Billion-euro SAP restructuring to slash 4,400 jobs

sap restructuring

The German software company announced on Tuesday it is to cut 4,400 jobs as in a billion-euro restructuring plan after profits stagnated in 2018, while insisting that the company was on track to boost revenue in 2019, according to a phys.org report.

“We are talking about a completely voluntary programme,” chief financial officer, Luka Mucic, said.

Mucic said the number of job cuts will be “slightly higher than in 2015″. In that year, the group cut more than 3,000 jobs when shifting its focus to “cloud” computing from traditional software.

“We are expecting 4,400 job cuts, more than the 3,000 in 2015 and we think that Germany and the US will be the most impacted,” spokesman Benjamin Nickel told AFP.

The company said it will spend between €800m (£698m/$915m) and €950m (£829m/$1.08bn) on restructuring in 2019 “to further simplify company structures and processes”.

The aim of the programme is to provide “a minor cost-benefit” in 2019, before slashing annual outgoings by up to €850m (£742m/$972m) from 2020.

Chief executive, Bill McDermott, said the job cuts will pave the way for SAP to make new bets on growth areas in the software industry.

“We are going to move our people and our focus to the areas SAP needs the most: AI, blockchain, internet of things, quantum computing,” he said.

“We currently have 95,000 people in the company, if we talk in a few years it will be more,” McDermott added.

SAP’s share price

News of the company’s plans to slash jobs led to a dip in SAP’s share price on Tuesday, but revenue from cloud sales increased.

However, the revenue rate wasn’t as high when compared to previous quarters.

Headline results saw Q418 total revenue (to 31 December 2018) increase 9% to €7.4bn (£6.4bn/$8.4bn) with operating profit up 22% to €2.4bn (£2.09bn/$2.7bn), however, profit after tax was down 9% to €1.7bn (£1.4bn/$1.9bn).

Cloud growth was 31% in Q417, but for 1418 it was down by 23%, which might be the reason why SAP plans to restructure.

However, the company remains confident about its cloud business and expects its cloud subscription and support revenue, which is now €5.03bn (£4.3bn/$5.7bn) a year, to triple by 2023. Full year revenue was up 5%  to €24.7bn (£21.5bn/$28.2bn), with a 17% in operating profit to €5.7bn (£4.9bn/$6.5bn) and profit after tax up 1% to €4.1bn (£3.5bn/$4.6bn).

 

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