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SAP EYES SMALLER MARKETS AS RIVALS FIGHT TO MERGE

According to Eric Auchard of Reuters, Big-business software maker SAP AG of Germany is looking to show off just how small it can become even as rivals Oracle, PeopleSoft and J.D. Edwards beat each other up over whether they should merge and grow bigger.

In a series of deals unveiled recently, Europe's largest software company is seeking to prove it has momentum in the global market for Web-based tools aimed at small- and mid-sized businesses, not just corporate giants.

SAP SAPG.DE said it was working with eBay Inc to encourage its base of big-business customers to sell used equipment via the Web through eBay's online auctions, which draws millions of small business and consumer bidders.

"Companies are looking for a way to go out to the Web to get rid of excess inventory. We have a way to do that," SAP spokesman Bill Wohl said in a phone interview. "Customers want very narrowly focused industry-specific functions to help them solve basic business problems. We have a way to do that.

"While the rest of the industry is consolidating, we're staying very focused," Wohl said of SAP's decision to remain on the sidelines, so far, in the recent wave of deal-making in which SSA Global Technologies, a manufacturing software firm, merged with Dutch software company Baan.

SAP also said it won a new deal with guitar maker Fender, a mid-sized corporate customer, marking the inroads SAP is making beyond its base of many of the world's biggest companies.

No financial terms were disclosed.

In an expanded alliance expected to be announced on Tuesday, SAP is teaming up with International Business Machines Corp (IBM), the world's largest computer and services company, to provide IBM middleware, computers and storage devices for SAP's small-business push, according to industry sources familiar with the plan.

Meanwhile, SAP said Switzerland's Novartis AG, the world's sixth-largest pharmaceutical maker, had chosen a range of SAP software customized for the drug industry to replace existing Novartis computer systems in 50 countries.

The Web-based MySAP system will allow Novartis to replace the older systems with SAP ones incrementally, in a bid to cut the costs of installing the new software and to reduce the overall cost of the system over its useful life, SAP said.

Analysts believe that SAP's success in gaining share in the business software market over the past 18 months helped spur the nasty merger battle heating up involving business software companies PeopleSoft Inc, J.D. Edwards & Co and Oracle Corp.

"In any acquisition there is chaos. Customers want to know who is going to hold their hand and support any new technology," industry analyst Bruce Richardson of Boston-based AMR Research said in a phone interview from Orlando.

"Oracle, PeopleSoft and J.D. Edwards have basically paralyzed the market, from the $100 million company to the No. 1 Fortune 500 company... and that's great news for SAP."

On Monday, PeopleSoft amended its friendly offer to buy rival J.D. Edwards for $1.7 billion by saying it would now pay $1.75 billion in cash and stock to buy the Denver-based company.

Oracle has said it hopes to woo PeopleSoft shareholders to support its own $5.1 billion hostile bid for PeopleSoft. Oracle argues PeopleSoft would be better off as part of a combined company ready to compete against mutual arch-rival SAP.