Thread regarding SAS Institute layoffs

Microfocus got acquired for USD 5.8 billion earlier this year. That’s a 2.3 multiplier on the previous year revenues. The revenues were growing, with a USD 1.38 billion revenues in 2017 and USD 2.9 billion in 2022. Just as a comp.

"$15-20 B sounds overpriced considering SAS's annual revenue is $3 B"

The fact that there have been no offers since Broadcom's offer, is suggestive that the market agrees with your conclusion: overpriced.

Of course that leads to the speculation that there is a gap between what the market is willing to pay and what the founders are willing to accept. Until those numbers intersect, SAS will remain unsold.

"The $15 billion-to-$20 billion deal price is based on the enterprise value of SAS, which typically includes debt, and is adjusted for cash in a businesses' financial statements, sources told the Journal. Jul 12, 2021" . This was reported in the media.

$15-20 B sounds overpriced considering SAS's annual revenue is $3 B but SAS has no debts. Who knows why it was valued so high initially. Even the smart guy Elon way overpaid by offering $44 B to Twitter/X and was stuck with it and couldn't get out of it.

It was unclear why the Broadcom and SAS deal fell through. Was it Broadcom that back out of the deal due to overpriced valuation perhaps or was it SAS that back out of the deal with rumor that SAS wanted all cash deal for $20B and Broadcom would only buy with stocks? Who knows what the true story was.

The point of @3yhb+1p7Gxvu5 being that unless SAS can be acquired at a bargain basement price, then it will likely take more years than a positive revenue stream exists to recoup the initial investment. Perhaps Goodnight and Sall would take some kind of structured pay out over time that would reduce the initial outlay for the buyer.

In any case, it’s some real dicey financial engineering/forecasting to structure an acquisition that leaves the buyer feeling good about their long-term ROI. Unless of course, there are tax consequences, some hidden gems of technology within SAS or other offsetting business/financial factors that are less obvious (the only one I can think of is a “white night” with some kind of vertical products business plan similar to what @1jmj+1p7Gxvu5 suggests, but with something more like 3000-4000 total employees instead of 6000.

Shrewd tech business folk know new vertical products can be innovated/delivered that compete directly/win against the best of what SAS has today for less money than acquiring the company. That’s a real dilemma SAS finds itself in and why what @1klu+1p7Gxvu5 concludes is more than likely correct.

3X current revenues is indeed a sane price. If Broadcom had offered $15B, SAS would have taken it.

“ Broadcom failed to take over SAS with $20 Billion deal in 2021 …”

In what universe is SAS worth $20 billion? Maybe if the deal included the campus real estate, the art and those European castles SAS international facilities are located in 😉. if it’s just the business, then that’s about as logical as Elon paying $44 billion for Twitter.

Assuming someone acquires SAS and cuts it to the bone, they are will left with $700M to $1 billion a year in operating expenses, and that’s only to sustain a declining revenue stream. Forget about any innovation that will create new streams of revenue, or forestall the ultimate collapse of what remains.

Isn’t 3X current revenues a sane price for a company with a business model like SAS?

Broadcom acquired CA Technologies for $18.8 Billion in 2018.
Broadcom made a $130 Billion failed hostile bid for Qualcomm in 2017.
Broadcom failed to take over SAS with $20 Billion deal in 2021 after it was leaked to WSJ.
Broadcom made a $61 Billion cash and stock acquisition of VMWare in May2022 and the deal is expected to close by October 30,2023.

Broadcom has a history of acquiring companies and in the process, streamlining operations to maximize profits. This often involves cost-cutting which means layoff.
VMWare warned its employees of impending layoffs. Employees will receive one of three options: a Broadcom offer, a transitional offer, or a severance package.

If Broadcom had succeeded in acquiring SAS back then in 2021, SAS employees would meet the same fate as VMWare employees.

"The best thing that could happen would be a purchase with tough love if someone sees potential with established vertical products that still rank in the magic quadrant"

A bit over two years ago JG and JS supposedly walked from around $15b offered by Broadcom. Me thinks alot of people would sn---h that offer today.

@2zcb+1p7Gxvu5

Spot on! FWIW, over 30 years ago, I tried to persuade the then head of SAS R&D (a very "old-school SAS guy" originally dating back to the late 70s who most people following these threads probably wouldn't even know of) to create a chief data infrastructure architecture person (I was thinking of myself, but a couple others would've qualified) to continue doing basic research in an effort to create a cogent and progressive overall data infrastructure/architecture that all of SAS, including future solutions, could build out on. This would include highly paralyzed, I/O, internal file format standards, metadata, access control, and cryptographic services, etc.

