SAP AG yesterday said it plans to start a stand-alone subsidiary based in Silicon Valley to set up and run business-to-business marketplaces on the Internet.
The new company will be called SAPMarkets and is due to open for business in May, with headquarters in Palo Alto, Calif. SAP said it expects to make an initial investment of nearly $500 million in SAPMarkets, which will start with about 150 employees.
The German software vendor said Hasso Plattner, its principal founder and co-CEO, will run SAPMarkets on an interim basis until a CEO is hired for the new subsidiary.
SAP will retain majority ownership of the new entity, but the employees who work for the unit will also be given an unspecified number of shares. Ajit Nazre, who will be vice president of business development at SAPMarkets, didn't rule out the possibility of a future public stock offering.
"But you have to build a company before you talk about an (initial public offering)," Nazre said. "Our first priority is to build it."
SAP has announced deals to set up 10 online marketplaces so far. But Nazre said the stand-alone subsidiary should be able to move more quickly in the rapidly emerging e-commerce market. "Speed to market is the biggest reason we're doing this," he said.
SAP's announcement comes one day after rival J. D. Edwards & Co., a Denver-based business applications vendor, said it was setting up a new business unit focused on online trading exchanges.