Ex-official of local SAP unit to be firm’s co-CEO

SAP AG's chief executive, Leo Apotheker, abruptly resigned over the weekend, leaving shares of the world's largest business software maker plummeting today as investors contemplated the move.

The Walldorf, Germany-based supervisory board decided not to renew Apotheker's contract, which would have expired at the end of the year.

His departure comes eight months after he took over in May 2009 as the sole CEO. SAP said in a statement yesterday that board members Bill McDermott and Jim Hagermann Snabe will take over as co-CEOs.

The new CEOs are known in the industry. McDermott, as head of global field operations, joined SAP in 2002. He lives outside Philadelphia and led SAP America, the largest subsidiary of the software giant, through some good years in the earlier 2000s. SAP's North America operations are based in Newtown Square, Delaware County.

SAP has about 2,000 employees in the Philadelphia region. Snabe has been credited with improving the productivity of the Business ByDesign development team, analysts said.

"No executive losing a job after the kind of year SAP had last year is a surprise," said analyst Peter Goldmacher of Cowen & Co. L.L.C. "I am not sure that promoting current management helps the situation. Sometimes you just need fresh blood for a fresh perspective. I don't think these changes give anyone confidence."

Apotheker was at the helm when license sales declined by almost 30 percent. "When a company performs so poorly, there is usually a sacrificial lamb," the analyst said.

"Confidence from investors comes with a plan for sustainable growth, not just costing cutting," Goldmacher said.

SAP cannot do that "without major changes to the business. All of the big IT shops have been very aggressive in mergers and acquisitions to diversify offerings except SAP," said Goldmacher. "I believe it is too late for SAP to proactively do M&A, as all the major game-changing properties have been taken out."

Ultimately, SAP will be acquired, Goldmacher predicted.

Analysts speculated that the shake-up may be the result of executives at the top disagreeing over the company's strategic direction.

SAP said on Sunday that the new setup will allow it to "better align product innovation with customer needs" and said that cofounder Hasso Plattner would continue to play a "strong role in advising the new leaders on technology and product development."

Apotheker, who had been with SAP for more than 20 years, was at the helm when SAP recently reported disappointing financial results and the first annual drop in revenue since 2003. In the global recession, customers delayed investing in new business software.

A recent internal employee survey found that employee morale was poor and that Apotheker failed to inspire workers, one analyst said.

The company's American depositary shares were down $1.46 or 3.18 percent to $44.50 on the New York Stock Exchange.