I'll leave it at this. He was a good politician and it never happened. Instead, we wound up with a little competing fifedoms and technologies like SPDS (minimal success it best) and TKTS (abysmal failure).

SAS hasn't taken an overall company wide Architecture seriously since the mid-to late 80s when MVA was concieved and built. Any elegant services/infrastructure technologies created after that exist because a relatively tiny number of highly competent individuals worked scads of extra hours over many years and fought all kinds of politics to get things done.

"Why would Apple want JMP? Apple could write its own system, if it hasn't already."

Doesn't Apple have R, R Studio, R Shiny, etc. under their control?

Why would Apple want JMP? Apple could write its own system, if it hasn't already.

SAS never listened to architects, especially those with significant experience at other companies. 10 years ago was the time to decide what the next generation of SAS products and engine was going to look like. Instead, VIYA emerged.

During that time, architects came in, tried hard, got frustrated, and left a year or two later. The attitude that drove them out: "We've had double-digit revenue growth every year since the company was founded. Who are you to tell us how to do things differently?" They found success at other companies that did value their vision, tempered with knowledge of where the industry was truly headed.

SAS had that revenue growth because it was the 800 pound gorilla in the market. But now, there's competition from hungry companies that know the place of open source as part of the product offering. SAS used to be the choice of students who took it with them into the workplace. Now students are using Python intead.

No comprehensive innovation led to zero revenue growth. Now, it's too late with current management. IMO, an IPO would see the stock price tank. The best thing that could happen would be a purchase with tough love if someone sees potential with established vertical products that still rank in the magic quadrant.

We shall see...

"I was thinking Apple may want to acquire it but I am also thinking that its not openly for sale yet, just like SAS is not."

Yet.... Broadcom supposedly made an offer. Nothing at this point is surprising. Inclusive that a sale or IPO never happens.

That is a great question about JMP. I assume at this point that JS doesnt buy it because he doesnt want to run the company JMP, he wants to work on JMP software. I was thinking Apple may want to acquire it but I am also thinking that its not openly for sale yet, just like SAS is not. It is hard to calculate the revenue per employee for JMP because where do you draw the line between SAS and JMP as it is not a wholy independent company. It sits on SAS campus, uses SAS HCC, landscaping, security, etc. But it does appear that it is moving towards being able to stand alone and be acquired separately.

"I too am interested in the JMP dynamic. Will JS purchase it and continue to run it independently? Will Apple buy it?"

But JS hasn't bought JMP and nor has Apple. Why not?
Someone please identify reasoning flaws on the following:
At this point, the net JMP revenue per JMP employee should already be a known. Even if not using generally accepted accounting methods, surely a decent guess has been made. Same for SAS sans JMP. The more attractive that JMP figure is compared to the figure for SAS(without JMP) the more likely there would be a separate news story regarding the sale of JMP standalone. But that had not happened. Therefore it might be reasonable to conclude that JMP's revenue per employee is underwhelming. Or negative.

Is JG really that benevolent of a dictator?

"JMP stands for John's Macintosh Project. How cute!"

Acquisition folk dont care about cuteness. Money and profit margins grabs their attention, not cuteness. Once they gain an accurate JMP revenue per employee, the fate or future of JMP will become better known.

From the eyes of a former SAS employee, two things were obvious. First, JMP doesn't sell for big money(comparatively speaking). Second, there are alot highly paid JMP employees coupled with a very lavish amount of money spent on JMP.

JMP is the data analysis tool of choice that scientists and engineers rely on for powerful analytic capabilities and dynamic statistical discovery.
JMP Pro offers all the capabilities of JMP, plus advanced features for more sophisticated analysis including predictive modeling and cross-validation techniques.

In case people don't know, JMP stands for John's Macintosh Project. How cute!

My brother is an EE and he uses JMP. JMP has a good niche and may be better off being spun off since it is already a wholly owned subsidiary of SAS led by JS, the junior owner of SAS.

"The rise of SAS was a case study at prominent biz schools."

And sadly, the fall of SAS will also be a case study at biz schools too.

SAS is 47 years old. We sincerely hope and pray that SAS at least make it to 60th birthday before being forced to "retire" for good. 50 is still young to retire and it would be really sad for SAS if everything goes down in the next 3 years.

@2ztj+1p7Gxvu5

Solid Informative post! As the future unfolds, it is unlikely SAS can succeed as an analytical tools vendor.

However, SAS could succeed as an enterprise software company with innovative vertical products, based heavily in advanced ML/AI, built from a combination of proprietary (e.g. salvageable pieces from TK and Viya) + open source infrastructure/language environments.

