Bloomberg : SAP Shares Fall After Software Architect Agassi Quits (Update1)

SAP Shares Fall After Software Architect Agassi Quits (Update1)

By Kenneth Wong

March 29 (Bloomberg) -- SAP AG shares fell after the resignation of Shai Agassi, the top software architect in the battle against Oracle Corp. and a candidate to succeed Chief Executive Officer Henning Kagermann.

The shares fell as much as 2.4 percent to 32.83 euros, and traded at 33.06 euros as of 12:08 p.m. in Frankfurt. Agassi decided to quit after SAP's board extended Kagermann's contract to 2009 last month, Chairman Hasso Plattner said on a conference call yesterday. Plattner had planned to make Agassi a co-CEO to succeed Kagermann.

Losing Agassi may hurt Walldorf, Germany-based SAP, the world's biggest maker of business-management software, as Oracle uses acquisitions to take a bigger share of the $56 billion market. Agassi, 38, took charge of product development globally in 2005 after becoming SAP's youngest and first non-German board member in April 2002.

``Agassi has been the lifeblood within SAP over the past few years,'' said Stefan Slowinski, an analyst at Societe Generale in London, who rates the stock ``hold.'' ``His departure is not a vote of confidence for SAP's expansion plans, or the company's ability to reach aggressive 2010 financial targets.''

SAP's head of sales Leo Apotheker, 53, takes over immediately as deputy CEO at the company.

`Sole Position'

Apotheker, a German based in Paris, joined SAP in 1988 and became a board member in 2002. He's fluent in five languages, and he earned a master's in business administration from Hebrew University in Jerusalem.

Apotheker's appointment ``puts him in sole position to be the successor'' to Kagermann in 2009, JPMorgan Chase & Co. analyst John Segrich said. He rates the stock ``underweight.''

Agassi and Apotheker were considered by analysts and investors to be the top candidates to succeed Kagermann. Plattner said in retrospect, Agassi ``most likely was not happy'' about Kagermann's contract extension.

``It became apparent that Shai was not comfortable committing to a 10- to 15-year period,'' Plattner said. ``I regret Shai's decision, but I respect it.''

Agassi is the chief architect of a new generation of software that can be integrated with competing products to help companies manage such tasks as payroll and inventory. Redwood City, California-based Oracle has spent about $20 billion on acquisitions since 2004 to add similar applications. It agreed to buy Hyperion Solutions Corp. for another $3.3 billion this month.

Oracle Lawsuit

SAP's 2006 software license sales, an indicator of future revenue, missed analysts' estimates and the company's own forecast. The company in January forecast its profit margin will decline for the first time in seven years because of spending to push sales to smaller companies. SAP wants these customers to generate $1 billion in additional revenue a year from 2010.

Last week, Oracle filed a lawsuit in the U.S., claiming SAP stole its software code on a ``grand scale'' to offer cheaper product services. SAP said it would fight the lawsuit.

Born near Tel Aviv, Agassi earned a bachelor's degree at Technion, Israel's Institute of Technology, in Haifa. He started his first company at the age of 21. In 1990, he recruited his father to help run a company called Quicksoft Ltd. He renamed it TopTier Software Inc. and moved the company to California before selling it to SAP in 2001.

`Best Job'

``I have the best job at SAP right now,'' Agassi said in Paris last May. ``I get to innovate and to create, and you can't ask for anything more. The rest is less than negligible.''

Agassi, who steps down April 1, will pursue his interests in environmental policy, alternative energy sources and issues related to Israel's future. He will remain Plattner's consultant and keep an office in Palo Alto, California, where he's based.

``We would not be surprised to see Mr. Agassi accelerate plans to run his own company,'' Goldman Sachs Group Inc. analyst Mohammed Moawalla wrote in a note.

Agassi plans to start a company that will make electric vehicles in Israel's northern town of Beit Shean, Ma'ariv newspaper reported today, without citing anyone.

SAP was created in 1972 by Plattner and four other software engineers from International Business Machines Corp. Plattner handed over many of his day-to-day responsibilities to Agassi ahead of stepping down as co-CEO in 20