SAP to cut 3,000 roles, explore sale of Qualtric stake

German enterprise software company SAP said Thursday that it will cut 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.

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“This led us to announce today that we intend to implement a very targeted restructuring in selected areas of the business, which will affect up to 3,000 positions and include a reduction of around 2.5%.”

SAP shares were trading over 2% lower at 8:05 London time after the announcement.

In response to a question about estimated cost savings from the layoffs, Luka Mucic, CFO of SAP, said the company expects “around 300 to 350 million euros ($327 million-$382 million) in savings over time.”

“We are guiding (the company) to double-digit profit growth in 2023, as we had always committed, but there will be only moderate help from the restructuring program to those results,” Mucic told CNBC’s “Squawk Box Europe” in an interview after the announcement .

“What this is really about is a very targeted effort to further streamline our portfolio and concentrate investment on the areas where we can clearly have the most positive impact,” he added.

It comes after the company reported positive results for the fourth quarter during the call.

“Our cloud momentum accelerated in the fourth quarter with S/4HANA (SAP’s enterprise resource planning software). Cloud revenue is also accelerating again, growing 90%. We also returned to positive operating profit growth of 2%,” Klein said .

“For the full year, we met our guidance across the board with our cloud revenue growing 24%, up five percentage points from 2021,” he said.

He added that the company achieved this despite its exit from Russia and the ongoing global macroeconomic volatilities.

Last week, Klein suggested that the company would avoid having to lay off employees because it is “in a very strong position,” in an interview with CNBC.

He added that he was generally optimistic about the outlook for technology despite challenges from higher interest rates and supply chain disruptions.

“We in the technology sector, we in SAP, we are very confident about the year ahead,” Klein said at the time.

SAP weighs Qualtric’s stock sale

During Thursday’s earnings call, Klein also said that SAP would explore selling its stake in Qualtrics as “we focus on our core.” SAP currently owns 71% of Qualtrics on a non-diluted basis.

In November 2018, SAP acquired US enterprise software provider Qualtrics for $8 billion. Qualtrics subsequently went public two years later.

“We’ve had a very successful collaboration on the go-to market and the technology front with Qualtrics, and we absolutely want to continue this,” Mucic said.

“The acquisition is intended to position SAP to be able to focus on the core ERP (enterprise resource planning) categories and the surrounding categories that go with it, while giving Qualtrics an even better ability to independently pursue its leadership and pursue the equivalent investment,” he said.

He added that Qualtrics is “a pristine and prime cloud asset” and that SAP “should be able to achieve a very positive valuation for shareholders, but that remains to be seen.”

“This will significantly boost SAP’s earnings performance, which is currently not reflected in the outlook,” he added, without disclosing further details.

Qualtrics on Wednesday posted fourth-quarter results and revenue guidance that beat analysts’ forecasts.

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