SAP plans to slash 3000 jobs in reduce costs, to focus on its cloud business

In an effort to reduce expenses and concentrate on its cloud business, the German software corporation SAP announced on Thursday that it wanted to eliminate 3,000 employees, or 2.5% of its global workforce, and consider selling its remaining Qualtrics investment.

SAP plans to cut 3,000 jobs of its global workforce

This news coincides with the announcement of cost-cutting cutbacks by major giants like Alphabet's Google, Microsoft, and Amazon as they prepare for more challenging economic conditions.

SAP expects moderate cost saving impact for 2023 and a more pronounced one in 2024

Chief Financial Officer Luka Mucic states,

"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,"

The company will slash a little more than 200 employees in Germany, where SAP is based.

SAP reports a rise of 30 percent in revenue of its cloud business in fourth quarter

The layoffs follow SAP's announcement that strong demand for its software helped its cloud business' fourth-quarter sales increase by 30%.

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SAP starts process to sell its stake in Qualtrics

The sale of SAP's interest in Qualtrics has also begun. It acquired the business in 2018 for $8 billion, and in 2021 it went public with a valuation of approximately $21 billion.

Qualtrics, a provider of survey software, is currently valued at $7 billion, and SAP owns a 71% interest.
"(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 forecasts core operating profit of 8.8 – 8.9 billion Euros at constant currencies for the year

According to SAP, this year's core operating profit would be between 8.8 and 8.9 billion euros at constant currencies. Additionally, it anticipates that cloud revenue would increase from 12.56 billion euros in 2018 to 15.3–15.7 billion euros in 2023, at constant currencies.

While analysts had expressed concern that SAP's profitable cloud business would suffer if other businesses cut their expenses as a result of the uncertain economy, SAP has been gaining new clients.

Chief Executive Christian Klein states,

"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,"

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