On Thursday, Sap said it has planned to cut 3000 jobs, or 2.5% of its global workforce, and explore the sale of its remaining stake in Qualtrics, as the Germany based software company look to cut costs and focus on its cloud business.
SAP joins Alphabet’s Google (GOOGL.O), Microsoft (MSFT.O) and Amazon (AMZN.O) in cutting jobs as these companies 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.
SAP headquarters in Germany is expected to see slightly more than 200 job layoffs.
The layoffs come after SAP reported a 30% increase in revenue in its cloud business in the fourth quarter, backed by strong demand for its software.
SAP is also going to start the process to sell its stake in Qualtrics, the company it bought for $8 billion and took public in 2021 at a valuation of nearly $21 billion.
Currently, Qualtrics holds 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 forecasted a 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.
The analysts had raised concerns that SAP’s lucrative cloud business might take a hit with other companies that are going to tighten their budgets due to economic uncertainty. Nevertheless, SAP has been signing more customers.
Chief Executive Christian Klein said, “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.”