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is embarking on a restructuring program that will affect some 2,800 employees as the German enterprise software company seeks to bolster its core cloud business at a time when customers are more cautious with their spending.
The Walldorf, Germany-based company said on Thursday it would earmark most of the €250 million to €300 million ($272.9 million – $327.4 million) restructuring costs for the during the current quarter. This decision should generate between 300 and 350 million euros in annual savings from 2024.
SAP employed almost 112,000 people at the end of December, which means that the move should affect around 2.5% of its workforce.
Earlier this month, Salesforce Inc. announced it would cut 10% of its workforce of about 80,000 people in its biggest round of layoffs yet in response to a tough economy. Last week, Microsoft Corp. decided to cut 10,000 jobs before the end of March, the company’s biggest layoffs in more than eight years.
The layoffs come as enterprise software vendors say customers are more careful with their spending, a trend that adds to a murky outlook in a sector that boomed at the height of the pandemic as customers sought to use their products to cut costs and keep their businesses running.
SAP ended the last quarter of 2022 with revenue of 8.44 billion euros on a non-IFRS basis, compared to 7.98 billion euros in the fourth quarter of 2021. Cloud revenue increased from €2.61 billion to €3.39 billion, while software-license revenue fell to €907 million from €1.46 billion.
Analysts polled by FactSet had forecast overall revenue of 8.51 billion euros and cloud revenue of 3.44 billion euros.
SAP, like other European software vendors, presents its numbers as two sets of numbers. One set is based on International Financial Reporting Standards – an international accounting method that aims to provide a global reporting standard – although analysts and investors tend to follow SAP’s non-IFRS figures. These figures exclude stock-based compensation, restructuring expenses and acquisition-related charges.
The company said its cloud business delivered strong performance across all regions in the fourth quarter, singling out Brazil, Germany and Japan as “outstanding”. China, India, the Netherlands, Switzerland and the United States were particularly strong markets, SAP said.
“SAP is more resilient than ever. We are ending 2022 with continued cloud momentum and a return to operating profit growth in the fourth quarter, marking an important inflection point,” said Christian Klein, Chief Executive Officer of SAP.
Operating profit for the quarter increased from €2.47 billion to €2.58 billion, with SAP’s operating margin down to 30.6% from 30.9%. Analysts polled by FactSet had expected operating profit of 2.59 billion euros.
For 2023, SAP expects non-IFRS operating income at constant currencies between €8.8 billion and €9.1 billion, and cloud revenue at constant currencies between €15.3 billion. euros and 15.7 billion euros. SAP plans to update its mid-term objectives in the first half.
Meanwhile, SAP said it was considering selling its stake in Qualtrics International Inc. to focus more on its own cloud growth and profitability, saying the move could unlock significant value for companies and shareholders. , although a final decision has not been made. . SAP has hired Morgan Stanley as a financial adviser on the potential sale.
Qualtrics, which makes software that helps companies track interactions with customers, brands and employees, went public in January 2021 as a spin-off from SAP.
Write to Mauro Orru at mauro.orru@wsj.com; @MauroOrru94
