Software giant SAP to cut 3,000 jobs to strengthen ’core business’

German software firm SAP said on Thursday said that the company has planned to cut 3,000 jobs, or 2.5% of its global workforce, and explore the sale of its remaining stake in Qualtrics, as it looks to cut costs and focus on its cloud business.

This comes at a time when tech giant including Alphabet's Google, Microsoft and Amazon announced 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 rise of 30 per cent in revenue of 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. 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.