SAP SE is planning to cut about 3,000 jobs this year while exploring a sale of its remaining stake in Qualtrics International Inc. as the company looks for ways to boost profit.
The German software company expects adjusted operating profit for 2023 to rise to a range of €8.8 billion ($9.6 billion) to €9.1 billion at constant currencies, according to a statement on Thursday. That beat the average €8.65 billion forecast by analysts in a Bloomberg survey.
SAP Chief Executive Officer Christian Klein said in a call with reporters that the job cuts were a strategic move and “not related to our business momentum.”
The shares dropped 3.3% to €102.48 at 9:14 a.m. in Frankfurt on Thursday. The stock has declined about 12% in the last 12 months.
The company said that the purpose of the reorganization and a motivation for the Qualtrics sale is to refocus on its largest business, cloud services. The cloud business became SAP’s largest revenue stream last year. Earlier this month, Moody’s improved SAP’s outlook to positive because of the company’s transition.
The job cuts represent 2.5% of its staff. SAP is joining a growing list of tech companies that are eliminating jobs and looking for ways to cut costs after share prices dropped last year. IBM announced it was cutting 3,900 jobs in a statement on Wednesday, following similar cuts this month from Alphabet Inc., Microsoft Corp., Amazon.com Inc. and other major tech companies.
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The tech sector announced 97,171 job cuts in 2022, up 649% compared to the previous year, according to consulting firm Challenger, Gray & Christmas Inc.
The restructuring will cost the company €250 million to €300 million, with most of that recognized in the first quarter of this year. “The program is expected to provide a moderate cost benefit” for the full year and will save €300 million to €350 million in annual costs in 2024, the company said.
Key Insights
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- SAP’s cloud revenue rose 22% in constant currencies in the fourth quarter from a year earlier, to €3.39 billion.
- The company’s current cloud backlog is €12 billion, an increase of 24% at constant currencies.
- SAP says Qualtrics’s results are currently included in the 2023 outlook.
(Updated on Jan 26, 2023, at 4.19 PM with CEO comment in third paragraph, background on job cuts from fifth paragraph)
