Could This Little Fish Splash SAP?

SAP (NYS: SAP) better watch out for stones, because Appcelerator may be slinging a few its way.

The small, privately held Appcelerator on Thursday touted its acquisition of Cocoafish, which will give Appcelerator a missing piece to its Titanium mobile platform, providing a back-end solution for developers to seamlessly plug cloud services into their mobile apps without having to get their hands dirty writing server code.

But even more importantly, it ties Appcelerator's existing front-end work in offering up open-source modules to speed mobile apps development with a back-end solution. In other words, it creates a one-stop shop.

"Our developer base wanted to build apps using our front-end capabilities, but they had to cobble together a back-end solution using apps in our [Appcelerator Open Mobile] Marketplace or by building it themselves," said Appcelerator CEO Jeff Haynie. "Cocoafish offered a back-end solution for mobile apps in the cloud and it unified our effort."

David vs. Goliath
The addition of Cocoafish's back-end solution puts Appcelerator in direct competition with SAP's Sybase, which has been hard at work trying to build up its mobile business to rival its bread-and-butter database business. Cocoafish directly competes with Sybase's High Performance Analytic Appliance (HANA), said Haynie.

Overall, Appcelerator gets about a third of its business from enterprise customers and a third from midsized businesses. SAP has for years been considered the enterprise apps king, but in 2002 began also embracing small and medium business customers when it launched its SAP Business One.

The acquisition will also push Appcelerator further into the cloud. Cocoafish offers cloud services that include features like push messages, storage, chat, and social integration that can be plugged into mobile apps.

SAP, along with just about every other technology provider, is looking for ways to offer their customers cloud capabilities.

Despite the head-to-head competition with SAP's Sybase that Appcelerator will inherit with its Cocoafish acquisition, Haynie said the two companies complement each other more than compete.

"Sybase has a good mobile device management product and integration," he said. "You can use our products alongside SAP and Sybase."

In its simplest terms, the mobile apps that developers create using Appcelerator's Titanium platform can sit on top of SAP's software stack. "Our customers are their customers," said Haynie.

Such relationships can sometimes lead to a proposal of "Hey baby, let's get hitched."

But Appcelerator's growth rate might hinder such a deal. The company generated more revenue in its first quarter of last year than all of its revenues for 2010, according to Haynie. And while the company is not yet profitable, it expects to break even with its cash flow in the next four quarters.

The company is also flush with funding, having just landed a $15 million series C round late last year led by Mayfield Fund, Red Hat, and Translink Capital. And, according to Haynie, Appcelerator may be teeing up more multimillion-dollar financing news in the coming weeks, noting the capital markets are looking favorable and it wouldn't be surprising for it to score additional funding in excess of $15 million if it goes that route.

"We don't need the capital per se, but there are a lot more acquisitions we'd like to do," Haynie said. "We'd like to do more tooling and are looking at testing tools. We're also interested in tools to design, build, and test apps."

Appcelerator is mum on how much it paid to acquire Cocoafish, its third acquisition in the past year, other than to note it's the largest acquisition it's done to date. Haynie said Appcelerator expects to make its money back from the acquisition within the next 24 months.

Baking with Cocoafish
Appcelerator plans to bake Cocoafish into its Titanium Platform by the start of the second quarter and label it Appcelerator Cloud Services (ACS). It's not an exciting name, but it sums it up nicely. Developers and publishers will be charged based on how much they dip into the service.

Here's the rub. Some of the cloud services that'll be offered by Cocoafish postmerger, such as push messages, storage, social integration, and the like, are already offered by Appcelerator's Marketplace partners like Urban Airship, Parse, and StackMob. Is it time for partners to hit the eject button?

"We plan to still support those companies. We're an open platform," Haynie said, noting that customers who'll defect to ACS will likely be the ones that want to deal with one vendor, aka Appcelerator.

Foolish takeaway
SAP investors should keep an eye on Appcelerator, especially now that SAP has loosened up its thinking on the way it handles mergers. In the past, the software giant largely took an attitude that it built rather than bought the software it sold. But as we know from its major acquisition of Business Objects to much smaller fill-in-the-holes types of technology acquisitions, SAP is inquisitive.

At the time thisarticle was published Fool contributorDawn Kawamotodoes not own any stock in the companies mentioned. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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