SAP Headquarters.

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German enterprise software company SAP said Thursday it would cut up to 3,000 jobs, or about 2.5% of its workforce, becoming the latest tech giant to announce significant layoffs.

“We are further focusing our portfolio on the areas where we are strongest to continue our accelerated growth,” said Christian Klein, CEO of SAP, during the company’s fourth quarter 2022 earnings call.

“This has led us to announce today that we intend to carry out a very targeted restructuring in selected areas of the company, which will affect up to 3,000 positions and include a reduction in the number of staff of approximately 2.5%.”

At 8:05 a.m. London time, SAP shares were trading more than 2% lower after the announcement.

When asked about the expected cost savings from the layoffs, Luka Muchic, SAP’s chief financial officer, said the company expects “only moderate cost reductions in 2023 and then more noticeable in 2024, talking about 300-350 million euro. [$327 million-$382 million] in saving rates.”

This came after the company reported positive results for the fourth quarter during the call.

“Our cloud momentum accelerated in the fourth quarter with S/4HANA [SAP’s enterprise resource planning software]. Cloud revenue is also accelerating again, growing by 90%. We also returned to positive operating profit growth of 2%,” said Klein.

“For the full year, we met our guidance across the board, increasing 24% by 5 percentage points compared to 2021,” he said.

He added that the company achieved this despite its exit from Russia and continued global macroeconomic instability.

In an interview with CNBC last week, Klein suggested the firm would avoid layoffs because it is “in a very strong position.”

He added that he is generally optimistic about the outlook for technology, despite challenges from higher interest rates and supply chain disruptions.

“We’re in the technology sector, we’re in SAP, we’re very confident about next year,” Klein said at the time.

SAP evaluates sale of Qualtrics stake

On Thursday’s earnings call, Klein also said that SAP is going to explore selling its stake in Qualtrics as “we focus on our core.” SAP currently owns 71% of Qualtrics on a non-diluted basis.

In November 2018, SAP acquired US business software provider Qualtrics for $8 billion. Two years later, Qualtrics went public.

“We’ve had a very successful collaboration with Qualtrics in the market and in technology, and we will definitely continue to do so,” Muchic said.

“This move is aimed at realigning SAP so that it can focus on core ERP [enterprise resource planning] categories and the surrounding categories that go along with that, giving Qualtrics an even better ability to drive its own leadership and make the appropriate investments,” he said.

He added that Qualtrics is a “pristine and prime cloud asset” and SAP “should be able to get a very positive valuation for shareholders, but that remains to be seen.”

“This would significantly increase SAP’s earnings, which is currently not reflected in the forecast,” he added, without disclosing further details.

Qualtrics on Wednesday reported fourth-quarter results and revenue guidance that beat analysts’ estimates.

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