SAP CEO Christian Klein announced today his intent to carry out “a targeted restructuring in select areas of the company” impacting up to 3,000 positions — or about 2.5% of its global workforce. He shared the news during company’s full-year and fourth-quarter 2022 earnings call, where he also announced the company will explore a sale of its stake in Qualtrics, the customer and employee experience management software firm SAP purchased in 2019 for $8 billion.
Company officials estimated the restructuring will cost between $272-$381 million and “reflects focus on strategic growth areas and accelerated cloud transformation.”
“We know if changes are necessary, it is never easy to make decisions that affect our colleagues in this way,” Klein said.
Tech Company Takedown Continues
The news represents the latest among a sea of tech company layoffs this month including around 18,000 employees at Amazon, 12,000 at Google’s parent company Alphabet, 10,000 at Microsoft, 8,000 at Salesforce, 450 at Informatica, 400 at ShareChat — and reportedly 3,900 cuts announced yesterday at IBM.
At the end of 2022, Meta announced layoffs for 11,000 employees and Twitter, Zillow, Peloton, Cisco and others followed suit. In all, 159,684 tech jobs were slashed in 2022, according to Layoffs.fyi. But in January 2023 alone, more than 60,000 more tech jobs have been cut — already reaching more than 42% of the total tech sector layoffs last year.
Many have cited the rush to hire amid rapid growth in the tech sector during the Covid-19 pandemic that left CEOs lamenting their optimism — and admitting they over-hired.
In a statement, SAP’s Klein said three factors led to SAP’s current situation — the company’s exit from Russia, the divestiture of Litmos and macroeconomic volatility. Both SAP and IBM noted the end of profitable business in Russia as one of the external factors that directly impacted company profit.
What Do SAP Layoffs Mean for the Future of Qualtrics?
SAP bought Qualtrics in 2019 for $8 billion. Then in 2021, in a move that made some insiders do a double take, SAP took the company public at a valuation of nearly $21 billion with SAP owning a majority of the stock — but giving Qualtrics the ability to operate independently.
Now Klein said he believes the potential sale of its stake in Qualtrics could unlock significant value for both companies. He said SAP would be able to focus more on its core business and profitability and Qualtrics could extend its leadership in the experience management category. “Since the acquisition Qualtrics has increased revenue by 3.5x to $1.5 billion, while delivering profitability and has significantly expanded its offerings and enterprise customer adoption.”
Further, he said the “final decision is subject to market conditions, agreement on acceptable terms, work laboratory approvals, and the approval of the SAP supervisory board”— but if the transaction is successful, he confirmed that SAP intends to remain a close partner with Qualtrics.
In a statement released to CMSWire, Qualtrics CEO Zig Serafin said, “This is another step in our journey with SAP, one that has the potential to give Qualtrics an even greater opportunity to accelerate our growth and our category leadership in experience management. It’s a win-win situation, where we can continue our partnership with SAP and unlock new value for both of our companies and our shareholders.”
Qualtrics Revenue Up as Future in Question
On Wednesday, Qualtrics released financial results for the fourth quarter and fiscal year 2022.
According to the report, full year 2022 total revenue was $1.45 billion, up 36% year over year and total revenue for the fourth quarter was $389.1 million, up from $316.0 million one year ago, an increase of 23% year over year. Subscription revenue for the fourth quarter was $327.6 million, up from $259.0 million one year ago, an increase of 26% year over year.
“Qualtrics delivered solid results in Q4, capping off a very strong year of growth and significant operating margin expansion,” Serafin said in a statement. “Qualtrics continues to be critical to helping companies build deeper relationships with their employees and customers to increase revenue and operate more efficiently in a challenging market.”
Qualtrics’ share price is down nearly 40% from this time last year, but, following SAP’s announcement, the stock rose 28% today from $10.74 to $14.94 per share.
But the company has not been immune to the tech takedown. On Jan. 11, in a letter to employees, CEO Serafin announced the decision to eliminate approximately 270 roles (about 5% of its global workforce) across the company.
“Being able to adapt to dynamic markets and changing customer needs will be more critical than ever in this coming year. How we focus through this is critical to achieving our goals. And as a result, we’re now aligning resources to these highest priorities,” Serafin said in a statement. “This involves making difficult decisions, including creating some new roles, restructuring current roles and eliminating some roles that do not map to priority areas.”