SAP to cut 3,000 jobs, explore Qualtrics stake sale

BERLIN: SAP (SAPG.DE) said on Thursday it planned to cut 3,000 jobs, or 2.5% of its global workforce, and explore the sale of its remaining stake in Qualtrics, as the Germany software company looks to cut costs and focus on its cloud business.

SAP is the latest tech company to cut jobs after companies including Alphabet's Google (GOOGL.O), Microsoft (MSFT.O) and Amazon (AMZN.O) announced thousands of layoffs to cut costs as they brace for tougher economic conditions."We expect only a moderate cost saving impact for 2023, and a more pronounced one in 2024, about 300 million euros to 350 million in run rate savings as of 2024," Chief Financial Officer Luka Mucic said in a call with journalists.

In Germany, where SAP is headquartered, the company will cut slightly more than 200 jobs.

The layoffs come after SAP reported a 30% revenue increase in its cloud business in the fourth quarter, helped by strong demand for its software.

"We expect only a moderate cost saving impact for 2023, and a more pronounced one in 2024, about 300 million euros to 350 million in run rate savings as of 2024," Chief Financial Officer Luka Mucic said in a call with journalists.

In Germany, where SAP is headquartered, the company will cut slightly more than 200 jobs.

The layoffs come after SAP reported a 30% revenue increase in its cloud business in the fourth quarter, helped by strong demand for its software.

SAP has also started the process to sell its stake in Qualtrics (XM.O). It bought the company for $8 billion in 2018 and took it public in 2021 at a valuation of nearly $21 billion.

Currently, survey-software seller Qualtrics has a market value of $7 billion and SAP has a 71% stake.

"(The sale) would result in a quite significant one-time gain," Mucic said. "This would materially increase the profit performance of SAP, but it's currently not reflected in the outlook."

SAP forecast core operating profit of 8.8-8.9 billion euros at constant currencies for this year. It also expects cloud revenue at constant currencies for 2023 to rise to 15.3-15.7 billion euros, from 12.56 billion euros last year.

While analysts had raised concerns that SAP'S lucrative cloud business might take a hit with other companies tightening their budgets due to economic uncertainty, SAP has been signing more customers.

"We are going to announce a unique strategic partnership with BMW betting on SAP on all dimensions - one of the biggest deals ever, which was signed yesterday," Chief Executive Christian Klein said.

Tech titan IBM lays off 3,900 employees, bets big on hybrid cloud, AI

Tech giant IBM is laying off 3,900 employees, which is a result of the spin-off of IT infrastructure services provider Kyndryl business and part of the AI unit called ‘Watson Health’.

The layoffs will cause a charge of $300 million in the January-March period to the company, according to IBM Chief Financial Officer James Kavanaugh.

“We have taken a number of significant portfolio actions over the last few years, which has resulted in some stranded costs in our business,” he said during the company’s earnings call. “We expect to address these remaining stranded costs early in the year and anticipate a charge of about $300 million in the first quarter,” Kavanaugh added.

IBM joins a slew of tech companies such as Meta, Alphabet, Microsoft and others in laying off thousands of employees amid the global economic headwinds.

In its quarter ending Dec 31, 2022, the company delivered $16.7 billion in revenue, $3.8 bn of operating pre-tax income, and operating earnings per share of $3.60.

“In our seasonally strongest quarter, we generated $5.2 bn of free cash flow,” said the company.

The revenue for the quarter was up over 6 per cent at constant currency. Arvind Krishna, Chairman and CEO of IBM, said that to bolster the software portfolio, “we invested in hybrid cloud and AI capabilities.”