German software group SAP to cut 3,000 jobs and is considering the sale of its remaining stake in experience management platform Qualtrics amid increasingly difficult economic conditions. It plans to cut costs across the business and focus on its cloud business. The news comes hours after IBM announced plans to make 3,900 staff redundant.
The SAP job cuts will see its global headcount drop by about 5% from its current 120,000. This figure grew through the course of the Covid-19 pandemic by about 20%, so the 5% cut means overall the headcount is still higher than at the start of 2020. It expects to see savings of up to €350m annually from 2024 as a result of the restructuring.
The German multinational also plans to raise money from the sale of its remaining stake in Qualtrics which it bought for $8bn in 2018 and took public in 2021 at a value of $21bn. SAP retains a 71% stake in the company which now has a market value of $7bn. SAP’s chief financial officer Luka Mucic told journalists the sale would result in a “quite significant one-time gain” that would “materially increase the profit performance” but isn’t reflected in the current outlook.
SAP’s cloud business saw a 30% revenue increase in the fourth quarter of 2022 as well as high demand for its traditional ERP software solutions.
The company has been attempting to transition its customers to the cloud for some time and appears to be making some progress in this respect. It expects cloud revenue to rise to €15.7bn in 2023 from a high of €12.56 in 2022. This growth comes despite shrinking IT budgets and is being driven in part by strategic partnerships with companies such as BMW.
Tech job cuts: IBM axes 3,900 roles
The SAP restructuring follows other tech industry job cut announcements from the likes of Alphabet, Microsoft, Amazon and Meta, as they pivot to new directions and prepare for a turbulent economic outlook including the threat of a recession. Last year alone more than 150,000 tech employees lost their jobs and that figure is expected to grow through 2023 as the post-Covid economy settles and the tech industry adjusts to low growth and investment.
IBM announced it would be making 3,900 layoffs last night, mostly roles no longer needed due to the spin-off of its Kyndryl business, and jobs in its Watson health division which will see it take a $300m charge this quarter. The company says it is positive about the future and plans to continue recruiting in “client-facing research and development” areas.
Shares fell by 2% on the announcement of the job cuts, which largely wiped out price gains made earlier in the day yesterday. Analyst Jesse Cohen told Reuters this was likely due to investors being disappointed the cost-saving measures didn't go deeper, with larger job cuts on a scale similar to those seen at other large technology companies.
The early share price gains were linked to largely positive results including a 6% growth in sales revenue following a difficult 2022 where the overall sales were the lowest since 1987.
Overall, though, 2022 was a good year for IBM with revenue up 5.5%, the highest in a decade, continuing an upward trend. It also saw growth in its cloud division following partnerships with the likes of Amazon's AWS and Microsoft's Azure.