SAP to cut 3,000 roles, explore sale of Qualtrics stake
SAP headquarters.
Krisztian Bocsi | Bloomberg via Getty Images
German enterprise software company SAP said Thursday that it will cut up to 3,000 jobs, or about 2.5% of its workforce, becoming the latest tech giant to announce significant layoffs.
“We are further focusing our portfolio in areas where we are strongest to continue our accelerated growth,”[ads1]; said Christian Klein, CEO of SAP, during the company’s fourth quarter 2022 earnings call.
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“This has led us to announce today that we intend to undertake a highly targeted restructuring in selected areas of the company which will affect up to 3,000 positions and include a staffing reduction of around 2.5%.”
SAP shares were trading over 2% lower at 08:05 London time after the announcement.
In response to a question about estimated cost savings from the layoffs, SAP CFO Luka Mucic said the company expects “about 300 to 350 million euros [$327 million-$382 million] in savings on driving speed.”
“We guide [the company] to double-digit profit growth in 2023, as we had always committed, but there will be only moderate help from the restructuring program to those results,” Mucic told CNBC’s “Squawk Box Europe” in an interview after the announcement.
“What this is really about is a very targeted effort to further streamline our portfolio and concentrate investment in the areas where we can clearly have the most positive impact,” he added.
It comes after the company reported positive results for the fourth quarter during the call.
“Our cloud momentum accelerated in the fourth quarter with S/4HANA [SAP’s enterprise resource planning software]. Cloud revenues are also accelerating again, growing by 90%. We also returned to positive operating profit growth of 2%,” Klein said.
“For the full year, we met our guidance across the board with our cloud revenue growing 24%, up five percentage points from 2021,” he said.
He added that the company achieved this despite leaving Russia and the ongoing global macroeconomic volatilities.
Last week, Klein suggested that the firm would avoid having to lay off workers, as it is “in a very strong position,” in an interview with CNBC.
He added that he was broadly optimistic about the outlook for technology despite challenges from higher interest rates and supply chain disruptions.
“We in the technology sector, we in SAP, we are very confident about the year ahead,” Klein said at the time.
SAP weighs Qualtric’s stake sale
During Thursday’s earnings call, Klein also said that SAP would explore selling its stake in Qualtrics as “we focus on our core.” SAP currently owns 71% of Qualtrics on a non-diluted basis.
In November 2018, SAP acquired US software provider Qualtrics for $8 billion. Qualtrics then went public two years later.
“We’ve had a very successful collaboration on the go-to market and the technology front with Qualtrics, and we certainly want to continue this,” Mucic said.
“The move is intended to set up SAP to be able to focus on core ERP [enterprise resource planning] categories and the surrounding categories that come with it, while giving Qualtrics an even better ability to independently pursue its leadership and pursue the corresponding investments,” he said.
He added that Qualtrics is “a pristine and premium cloud asset” and SAP “should be able to provide a very positive value proposition for shareholders, but that remains to be seen.”
“This will significantly increase the earnings performance of SAP which is not currently reflected in the outlook,” he added, without disclosing further details.
Qualtrics on Wednesday announced fourth-quarter results and revenue guidance that exceeded analysts’ forecasts.
