SAP sets restructuring after missing 2018 revenue, profit goals
Germany (Reuters) – Business software company SAP said on Tuesday it would undertake a company-wide restructuring to accelerate its business transformation, after missing its revenue and profits guidance in 2018.
SAP, Europe’s most valuable technology company said it would take restructuring charges of 800 to 950 million euros ($912 million to $1.04 billion), mainly in the first quarter.
It sees a minor cost benefit in 2019 and savings of 750 to 850 million euros from 2020.
Walldorf, Germany-based SAP will reassign some employees and offer early retirement to others, but still expects its overall head count to be higher at the end of this year, finance chief Luka Mucic told journalists on a call.
“This is not a cost-cutting program – it’s a fitness program and a simplification,” said Mucic.
The shakeup comes as SAP announced 2018 results that chief executive Bill McDermott called “outstanding”. Yet they fell short of guidance on total revenues and operating profits that the company had raised when it published its third-quarter results.
Key metrics showed signs of weakness in fourth quarter, with growth in new cloud bookings, an order-entry metric, slowing to 23 percent from 37 percent in the third quarter.
Underlying non-IFRS operating margins, at constant currency, were squeezed by 1.5 percentage points in the quarter to 33.2 percent as SAP implemented hyperinflation accounting for crisis-hit markets in Latin America such as Venezuela.
SAP, which has just closed its $8 billion takeover of Qualtrics, a U.S. company that tracks customer sentiment online, baked the impact of that deal into raised 2019 revenue guidance of 28.6 to 29.2 billion euros.
But it kept its forecast of non-IFRS operating profit unchanged at 8.5 to 9.0 billion euros, up 7.5 to 11.5 percent year on year.
Giving its first forecasts for 2023 ahead of a capital markets day in New York on Feb. 7, SAP said it expected to more than triple cloud subscription and support revenues, hit total revenues of 35 billion euros and expand operating profit at an annual growth rate of 7.5 to 10 percent.
(Reporting by Douglas Busvine; editing by Thomas Seythal and Maria Sheahan)