SAP shares rise on restructuring of 8000 jobs to

SAP shares rise on restructuring of 8,000 jobs to expand AI

(Bloomberg) — Shares of SAP SE posted their biggest rise in more than three years after the German software company said it plans a restructuring that will affect about 8,000 jobs and increase its focus on artificial intelligence. The company forecast that this would boost operating profit next year to about 10 billion euros ($10.9 billion).

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Shares rose 7.1% at 9:10 a.m. in Frankfurt, having previously risen as much as 7.5% to €160.58, their biggest intraday gain since July 2020 and a record high.

As part of the restructuring this year, SAP will focus more on strategic growth areas, particularly artificial intelligence for enterprises, and identify “AI-driven efficiencies” in its operations, it said in a statement late Tuesday. While the company did not immediately respond to a request for comment on how many people will lose their jobs, it said in the filing that due to “reinvestment” in other areas, it plans to end 2024 with a headcount of corresponds to the current level.

Europe's largest software company is working to remain competitive with its corporate customer base. After shifting its enterprise business to cloud subscriptions in recent years, SAP is focused on advancing AI integration into its software, using the technology to help retailers predict orders, and a generative AI assistant called Joule onto the market.

“The next phase is about continuous transformation,” CEO Christian Klein said in an interview on Bloomberg TV. “We are investing in AI, over a billion over the next two years, and of course we are also applying AI internally. Therefore, we will aim for greater automation and automation of activities. It’s about educating yourself and making sure that SAP alone becomes more productive.”

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The German software giant also invested in Aleph Alpha GmbH, Anthropic PBC and Cohere last year and plans to add more AI services.

In May, SAP also announced a partnership with Google's cloud computing division that would allow customers to more easily unify data from disparate sources and use AI to improve their operations. The company is working with its software competitors to integrate AI tools into virtually all of its products.

The restructuring will ensure that the company's “resources continue to meet future business needs” and is expected to cost around 2 billion euros, the “vast majority” of which is expected to be booked in the first half of 2024, SAP's statement said. The majority of affected positions will be covered by voluntary furlough programs and internal “retraining” measures. The number of full-time employees at the company was 107,602 as of December 31.

Fourth quarter

Separately, SAP reported fourth-quarter revenue of €8.47 billion, beating analyst estimates of €8.35 billion. Adjusted operating profit was 2.51 billion euros in the period ended December 31, compared with an average estimate of 2.53 billion euros.

SAP's forecast cloud revenue this year would be on the high side of analysts' expectations as the software company moves more legacy customers into the faster-growing market.

Cloud sales this year are expected to be between 17 and 17.3 billion euros, adjusted for currency effects, the company said. In comparison, the average estimate of analysts surveyed by Bloomberg is 17 billion euros.

Cloud infrastructure services are important for companies that want to leverage technologies like AI. A Bloomberg Intelligence survey this month found that 72% of companies plan to increase their IT infrastructure budgets in 2024.

SAP also forecast operating profit of up to 7.9 billion euros in 2024, up 21% at constant exchange rates. The company's profit outlook of €10 billion for 2025 reflects a €2 billion reduction in share-based compensation expenses and “incremental” restructuring gains of €500 million.

– With support from Vlad Savov and Anna Edwards.

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