Editor’s Note: This article originally stated that Qualtrics owned SurveyMonkey’s applications; however, they are actually competitors. It has since been updated to correct this inaccuracy.

SAP SE (NYSE:SAP), the German database company, is buying privately held Qualtrics for $8 billion in cash; SAP stock fell on the news.

The deal comes a month after the Utah-based Qualtrics filed for its Initial Public Offering , where it planned to raise $500 million.  Qualtrics was expecting revenue of $400 million this year, and the IPO would have valued it at close to $5 billion.

SAP, best known as the main competitor to Oracle (NASDAQ:ORCL) in database software, has been working to become a competitor in cloud, and its survey applications are considered vital in that effort.

Investors were unhappy about the price, however, and have taken over 5% out of SAP stock’s $128 billion market cap, almost $6.5 billion, since the deal was announced. SAP stock was trading early on Nov. 12 near its 2018 low of March, $102 per share, down almost 10% from the start of the year.

Another Utah Billionaire

The deal will make Smith, a Mormon whose family owns 40% of the company and who founded it with his father and brother 16 years ago, a billionaire, but he said he plans to remain with the company, which has offices in Seattle as well as Provo, Utah.

In interviews, Smith, now 40, is portrayed as a devoted family man with a passion for child-like pursuits such as skateboarding, basketball, ice cream and Mountain Dew.

First known for its SurveyMonkey online surveys, Qualtrics began seeking venture funding in 2012, and acquired Statwing in 2016, after which it began billing itself as an “experience management”  company, selling its “XM” platform to over 8,000 companies.

Hot Market in Cloud Apps

The deal also continues a trend of bidding high for “cloud apps,” applications that run from cloud data centers. Microsoft (NASDAQ:MSFT), International Business Machines (NYSE:IBM), Adobe (NASDAQ:ADBE) and Cisco Systems (NASDAQ:CSCO) have all been bidding high for such applications in 2018, hoping to use them in order to compete with Amazon (NASDAQ:AMZN) Web Services in the cloud infrastructure market, by tying software tools to those contracts.

While paying 20 times current year revenue sounds harsh to the market, it’s not completely out of line when placed against the $34 billion IBM recently said it would pay for Red Hat (NYSE:RHT). Red Hat fetched over 10 times 2018 revenue and it just supports operating systems and middleware, while Qualtrics makes applications, which have a higher added value.

SAP had $4.5 billion in cash on its books on Sept. 30, but said it has secured financing of $7.9 billion to buy Qualtrics, increasing its long-term debt to about $14 billion, against total assets of $45.6 billion. SAP insists that Qualtrics will continue to operate independently.

SAP is trying to convince investors that it made a good deal, despite the high price, pointing out that Qualtrics is profitable, that its “market research and data analysis” products complement SAP’s offerings and compared it to Microsoft’s acquisition of LinkedIn. Reid Hoffman, who co-founded LinkedIn at about the same time the Smiths founded Qualtrics, is now a venture capitalist at Greylock Partners with a net worth estimated at $1.8 billion.

The Bottom Line on SAP Stock

Given the choppiness of the market for tech stocks, and the high price being paid, this could turn out to be an “AOL Moment” for cloud applications — the point where a maximum price is reached.

There is little doubt that the Smiths have made a great deal. Qualtrics was said to be worth $1 billion two years ago, and the company’s IPO road show seemed to be valuing the company at nearly $5 billion. SAP’s price of $8 billion in cash is a 60% premium from there.

The market thinks the Germans got fleeced by the nice Mormon gentleman, and are selling SAP stock in protest.

Dana Blankenhorn is a financial and technology journalist. He is the author of a new mystery thriller, The Reluctant Detective Finds Her Family, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in MSFT and AMZN.