Software giant SAP to cut 3,000 jobs amid profit slump
German software giant SAP has joined the ranks of tech companies to lay off employees this year. The firm announced that it plans to axe 3,000 staffers or about 2.5% of its global workforce. The Walldorf-based group suffered a steep drop in profit in the last quarter of 2022. The company has also decided to explore selling its stakes in Qualtrics.
Why does this story matter?
The post-pandemic economy has forced technology companies to take a hard look at their costs. After hiring rapidly during the pandemic, many tech giants have announced mass layoffs. As macroeconomic headwinds show no sign of slowing down, tech companies are bracing for an even tougher 2023. SAP's decision to cut jobs is an indication that layoff season has reached Europe as well.
Layoffs are part of a 'targeted restructuring program'
SAP's decision to lay off employees is part of a "targeted restructuring program." The company announced the decision while unveiling its full-year results for 2022. The firm aims to "strengthen its core business" and "improve overall efficiency" with cost-cutting measures. Per the company, the restructuring program is expected to result in annual savings of €300 million to €350 million in 2024.
Sale of Qualtrics would result in significant one-time gain: CFO
As part of the restructuring, SAP plans to sell its stakes in survey-software company Qualtrics. It bought the company for $8 billion in 2018. SAP currently has a 71% stake in Qualtrics, which is currently valued slightly lower at $7 billion. "(The sale) would result in a quite significant one-time gain," said Luka Mucic, the company's chief financial officer.
SAP's profit declined by 47% in the last quarter
In Q4 of 2022, SAP recorded €8.44 billion in revenue, up from €7.98 billion in the year prior. However, its net profit plunged 47% to €1.2 billion. The company attributed the profit slump to the Ukraine-Russia crisis and its decision to wind down businesses in Russia and Belarus. The poor performance of Sapphire Ventures, its start-up investment arm, also contributed to the decline.
The company announced a strategic partnership with BMW
SAP has been focusing a lot on its cloud-based subscription service. The cloud revenue increased by 30% to €3.39 billion in the fourth quarter. Its software-licensing business, however, took a hit, with revenue falling from €1.46 billion to €907 million. The company has announced a strategic partnership with BMW, where the auto giant's industrial cloud would be merged with SAP's premium cloud business.
