According to the Pioneer Press according to Reuters, Lawson (LAWS) is back in play by its own choice. Previous rumors flew in June 2010 when legendary corporate raider Carl Ichan took a large position in Lawson.
The big four in the enterprise software market -- IBM, Microsoft (MSFT), Oracle (ORCL) and SAP -- get listed as the likely prospects in these reports. But the underlying Reuters story provides a hint of why any possible Lawson merger/acquisition might go in another direction. It notes the fact that Lawson's strengths are in healthcare and retail.
This industry-centric factoid points out the hidden secret of ERP -- and enterprise software in general. This factoid should be the most relevant to enterprise software investors. Although most applications and even middleware are talked about in terms of generic, horizontal functions such as general ledger, inventory management, sales order processing, or application server, the hidden fact is that all of these functions and more (MRP, BOMP, DDA, EMR, POS -- I could string these out all day) are very different industry by industry, 4-digit NAIC code to 4-digit NAIC code. All of the leading software providers other than IBM and Microsoft know this and tune their applications and middleware to those major industry-specific needs.
Therefore SAP with its strengths in process manufacturing would not be a good candidate for taking over Lawson. There would be little synergy in sales forces and even developer mindsets. Neither would Oracle be a good candidate for the opposite reason; through its acquisitions of PeopleSoft and Retek in the past, it is already strong in healthcare and retail. Why would Oracle add more disparate applications it would later have to integrate? (Yeah, I know. Oracle acquisitions aren't always logical.)
[Viewing a likely white knight for Lawson through the industry-centric prism breaks down when thinking about IBM and Microsoft however. The application strengths of these two companies are horizontal and generic: collaboration via Notes/Domino and Office/Sharepoint respectively. Either company could pull it off but I doubt either wants to.
- [IBM just does not want to get back into the ERP market despite the fact that it invented it. Lawson is an important IBM partner so IBM might acquire Lawson in self defense but that would be the only reason I could think of for IBM acquiring Lawson.
- [And the fact that Lawson is such a big IBM partner is also why Microsoft would probably not want to get involved. Not to mention the fact that it really should get out of the ERP business and give up on the Great Plains/Solomon/Navision experiment. But Microsoft might want to double down which is the only reason I could think of for Microsoft to acquire Lawson.
[I can't dismiss the hint in the report that privately held Infor might acquire Lawson but that would mean it's a fire sale and there is also no investment play there.]
So keeping the industry-tinted glasses on, a better white knight for Lawson (assuming it is on the block) might be one of the healthcare ERP players such as Cerner (CERN), McKesson (MCK), or Siemens (SIEM) or one of the retail ERP players such as JDA Software (JDAS) or Micros Systems (MICR). But ask yourselves whether these suppliers have the deep pockets -- or the egos -- to play the game of driving up the Lawson share price the way market action March 8 and March 9 indicates?
-- Dennis Byron