SAP to cut 3,000 jobs and consider selling Qualtrics stake

SAP Headquarters.

Krisztian Bocsi | Bloomberg via Getty Images

German enterprise software company SAP said on Thursday it would cut up to 3,000 jobs, or about 2.5% of its workforce, becoming the latest tech giant to announce major layoffs.

“We are further focusing our portfolio in areas where we are strongest to continue our accelerated growth,” SAP CEO Christian Klein said during the company’s fourth quarter 2022 earnings call.

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“This has led us to announce today that we intend to carry out a very targeted restructuring in certain areas of the business which will affect up to 3,000 positions and include a reduction in the workforce of approximately 2.5 %.”

SAP shares were trading down more than 2% at 8:05 a.m. London time after the announcement.

Responding to a question about the estimated cost savings from the layoffs, SAP CFO Luka Mucic said the company expects “around 300-350 million [$327 million-$382 million] in operating rate savings. »

“We guide [the company] double-digit earnings growth in 2023, as we have always been committed to, but the restructuring program will only provide moderate support to those results,” Mucic told CNBC’s “Squawk Box Europe” in a statement. interview after the announcement.

“This is really a very focused effort to further streamline our portfolio and focus investments on areas where we can clearly have the most positive impact,” he added.

This comes after the company announced positive fourth quarter results on the call.

“Our cloud momentum accelerated in Q4 with S/4HANA [SAP’s enterprise resource planning software]. Cloud revenue is also accelerating again and 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 had achieved this despite its exit from Russia and the ongoing global macroeconomic volatilities.

Last week, Klein suggested the company would avoid having to lay off workers because it is “in a very strong position,” in an interview with CNBC.

He added that he was broadly optimistic about the outlook for the technology despite the challenges posed by rising interest rates and supply chain disruptions.

“We in the technology industry, we at SAP, are very confident about the year ahead,” Klein said at the time.

SAP assesses sale of Qualtrics stake

During Thursday’s earnings call, Klein also said SAP would explore selling its stake in Qualtrics because “we are focused on our core business.” SAP currently owns 71% of Qualtrics on an undiluted basis.

In November 2018, SAP acquired US enterprise software provider Qualtrics for $8 billion. Qualtrics then went public two years later.

“We’ve had a very successful market and technology collaboration with Qualtrics and we will absolutely continue that,” Mucic said.

“The move aims to configure SAP to be able to focus on the core of the ERP [enterprise resource planning] categories and surrounding categories that come with it, while giving Qualtrics an even better ability to independently pursue its leadership and pursue corresponding investments,” he said.

He added that Qualtrics is “a pristine, premier cloud asset” and that SAP “should be able to achieve very positive shareholder valuation, but that remains to be seen.”

“It would significantly increase SAP’s earnings performance which is currently not reflected in the outlook,” he added, without revealing further details.

Qualtrics on Wednesday announced fourth-quarter results and revenue guidance that beat analysts’ forecasts.

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