I wonder what a SAS + SingleStore merger (or deepening of their existing relationship) would look like, replacing much of CAS with SingleStore as the data plane?

Earlier someone said they believe that history will reveal that Viya was the death of SAS. As a 40+ year user of SAS and a 25 year employee of SAS, I sadly agree.

The reasons for agreement? A combination of 3 aspects: poor timing, poor communication, and arrogance. Let's drill deeper into each of those 3 aspects.

1. Poor timing - Viya came about too late and took too long to bake(geezus....it is still baking, ugh). The emergence of Viya unfortunately - for SAS - coincided closely with a mindset change in the SAS customer base. Devout SAS users were dying out gray heads. New SAS users did not share the enthusiasm for SAS that was espoused by the gray heads. A significant number of new users viewed SAS as an overly bloated way to accomplish a task which they already knew how to solve with their tool chest(open source). Viya never meshed well(baked too slow coupled with rocky and sluggish deployment) enough to stem the negative increasingly anti SAS sentiment being espoused by the growing younger demographic. It doesn't take much imagination to realize the some of the growing wave of "alternatives are better and cheaper than SAS" would become the future decision makers. Decision makers control budgets and budgets over time were being channeled away from SAS towards open source. Viya sites were not increasing fast enough for the market to view it as a cool wave to ride.

2. Poor communication - SAS has a poor history handling migrations. Version 5 migration to Version 6 was a chinese fire drill for many users. SAS was too slow to react. It seems that lessons were not learned from that to the degree necessary in order to give Viya a decent chance during migration from V9 to Viya. Inside SAS enthusiasm for Viya never was matched by user enthusiasm necessary for much acceptance and adopting of the USA user base. No bueno. Right or wrong, the USA V9 user base was mostlyleft behind. Wondering how they will fit into the future. The gray heads understood the problem but recognized that SAS was dragging feet on rolling out viable migration plans. For example, straight from google authored by SAS:

"use SAS/CONNECT to retrieve data from your SAS 9.4 deployment and transfer it directly into memory in SAS Viya." Talking about getting data into Viya while mostly ignoring how years of legacy code/applications migrate to Viya? Code and applications do not migrate by SAS/Connect. Again, the long time gray head SAS users understood that data in Viya is useless without the previously built code and applicationsbcoming along with that data. Gray heads also understood that they would depart the workforce before that pesky migration problem was ever adequately addressed by SAS. Hence they were not the squeaky wheel. Meanwhile, the new generation of SAS users were increasingly using a dr-g they enjoyed better than SAS. That dr-g is known as open source. Bottom line, the gray heads cared but did not matter and their younger replacements mattered but did not care about SAS. Ignored problems seldom self solve and that largely explains the mostly self induced pickle SAS(the company) finds itself mired in.

3. Arrogance - the Big German(BG) epitomized arrogance. He was so smart yet he had no awareness of what he did not know. His academic accolades were only surpassed by his lack of understanding(and experience !);of how the business world operates. The Big German is the biggest reason the company is mired between a declining V9 market and almost zero USA market enthusiasm for Viya. BG departed. As arrogant as he was(witnessed first hand by many, me included), I don't think his intention was to torpedo SAS. But his arrogance by mostly ignoring migration to Viya, really showcased his lack of business acumen. Again, I think BG had intentions of saving SAS with Viya. BG was just too academic to have enough awareness of where or even how to toss the Viya lifejackets.

The rise of SAS was a case study at prominent biz schools. I REALLY hope I am wrong but do feel we are witnessing history in the making and that history is the fall of SAS. History has proven over and over that greatness is not permanent.

@1paf+1p7Gxvu5

I have friends in the JMP Division. Several JMP employees accepted the previous buyouts.

I’ve not heard of any JMP employees laid off. I’ve always been told that JMP is profitable, so that may be the reason.

Recent changes have separated both JMP technology and staff from SAS. This would enable the business to be easily spun off, by either current or future owners.

JG seems to be at least somewhat concerned with breaking even on SAS, if not making a profit. Is that a possibility without major changes over the next 20 years? For him to reign as a 100 year old CEO he may have to make some of these less than popular changes outlined below.

I too am interested in the JMP dynamic. Will JS purchase it and continue to run it independently? Will Apple buy it?

Here's a perspective that SAS might relate to:

https://stocks.apple.com/AnQ0w60QAToqpxSeEiA5KQA

SAS hired some hardcore in the past because they used to have tough interview standards but starting around 2005-2010 and after that SAS hired too many HFFs and not enough hardcore. Other companies were getting rid of their deadweights but SAS was picking them up thinking they got them at a bargain not realizing they picked up a bunch of HFFs. Once HFFs got into SAS and got power they brought in their other HFF friends to join them. Now most of the hardcore and good people left but the HFFs still thrive politically and drive SAS into the ground. Beyond sad!

