SAP To Cut Up To 3,000 Jobs, About 2.5 Percent Of Its Workforce

The software giant will focus on its core S/4HANA and Business Technology Platform products and plans to sell off its stake in customer experience application developer Qualtrics.

Business application giant SAP is laying off up to 3,000 employees – about 2.5 percent of its global workforce – joining a growing list of IT vendors cutting their payrolls this month.

The layoff plans were disclosed this morning during the company’s fourth quarter/full-year 2022 financial results conference call where CEO Christian Klein said they are part of a “targeted restructuring in select areas of the company.”

“This will impact up to 3,000 positions and will include a headcount reduction amounting to about 2.5 percent of our workforce,” Klein said on the call, according to a transcript posted on Seeking Alpha. “While we know these changes are necessary, it is never easy to make decisions that affect our colleagues in this way.”

[Related: Tech Company Layoffs In 2023: The Latest Cuts In Q1]

The company provided few details about where the layoffs would occur, either geographically or throughout the company. Reuters reported that slightly more than 200 jobs would be cut in Germany where the company is headquartered.

The company said the savings from the cuts would be modest in 2023 and provide a savings run rate between 300 million and 350 million euros ($325 million and $380 million) in 2024.

SAP joins a rapidly growing list of IT vendors who have announced layoffs this month including Salesforce, Amazon, Microsoft and Alphabet. Wednesday IBM confirmed layoffs that could number up to 3,000 employees.

The SAP layoffs come despite solid fourth-quarter financial results, including a 6 percent increase in revenue and a 30 percent gain in cloud revenue, but also a marked decline in profitability.

Klein said the restructuring and layoffs are part of an effort by SAP “to focus more on its core business and profitability.” That includes a move to “simplify and consolidate our portfolio,” he said, specifically citing the company’s flagship S/4HANA application suite and Business Technology Platform (BTP).

SAP also said it is exploring a sale of its 71 percent stake in Qualtrics, the developer of customer experience software that SAP acquired in 2019 for $8 billion and then spun off in an IPO in January 2021 while retaining a majority stake in the company. “SAP believes that this potential transaction could unlock significant value for both companies,” Klein said.

During the fourth quarter SAP divested itself of its Litmos business, a developer of learning management and CRM education software, to global investment firm Francisco Partners.

“In 2023, we intend to sharpen this portfolio focus further,” Klein said. “As we continue to build on our core strengths, we will be pivoting our CX [customer experience] and industry areas to be more focused on specific industries, complemented by a strong ecosystem. This focus on our core, together with our ongoing optimization of SAP‘s structure for cloud success are behind the [Qualtrics] announcement we made today.”

A final decision about a sale of its Qualtrics stake is subject to market conditions, an agreement on acceptable terms, regulatory approvals and approval by the SAP supervisory board, Klein said.

For SAP’s fourth quarter (ended Dec. 31, 2022) the company reported revenue of 8.44 billion euros ($9.17 billion), up 6 percent from 7.98 billion euros ($8.67 billion) in the fourth quarter of 2021. But the company reported a profit of only €332 million ($360.8 million) for the quarter, down 77 percent from 1.44 billion euros ($1.57 billion) one year before.

For all of 2022 SAP reported revenue of 30.87 billion euros ($33.56 billion), up 11 percent from 27.84 billion euros ($30.26 billion) in 2021. Profit for the entire year was 1.71 billion euros ($1.86 billion), down 68 percent from 5.38 billion euros ($5.84 billion) one year earlier.

CFO Luka Mucic said on the call that cloud revenue became SAP’s the single largest revenue stream in 2022. Cloud revenue increased 30 percent in the fourth quarter to 3.39 billion euros ($3.68 billion) and reached 12.56 billion euros ($13.64 billion) for all of 2022, up 33 percent from the year before.