Takeaway: Removing Callidus from Best Ideas

SAP bought CALD for 118x trailing FCF.

SAP bought a company that is plainly losing market share.

SAP bought a software product about which customers say “CallidusCloud deployment services fail to guide them with best practices. Customer support is inconsistent and lacking key resources, which has led to unresolved issues and the need for escalations” AND “this vendor's resources are expensive and [its] functionality has been oversold during the sales process.”

The above quotes come from Gartner’s latest MQ for SPM solutions. Industry participants are well aware that an x-CALD employee working at Gartner helps manage the framework for SPM that includes reviews of Callidus. Clearly, some things you can’t hide.

After the deal, CALD’s competitors will be stronger including Anaplan (we think ORCL buys), CRM, and Apttus.

When all is said and done, SAP will own the high turns Litmos Learning software ($40-50m annual revs – our estimate) if they want to keep the wheels of the sales force eternally spinning to sell it. They will own a l-s-d% growth core on a historical basis that is about to start declining without all the tricks the company has pulled to make it look good.

In the end, the $2.4b SAP acquisition will be a write-down within 2-3 years to something much more modest like $5-600m. But a $2.4b blunder won’t sink $128b SAP.

What were the obvious signs? Recently the x-CALD employee at Gartner scrubbed the competitive metrics to make it look like SAP did not have overlapping product. We wondered what could be the reason for erasing the truth. Now we know.

We’ll take CALD as a black eye but we won’t stop looking for companies like Callidus who pretend to be something they are not, and who hide and obscure everything that they are. Only this time, we will look more carefully for the acquisition clues.