Software major SAP announced a major restructuring program that will cost the company €800 million or $915 million to €950 million or $1.08 billion — to simplify structures and processes.
SAP announced 5 percent growth in revenue to €24.71 billion with an operating profit of €5.705 billion in 2018.
This is the first restructuring program since 2015 for the business software supplier based in Germany. SAP did not reveal any details about a possible job cut.
The business software company will reassign some employees and offer early retirement to others.
SAP, Europe’s most valuable technology company, will reassign some employees and offer early retirement to others. SAP still expects its overall head count to exceed 100,000 by the end of 2019, up from 96,500 at the turn of the year, Reuters reported on Tuesday.
“This is not a cost-cutting move. We are a growth company,” SAP CEO Bill McDermott told Reuters in an interview at SAP’s campus in Walldorf, Germany, adding that the restructuring was not a cost-cutting exercise.
SAP expects its overall head count to be higher at the end of this year, CFO Luka Mucic told reporters on a call. “This is not a cost-cutting program – it’s a fitness program and a simplification.”
Excluding restructuring expenses, the program is expected to provide minor cost benefit in 2019. Annual cost savings will be €750 million or $858 million to €850 million or $972 million as of 2020. SAP will invest the costs savings into strategic growth areas.
SAP targets €28.6 billion − €29.2 billion revenue against the previous target of €28 billion − €29 billion in 2020. SAP aims to achieve €8.5 billion − €9 billion operating profit in 2020.
SAP aims €8.6 billion − €9.1 billion cloud subscriptions and support revenue against the previous target of €8.2 billion − €8.7 billion in 2020.
SAP said it aims to more than triple cloud subscription and support revenue in 2023 from €5.03 billion in 2018, achieve revenue of more than €35 billion against €24.74 billion in 2018.
SAP will discuss the key drivers behind the long-term growth aspirations at its Capital Markets Day in New York on February 7, 2019.