@1nsa+1p7Gxvu5

SAS has hired "hardcore" people in the past. These are serious people that like to get work done and aren't there to sc--w around. They are goal-directed and speak in firm tones. They aren't there to play politics.

Hardcore people are incompatible with SAS culture. SAS is full of hot-house flowers (HHF) who wilt upon serious goal directed efforts. The HHF's have ingratiated themselves with the power structure through other HHF's, "special friendships", paternity and other dirty tricks. When the HHF's feel a bit of a wilt, they engage in mobbing behaviors and make life unbearable for hardcore folks, driving them out.

Your last bullet point is how HHF's game the system. Since SAS is all about good PR, doing something hard and unpleasant is antithetical to SAS's DNA. For the entirety of SAS, the culture has been less about the core business, and more about "the feelz". HHF's really bloom in a culture of "the feelz". The business and hardcore people wither away, but the HHF's certainly bloom.

There's no saving it.

I had a customer in a senior role who had built their career on SAS and had purchased and implemented SAS9 (EBI and EDI), and Viya (VA), and would regularly tell me that JMP was by far the best product SAS ever produced.

As far as I could tell, what JMP could do from an end user perspective was well ahead of it's time - it just lacked a scalable architecture. Maybe if SAS had taken more inspiration from JMP when it was designing VA, maybe it wouldn't have been such a terrible dog of a product.

@1jmj+1p7Gxvu5

All of your 7 strategy suggestions are very good and something SAS should seriously consider but I don't see SAS implementing them. A few issues...

• SAS needs to refresh the current management teams...no to low chance of this happening.... too many useless middle management.

• too many very good and experienced SAS veterans have left the company in the last few years, there are slim pickings remain.

• SAS is by nature, stingy and cheap and will not pay competitively enough to attract the best talents and or even enough to keep the best talents.

• SAS doesn't know how to hire hard-core people. In order to get "hard-core" people you need to hire the right people with the right skills and good work ethics (no lazy people) and reward them enough and appropriately every year.

• SAS does not like to do a big mass layoff because it will attract negative PR and media stories. SAS likes to do small batches of layoffs periodically, every month, every quarter, every 3 years to fly under the radar. Anything less than 200-300 cuts at a time l will not attract much attention especially when spreading it out over a year. Cutting a few thousands at once will get national media attention. This means SAS will continuously layoff here and there, causing continuous anxiety, fear, dread and impacting productivity/morale for remaining employees.

Regarding the comments on JMP, I completely agree they should spin off or sell it. It would be best for both companies as SAS moves towards IPO readiness. JMP is bloated and dependent on SAS to be sustainable, but it's a decent revenue stream for a potential buyer like Software AG--they could strip it to the bone and ride the margins until the horse is dead, like they have other software companies. JMP has been run by JS more or less without much interference from JG for decades, and it's been a fat, slow company for a long time. JS has no interest in changing how he runs the business, and I think he's a big reason the Software AG sale blew up in '21--he owns just enough of SAS to be a PITA for JG.
If SAS sold/spun off JMP, that would remove about 500-1k in headcount from SAS overhead due to all the dev/sales/ops/support/etc. personnel dedicated to the product. JS could ride off into the sunset feeling successful, and it would certainly help SAS improve its metrics for IPO readiness. Really not seeing why JMP should still be part of SAS.

Without Technical Support, say good-bye to the renewal stream.

"JMP Is fundamentally irrelevant to the long-term picture for SAS. It has never had much significant intersection with SAS".

Based on how I read your comment above. JMP is living on borrowed time. Sale or IPO poof it goes away due to not being a good strategy fit and a poor ROI performer.

No sale or IPO and company is restructured per your vision(which seems very sound!), same result, poof JMP goes away.

So, it seems the best survival chances for JMP is for it to be completely unwinded and divorced from SAS and be put up for sale ASAP. Yet, we have seen no push for the sale of JMP(divorced) from SAS. Could this mean that JMP might be gone by 2025 and JS happily fades into the sunset free of the JMP hassle?

SAS strategy is largely ego based. I cannot imagine a world in which JG will lay off 50% of his employees. The press would eat him alive. I am guessing that SAS will either try to become slightly profitable (10%) or nothing major will change until there is a new leader. If there were larger than 1% layoffs a year I would think that the severance package would be drastically decreased as well.

Cost per employee is one of the reasons so many companies outsource all their support services and use contractors. This shifts the expense (which may be way higher) to other lines in the budget. Magically, the cost per employee drops.

