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German enterprise software company SAP said Thursday that it will be cutting 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,” said Christian Klein, CEO of SAP, during the company’s fourth-quarter 2022 earnings call.
“This led us to announce today that we intend to carry out a very targeted restructuring in select areas of the company that will impact up to 3,000 positions and include a headcount reduction of about 2.5%.”
SAP shares were trading over 2% lower at 8:05 am London time following the announcement.
Responding to a question on estimated cost savings from the layoffs, Luka Mucic, CFO of SAP, said the company expects “only a moderate cost saving impact for 2023 and then a more pronounced one in 2024, talking about 300 to 350 million euros [$327 million-$382 million] in run rate savings.”
It comes after the company reported positive fourth-quarter results during the call.
“Our cloud momentum accelerated in the fourth quarter with S/4HANA [SAP’s enterprise resource planning software]. Cloud revenue is also accelerating once again and growing at 90%. We also returned to positive operating profit growth of 2%,” said Klein.
“For the full year, we met our guidance across the board with our cloud revenue rising 24%, up five percentage points from 2021,” he said.
He added that the company achieved this despite exiting from 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 posed by higher interest rates and supply chain disruptions.
“We in the tech sector, we at SAP, we are very confident about the year ahead,” Klein said at the time.
SAP weighs Qualtric’s stake sale
During the Thursday earnings call, Klein also said SAP was going to explore the sale of its stake in Qualtrics as “we focus on our core.” SAP currently holds 71% of Qualtrics on an undiluted basis.
In Nov. 2018, SAP acquired American business software provider Qualtrics for $8 billion. Qualtrics subsequently went public two years later.
“We have had a very successful collaboration on the go-to market and technology front with Qualtrics and we absolutely will continue this,” said Mucic.
“The move is meant to set up SAP to be able to focus on the core ERP [enterprise resource planning] categories and the surrounding categories that come along 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 premier cloud asset” and SAP “should be able to command a very positive valuation for shareholders, but that remains to be seen.”
“This would materially increase the profit performance of SAP that is currently not reflected in the outlook,” he added, without revealing further details.
Qualtrics announced Wednesday fourth-quarter results and revenue guidance that exceeded analysts’ forecasts.