Sense of urgency – there is no doubt that Hubwoo's current position in the market is greatly affected by the outcome of SAP's proposed acquisition of Ariba. But even with Ariba under its wing, SAP will have many years of product integration, solution rationalization and most important, platform/network re-architecting to contend with. During this time, Hubwoo has an opportunity to continue to capitalize on the SAP customer base, which is likely to want choice (e.g., not being locked into Ariba's supplier network fees). FYI – network sales, and the BPO team/BPO partnership are mutually exclusive topics within SAP. At the same time, we believe it is unlikely that Hubwoo will remain independent for long, based on current low valuation levels.
Stock price comeback – as my colleague Peter Smith observes in a post on Spend Matters PRO, How Has the SAP/Ariba Deal Affected Other Firms' Stock Prices?, "the immediate dynamic here was very dramatic – the day after the SAP deal was announced, Hubwoo shares fell by over a third from 0.18 Euros to 0.11!" Hubwoo are close partners with SAP, forming part of an ecosystem and offering products and services that complement the SAP e-procurement product range, such as a supplier network and other cloud-based services. SAP also holds a small equity stake in Hubwoo themselves."
Further, "the immediate market judgment was that with the Ariba network coming into the SAP family, the need for SAP clients to work with Hubwoo had declined greatly," and the stock took a significant haircut. Since the drop, likely owing to a French stock market that has risen around 15% since the end of May, Hubwoo shares have now recovered completely and are back at 0.18 euros, which is slightly higher than the pre-Ariba announcement by SAP. That said, it still values the firm at less than 1X revenue."
Solid non-SAP revenue – it is also interesting to note, that even though Hubwoo had previously positioned itself as "Cloud Procurement powered by SAP software" (a conscious choice by the company to leverage a less competitive go-to-market strategy alongside SAP), less than 25% of the firm's revenues are related to SAP applications. Over half of Hubwoo's revenues are actually recurring network revenues that come from its own technology IP.
So there you have it. Hubwoo is valued at a multiple that is less than entirely services-driven firms – despite its underlying IP. To adopt a favorite Warren Buffet saying, we believe "someone is going to pick up a network cigar butt" here – and one with potentially more than just a few puffs left on it.
In the final post in this series, we'll investigate who potential suitors might be.