SAP has expanded the number of jobs affected by its restructuring program by up to 20 percent after generating higher revenue but lower operating profit in the most recent full quarter.

In January, the ERP and enterprise software biz said the restructure was likely to impact 8,000 positions worldwide. However, the European Works Council later described this as a "euphemism" for headcount reduction.

Announcing calendar Q2 results to financial markets last night, the German tech vendor said it was upping the figure.

CFO Dominik Asam told investors: "We now estimate that between 9,000 and 10,000 positions will be affected with the corresponding impact on restructuring provisions, cash out and run rate savings after completion of the program. As compared to what we had indicated in the first quarter, we added about €800 million of restructuring expenses and cash out.

"It's important to note that the increase in the number of affected positions does not imply complete elimination of these roles but allows us to refine our setup in terms of skills and locations."

In Q2, total revenue was up 10 percent year-on-year, reaching €8.3 billion. Operating profit was down to €1.2 billion from €1.4 billion in the same period last year, owing to a restructuring hit of €600 million.

The financial markets reacted positively to SAP's performance and confirmation of the widening restructure. Shares increased by as much as 7 percent on Tuesday following the news. Adjusted operating profit beat analysts' expectations.

CEO Christian Klein told investors: "We continued to execute on our transformation program with great discipline with rehiring only for the skill sets we need. As you have seen, we are increasing the volume of the program. That's why we are able to announce an upgrade of roughly €200 million on the bottom line of our Ambition 2025."

SAP has spent the last year integrating AI features into its business applications and development environment. Klein said that almost 20 percent of all deals in Q2 included premium AI use cases.

The company said it bagged global oil and energy company ExxonMobil for its RISE with SAP program, designed to lift-shift-and-transform legacy on-prem software and processes to the cloud.

Megabuyte analyst Nathan Jackson said SAP had maintained its strength in cloud growth across worldwide markets. "The current cloud backlog suggests a stable buying environment, which will be interesting to compare to the likes of Workday and ServiceNow when they report later this month." While management said it was prioritizing becoming a leaner business, the company also decided to buy workflow outfit WalkMe for $1.4 billion.

"This more conservative cost approach isn't, however, flowing into underlying cash generation just yet, with the cost of redundancies being phased through 2024 into early 2025, hence we don't expect cash conversion from profits to return to an upwards trajectory until closer to 2026," Jackson said. ®

https://www.theregister.com//2024/07/23/sap_jobs_restructuring/