SAS pushes back timeline to reach stock market as IPO takes ‘longer than anticipated’
.jpg "An aerial view of SAS Institute headquarters in Cary.")
The prominent analytics software company SAS Institute forecasts reaching the stock market in 2025, a year later than its previously stated goal, as the Cary firm says it’s “taking longer than anticipated” to ready its internal systems for an initial public offering.
SAS Chief Technology Officer Bryan Harris told The News & Observer Wednesday that his company has invested approximately $50 to $60 million in its internal systems in preparation for its IPO.
“When you’ve run privately for 47 years, you’ve got to go do the audits to make sure all of the systems move (properly),” he said of the company that started in 1976.
Harris affirmed an IPO remains the clear intention of the company and its billionaire cofounder and CEO, James Goodnight. “There’s no wavering from that,” Harris said, adding, “I think we’re looking at 2025 at this point in all reality.”
SAS had announced its plans to go public in July 2021, with a target to be ready for an initial public offering by 2024. The company made its intentions known shortly after a report circulated that it was in talks to be sold to the chipmaker Broadcom.
This isn’t the first time the company has pledged to reach the market: Goodnight initially declared plans to take SAS public in 2000.
For a private company, going public can be a lengthy process, said Saša Pekeč, a professor at Duke University’s Fuqua School of Business who served on the board of a company in his native Croatia called Atlantic Grupa as it went public in 2007.
“You’re positioning yourself to different levels of communicating with the general public,” he said. “There are different requirements. For a company (SAS) this large, this established, I think it’s especially likely timing can change.”
While assessing the value of private companies is difficult, SAS is considered by many to be the world’s largest privately-held software company.
External economic factors also dictate when companies seek to become public. And 2021 was a boom year for IPOs, with a record number of U.S. companies seeking to enter the market as stocks soared and interest rates were low. The past two years have seen a correction, with the number of IPOs on pace for below pre-pandemic levels.
Going public could squash buyer rumors
Today, SAS provides data analytic services to clients in a wide range of industries, including health care, utilities, finance, and government. The business-to-business firm is among the largest analytics providers in the world and counts around 90% of Fortune 100 companies or their affiliates as customers. It also ranks among the biggest private companies in the state.
But its growth in recent years has plateaued. In 2017, SAS generated $3.24 billion in revenue. In its 2022 annual report, the company said it “continues to record more than $3 billion in annual sales.”
The company still employs several thousand workers in the Triangle area, but it has lowered its headcount in recent years.
“We understand the perception of (flat revenue) in the market, but it would be different if we were a $10 million- or $100 million-dollar company,” Harris said. “But at $3 billion, we’ve saturated quite a bit of the market.”
Harris later emphasized SAS still has room to expand, especially through its cloud services division.
There have been rumored attempts by other companies to acquire SAS in the past. Most recently, in 2021, The Wall Street Journal reported Broadcom was in talks to buy SAS for between $15 and $20 billion. No deal was reached, and two weeks later, SAS announced its aimed to be IPO-ready within three years.
Harris said he hopes SAS’s current push to go public will quell future speculation about prospective buyers. “The scale at which we would be as a public entity, there would only be a few companies that would even consider paying for what we think the value of the business is,” he said.
In fact, Harris noted gaining access to the public market should allow SAS itself to pursue larger acquisitions than its current capacity allows.
The future of SAS lies in AI
One way SAS seeks to boost revenue is by expanding into artificial intelligence. In May, the company pledged $1 billion over the next three years to develop services for its AI-backed analytics engine, SAS Viya.
This isn’t its first foray into AI; in 2020 alone, SAS spent more than $1 billion on artificial intelligence technology and services. Yet recent innovations in generative AI, led by the November debut of the large language model ChatGPT, have rewritten what software companies can offer.
“It really comes down to compute and processing power which is enabling advancements,” said Leigh Cullen, a senior product manager at SAS. “When you look at (large language models), the sheer amount of data that they are scrapping to generate data is a breakthrough in itself.”
Speaking in Las Vegas this week at the annual SAS Explore conference, Harris and fellow SAS executives introduced multiple upcoming AI-powered services, including an app developer (App Factory), a model-building platform (Workbench), and a generative AI feature in SAS Viya that’s being developed in a partnership with Microsoft (which has invested in ChatGPT-creator OpenAI.)
“The fact is, we are now able to interact with our software end data in ways we never thought were possible,” Harris said during a media briefing Tuesday.
Embracing artificial intelligence is now necessary for an analytics firm like SAS to stay competitive, said Pekeč, who called AI a “transformative power.”
“You will be left behind if you don’t use it,” he said. “It is like if everyone starts using trucks, and you still use horse and carriage.”
This story was originally published September 14, 2023 at 6:00 AM.
