UPDATED 14:57 EST / JULY 12 2021

BIG DATA

Broadcom reported in talks to buy closely held SAS Institute

Broadcom Corp. is in talks to buy Cary, North Carolina-based SAS Institute Inc. in a deal that would value the closely held SAS at between $15 billion and $20 billion, according to a report today in The Wall Street Journal.

Citing unnamed sources, the Journal said the deal could be finalized within weeks. It would give Broadcom a major presence in software used for data analytics and scientific computing.

Broadcom’s primary business is producing semiconductors, but the company has been aggressively diversifying, beginning with the $5.9 billion acquisition of Brocade Communications Systems Inc. in 2016 and followed by a $19 billion deal to acquire CA Technologies Inc. in 2018 and the $10.7 billion purchase of Symantec Corp.’s security business in 2019.

Founded in 1976 by North Carolina State University graduate students James Goodnight and John Sall, who still lead the company, SAS built its reputation on its Statistical Analysis System, a package of tools for accessing, managing, analyzing and presenting data. It reported $3 billion in revenue in 2020, making it the largest privately held software company.

Along the way, SAS diversified into other analytics-related categories such as machine learning, security intelligence, marketing analytics and risk management, but it has always remained anchored in data analysis. It says it has more than 83,000 customers in more than 60 countries, including every Fortune 100 company.

“Broadcom must spot a deal in SAS,” said Patrick Moorhead, president and principal analyst at Moor Insights & Strategy. “SAS brings additional analytics firepower to the company, but I’m not sensing any fast integrations.”

“Jim Goodnight is 78 years old so there may be any number of reasons he may wish to sell at this point,” said Mike Gualtieri, principal analyst at Forrester Research Inc., adding that he has no specific information on those reasons.

SAS has been fiercely independent for most of its history, although it announced plans for a public offering in 2000 and subsequently pulled it back after the dot-com bubble burst. It has long issued annual reports with limited information about its financial performance, even though it is not required to do so.

The company has long been a maverick in the industry. SAS typically invests 30% or more of its annual revenues in R&D compared with an industry average of about 20%.  It has licensed its products on a subscription basis since inception and doesn’t pay its salespeople commissions in the belief that their job should be to find the best solutions for customers rather than to sell software.

Fringe benefits for its 5,200 headquarters employees include free onsite Montessori daycare, fitness and health care facilities. The company owns the 300-acre campus on which its 24-building world headquarters is located, and co-founder Goodnight owns a local 54-hole country club and surrounding land where he built homes and sold them to employees at a discount. As a result, SAS routinely lands on lists of the best places to work. Employee turnover averages less than 4% annually, the company says, compared with more than 20% across the software industry.

A sale to Broadcom could be a shock to SAS’s insular culture. “Broadcom’s modus operandi is to buy a company, strip it to its bones from an opex perspective and ride it as long as it can,” Moorhead said.

However, Gualtieri said a sale to Broadcom is far from assured. “Other bidders most certainly will emerge because AI is hot and this is a way for an organization without to get it fast,” he said. The reported price tag of $15 billion to $20 billion “seems very fair when you consider the deep penetration SAS has within the world’s largest enterprises and the absolute necessity of using advanced analytical models to run business.”

Photo: SAS Institute

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