Are the health care center and gym outsourced?

When I left SAS, the only benefit I missed was the healthcare center.

JMP Is fundamentally irrelevant to the long-term picture for SAS. John Sall wanted a native product on the Mac back in the 80s. JMP was the result and It has never had much significant intersection with SAS.

Here is the brutal truth regarding the SAS . If the company has any hope of not only surviving but thriving, they need a strong decisive leader who recognizes that with their current product mix and shrinking market, SAS should have half the number of employees they currently have. They needed to find a very clear-cut focused mission.

This would be my simple strategy:

1. Form a “Tiger team” of seasoned veteran SAS R&D and tech support employees to take care of supporting and minimal fixes/security patches to Version 9. Ideally this should be no more than 100 people total. Select only the best/most productive of the remaining employees capable of doing this. Many of these folks will be in their 50s to early 60s — near the end of their career so as V9 winds down they should be fine eventually retiring in the next 5 to 7 years. Give them all a raise.

2. Form a “modern infrastructure” R&D team made up of the best developers who understand the core of Viya (CAS, Computer Services, Microservices) and are also committed to doing ongoing basic research. Heavy focus on public cloud integration without ignoring the fact that some extremely lucrative customers also need to run on premise. This should be no more than 150-200 people. Give them a big raise and expect everyone of them to be “hard-core”.

3. Select the best people from Risk/Fraud and other profitable vertical product development teams under the umbrella of a new product division. Give them a raise and expect everyone of them to be “hard-core”. They will be required to work closely with team 2). This should be no more than 300 people Working across several products with this much common code/technology as possible

4. Together a highly selective SAS research division with ML/AI experts paid competitively with West Coast tech. This team would focus a lot of its efforts on open source but yet also interface with team 2) To build out proprietary algorithms/infrastructure support where It makes business sense.

5. Embed product management directly with engineering. Build a true culture of innovation.

6. Build appropriate sales/channel and services teams around 3).

7. Lay everyone else off.

If done right SAS would have no more than 6000 employees worldwide. Revenue per employee would immediately double and the company would have a sustainable strategy to eventually be successful again based on proprietary infrastructure (which could include considerable open source integration/contribution via team 3)).

Has anyone from JMP division been cut with layoffs or VRBPs at all or so far it's only SAS (non-JMP) employees that have been cut?

What is the gross revenue from JMP and how many employees are in JMP? Those two numbers would at least reveal gross revenue per employee.

Guessing their costs are well hidden. On purpose, of course. because it would be an embarrassment for one of the founder's product to be outed with a poor ROI metric. JMP ROI will have to surface if a sale/IPO is ever going to happen.

From published figures, SAS revenues have been flat, around $3B each year, for the past 10 years.

But they’re flat only if inflation is ignored. In the real world, SAS revenues have decreased >2% each year for the past 10 years.

So if this trend continues, we can expect >2% annual headcount reductions, just to maintain current revenues and profits per employee.

If management desires to increase those metrics, they must do more. Again, from published figures, through layoffs, buyouts, and attrition, SAS has reduced headcount by about 5% each year over the past three years.

Someone else may provide more precise numbers, but those are in the ballpark. Understand your situation and develop your plans. Good luck all.

@OP+1p7Gxvu5

"Revenue per employee is one of the key metrics that the market looks at when evaluating the relative efficiency of software companies."

Dave Mac (Chief Revenue Officer) said this back in what, 2019, at an R&D Town Hall? Whatever, it was before the pandemic. Basically he said that SAS has too many employees, or too little revenue. He made exactly the same argument: SAS's revenue per employee was too low compared to other, more successful companies.

He was the first and most vocal of SAS's executives to go "on the record", so to speak, but before that we had been told (vaguely) to "reduce expenses" so travel for conferences was cut, discretionary travel for SAS managers was cut, etc. He left SAS quietly in 2020, less than a year after that Town Hall. At the time there was a lot of speculation that it was because he had said the quiet part out loud.

He also said that the inflection point was fast approaching... in 2019. So the inflection point is now in the past and that's the reason for SAS's current austerity measures. All of the recent changes have been driven by SAS's need to reduce expenses, because SAS revenue has been flat, if not decreasing faster than expected, for the past three or four years.

Technical Support adds value but generates no revenue. Uncomfortable position to be in.

R Studio and Python run great on my Mac. Free, too!

@kml+1p7Gxvu5

Bldg. C café is outsourced to Bon Appetit. R and T cafés are SAS employees.
On-campus childcare is outsourced. I think landscaping and HCC are all or mostly SAS employees.