Olivier Le Moal - stock.adobe.co
SAS Institute Inc. is an acquisition target.
The Wall Street Journal first reported news of the acquisition, including a potential price of between $15 billion and $20 billion.
"From my understanding, the talks are happening," said R "Ray" Wang, founder, chairman and principal analyst at Constellation Research.
SAS did not confirm or deny the potential acquisition.
"SAS does not comment on rumors or speculation," a spokesperson wrote in an email. "SAS remains focused on furthering innovation to best serve its customers."
SAS Institute, founded in 1976 when it was part of North Carolina State University, is based in Cary, N.C. It specializes in advanced analytics with a software suite geared primarily toward data scientists and other trained data analysts. The vendor offers SAS 9.4, an enterprise analytics platform for on-premises users, and Viya 4, an analytics platform first introduced in 2016 that was reengineered in 2020 to be fully cloud-native.
Broadcom was founded in 1961 and is based in San Jose, Calif. The $24 billion conglomerate has been a designer and supplier of semiconductors since its inception as a division of Hewlett-Packard. It added infrastructure software product development through its $18.9 billion acquisition of CA Technologies in July 2018.
In 2020, SAS, which is privately held, generated revenues of $3 billion, according to WRAL TechWire, which was down slightly from 2016 when revenues were $3.2 billion.
An acquisition price of $15 billion would represent five times total revenue, while $20 billion would be slightly less than seven times total revenue.
SAS growth slowed
SAS' troubles attracting new customers is one potential reason the vendor is negotiating to be acquired, according to analysts.
"SAS really just cross sells its products to its existing base," said Boris Evelson, principal analyst at Forrester Research. "I haven't talked to any clients who have purchased their data analytics products who don't already use their base machine learning and data science products. Basically, it's all kept within the SAS ecosystem."
Meanwhile, competitors, including AWS, Google and Microsoft, are attracting the developers and data scientists that SAS has traditionally targeted, he continued.
Similarly, Wang said SAS might be looking for a buyer because of its recent problems attracting new customers. Broadcom has recent experience buying an established company and integrating its technology, he added.
"SAS is seen as the Cadillac of analytics. A lot of it is really for data geeks, and they haven't been attracting as many younger users," Wang said. "That's been a challenge. It's similar to the CA base, so based on the experience of owning CA, Broadcom knows how to manage that kind of base pretty well."
Goodnight could step away
Another potential reason SAS is in talks to be acquired is that it would enable James Goodnight, co-founder and CEO of SAS -- who, with a doctorate in statistics from North Carolina State, is widely known as Dr. Goodnight -- to retire after 45 years, according to the analysts.
"The question we've been asking ourselves is whether it's a leadership transition issue," Wang said. "Does Dr. Goodnight want to retire? That's where all the speculation is."
Evelson, meanwhile, noted that SAS and Broadcom don't have overlapping capabilities, meaning Broadcom will likely leave SAS' portfolio intact. The 78-year-old Goodnight could then step aside knowing the company he built will continue.
"That's purely Jim Goodnight not getting any younger, retiring," he said. "It's almost a sole proprietorship."
From Broadcom's perspective, the acquisition of SAS would continue its transition from a purely hardware vendor to a vendor with a strong position in corporate software, where there is a lot more growth potential, according to Wang.
"There's not a lot of growth in hardware," Wang said. "Software is where the options are, and that's why they picked up CA. Analytics has a much higher margin, and it looks like Broadcom is finishing out its strategy to be able to transition the company from hardware-based to software-based. It makes sense for them to look at SAS."
Big analytics acquisitions
At $15 billion to $20 billion, Broadcom's acquisition of SAS would rival or exceed Salesforce's $15.7 billion acquisition of Tableau in 2019 and make it the biggest analytics sector acquisition ever.
Earlier this year, Logi Analytics was acquired by ERP vendor Insightsoftware, and in late 2020, IBI -- formerly Information Builders -- was acquired by Tibco Software.
Consolidation has been an ongoing trend in analytics over the past few years, including Google's $2.6 billion purchase of Looker just days before Tableau was bought. Broadcom's acquisition of SAS would be the latest, and potentially the largest.