SAP plans to cut 3,000 jobs; 2009 seen as challenging

SAP plans to cut 3,000 jobs; 2009 seen as challenging

Summary: SAP said Wednesday that it will cut 3,000 jobs as 2009 will "remain challenging" and offer "limited visibility."The layoffs are designed to save 300 million to 350 million euro starting in 2010, the company said in a statement.

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SAP said Wednesday that it will cut 3,000 jobs as 2009 will "remain challenging" and offer "limited visibility."

The layoffs are designed to save 300 million to 350 million euro starting in 2010, the company said in a statement. After the job cuts, SAP will have about 48,500 employees at the end of 2009. SAP didn't specify what departments would get hit.

In a letter to employees, co-CEOs Henning Kagermann and Leo Apotheker wrote:

Despite the dramatically deteriorating market conditions since September, we have achieved good results for the entire year. This has only been possible because of the remarkable efforts of all employees, and we would like to express our gratitude to all of you for this. Unlike in past years, which were characterized by double-digit growth rates, the outlook for 2009 is completely different.

For this reason, we will have to intensify our cost-savings efforts by implementing additional measures. After an exhaustive and thorough evaluation of all options, we have concluded that a reduction in the number of persons employed is necessary. This is not an easy step for us to take, and we are fully conscious of the implications of this decision.

As SAP is a global company, we will consider each region and each line of business at all levels. We are looking for fair solutions according to accepted practice, and we will make this process as transparent as possible. We owe this to our employees. We plan to reduce the number of positions globally from 51,500 to 48,500, taking full advantage of attrition as a factor to reach this goal. In countries with employee representatives we have initiated contact with the relevant employee representative bodies. This should enable us to decrease the annual personnel costs by 300 - 350 million euros in subsequent years. As long as the specific regional legal conditions permit, there will not be a salary round in 2009.

SAP's fourth quarter showed some strain and the company declined to give an outlook for software and services revenue for 2009. SAP said total revenue for the fourth quarter was 3.48 billion euro, up from 3.24 billion euro a year ago. However software revenue was down 7 percent to 1.32 billion euro. Operating margin, however, improved to 36.6 percent from 34.2 percent a year ago. Net income was 850 million euro, up from 752 million euro a year ago.

For 2008, SAP delivered total revenue of 11.5 billion euro, up 13 percent from 2007. Net income was 1.88 billion in 2008, down 2 percent. Operating margins for 2008 were 24.6 percent down from 26.7 percent in 2007. There were a few moving parts for SAP in 2008 as the company integrated BusinessObjects, an acquisition that closed early in the year. Meanwhile, SAP invested heavily in its software as a service suite--BusinessByDesign.

In a statement, SAP co-CEO Henning Kagermann summed it up:

2008 can be described as a year having two completely opposite halves, where a strong first half performance was greatly disrupted late in the third quarter by the beginning of the worst economic and financial crisis the world has witnessed in decades.

SAP figures its market share is 32.8 percent among core enterprise application vendors.

A few key charts from SAP's presentation:

Revenue by region (click to enlarge):

The 2009 outlook:

Also see:

Topics: IT Employment, Banking, Cloud, Emerging Tech, Enterprise Software, SAP

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  • SAP job cuts

    I have often thought that some behemoths exist merely to keep good money out of the shareholders hands. At some level, decision makers prefer to do costly "business process rengineering" which benefit their cronies, rather than minimalist "just do it" and hand over better earnings per share results to the investors.
    mchellappa@...