[adventured]

> how does someone decide on a price 26x higher than earnings?

That's 3,077x earnings. $2.6m vs $8b. 26x would be a great price in this market.

For the same reason Facebook paid a billion dollars for Instagram, with zero revenue (or Google & YouTube). Aggressive speculation on the future outcome (growth) of what they're buying. They're plausibly betting Qualtrics might be a $3b sales division some day, yielding $500m in profit, or similar. They're willing to pay up now for those hopeful future profits, to take them off the market before a competitor does or Qualtrics gets far larger and more expensive in the future. Definitely a very rich premium they're paying (from SAP's side, it's equivalent to two years of their after-tax profit).

[twtw]

> That's 3,077x earnings

Whoops. Thanks, updated.

Coming from experience with semiconductor companies years back, 3-4x earnings was a typical acquisition price. This speculation on growth is very interesting to me.

[nylonstrung]

Recurring SaaS revenue with good retention is highly predictable with 80-90% gross margins and requires essentially no CapEx to scale, which is in stark contrast to the semi world.

You are also seeing YoY growth that can be orders of magnitude greater