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German enterprise software firm 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 “about 300 to 350 million euros.” [$327 million-$382 million] in running rate savings.”
We are guiding [the company] to double-digit profit growth in 2023 as we had always committed, but there will be only a moderate help from the restructuring program to those results,” Mucic told CNBC’s “Squawk Box Europe” in an interview following the announcement.
“What this is really about is a very targeted effort to further streamline our portfolio and focus investments on the areas where we clearly can have the most positive impact,” he added.
It comes after the company reported positive fourth-quarter results during the call.
Our cloud growth 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’re in the tech sector, we’re at SAP, we’re very confident about the year ahead,” Klein said at the time.
SAP weighs Qualtrics 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 November. 2018, SAP acquired American business software provider Qualtrics for $8 billion. Qualtrics subsequently went public two years later.
“We have had a very successful go-to market and technology collaboration 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.