trying to get Microsoft to be part of the deal and bid.
R 'Ray' WangFounder, chairman and principal analyst at Constellation Research

"I can confirm that Dr. Goodnight sent a message to all employees which said, 'We are not up for sale,'" she said.

Regarding Wang's statement that SAS is hoping to get acquired by Microsoft, Heath added that SAS had no comment.

"With regard to the additional inquiry about Microsoft, SAS does not comment on rumors or speculation," she said.

Microsoft also declined to comment.

A good relationship

SAS, founded in 1976 when it was part of North Carolina State, is based in Cary, N.C., has a deep existing relationship with Microsoft.

In June 2020, SAS and Microsoft unveiled a partnership agreement under which Microsoft became the preferred cloud provider for SAS' analytics products, which include SAS 9.4 for on-premises users and Viya 4 for its cloud customers. In addition, SAS' analytics tools were migrated onto Microsoft Azure, the tech giant's cloud computing platform, and SAS and Microsoft developed a joint go-to-market strategy.

Despite the partnership agreement, however, SAS remained cloud agnostic and in May 2021 added native support for both AWS and Google Cloud Platform.

Given the close relationship between SAS and Microsoft, which includes significant customer overlap, there would be positives to a potential deal between the two, according to Boris Evelson, principal analyst at Forrester Research.

But because the Microsoft and SAS have similar technological offerings, there would be negatives as well, he added.

"Ever since I've been working closely with SAS, going back to 2000-2001, they've always had suitors," Evelson said. "SAS is a prime, well-known global brand, and has enjoyed almost uninterrupted profitability for several decades. Every large software company would benefit from owning SAS."

Potential benefits of a deal between SAS and Microsoft are varied, he said. They include the vendors' already strong working relationship, the popularity of Azure with SAS customers, and potential synergies between Microsoft's Power Apps and Power Automate -- tools that enable business users to develop applications without an expertise in coding and data science -- and SAS' analytics capabilities.

Meanwhile, beyond significant technological overlap, a potential downside could be Microsoft's acquisition pattern of taking companies off the market and either integrating them into existing Microsoft products or reintroducing them as a new Microsoft product.

"That approach will clearly not work with such a behemoth as SAS," Evelson said. "This means Microsoft will most likely leave SAS operating as an independent business unit for at least a few years, and over time will rationalize the portfolio, embed some products in Microsoft's stack and retire some."

Wang similarly noted that the existing partnership between SAS and Microsoft is significant, but added that the quality of that the partnership could enable the companies to overcome potential hurdles.

"SAS has been building deep relationships with Microsoft, from Azure to analytics to compute," he said. "There seems to be a very peaceful and productive relationship."

Kjell Carlsson, principal analyst at Forrester, meanwhile, said it makes sense for SAS to seek a buyer, but that Microsoft might not be the one that actually winds up making the purchase.

An acquisition would enable Goodnight, who is 78 years old, to retire. Oliver Schabenberger, who spent 19 years at SAS and served as both chief operating officer and chief technology officer, had been viewed as a possible successor but left to become chief innovation officer at SingleStore in early 2021.

"To state the obvious, SAS has a leadership succession problem," Carlsson said. "Now that Oliver has left, I think everyone is scratching their head as to who that successor could be. Other companies have turned to selling the business in similar situation."

He noted, as an example, EMC selling itself to Dell.

The main issue, however, is what Microsoft might get out of acquiring SAS, he said.

SAS would bring capabilities that target data scientists -- a persona Microsoft hasn't traditionally targeted -- but a vendor that specializes in augmented intelligence and machine learning might make a better fit for Microsoft, according to Carlsson.

"SAS is, above all else, a data-scientist-oriented company," he said. "You could make the case that Microsoft would benefit from filling this gap, but in practice Microsoft [might] struggle to successfully leverage a potential SAS acquisition versus other players in the ML/AI platform ... who they could acquire more cheaply."

An acquisition trend

Should SAS get acquired by Microsoft, Broadcom, or anyone else, it would represent the continuation of consolidation among analytics vendors.

In April 2020, Logi Analytics was acquired by ERP vendor InsightSoftware, and in October 2020, IBI -- formerly Information Builders -- was bought by Tibco Software. In 2019, just four days before Salesforce acquired Tableau on June 10, 2019, Google purchased Looker for $2.6 billion.

In addition, there have been a series of smaller deals with analytics vendors acquiring AI and ML vendors to add those capabilities to their analytics tools. ThoughtSpot, for example, has already made two acquisitions in 2021, and Qlik acquired Blendr.io on the same day Tibco bought IBI in 2020.

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