SAP Will Cut Staff As Full-Year Net Income Dips 2 Percent
SAP announced mixed fourth-quarter and 2009 earnings on Wednesday, and also that the enterprise software vendor will cut its global workforce by 3,000 by the end of this year.
Wed, January 28, 2009
IDG News Service — SAP intends to reduce its global workforce to 48,500 staff by the end of this year, from 51,500 now, it said Wednesday.
The staff cuts will result in annual cost savings of €300 million to €350 million beginning in 2010, Co-CEOs Henning Kagermann and Léo Apotheker wrote in an e-mail message to all SAP staff. There will also be no pay increases in 2009, unless local laws require them, they wrote.
SAP's net income for the full year 2008 dropped 2 percent year on year, to €1.89 billion, even as total revenue for the year grew 13 percent to €11.6 billion (US$16.3 billion as of Dec. 31, the last day of the period reported).
Despite the dip in full-year net income, SAP posted strong figures for the fourth quarter: Revenue from software and software-related services rose 8 percent year on year to €2.67 billion, while total revenue for the quarter was €3.5 billion, also up 8 percent. Net income for the quarter rose 13 percent to €850 million.
For the full year, software revenue totalled €3.61 billion according to U.S. generally accepted accounting principles (GAAP), representing an increase of 6 percent over the previous year, SAP said.
"It could have been the best year in SAP's history [...] but since September we have been talking about a new reality in the world's economy," Apotheker said in conference call with the press.
The results include gains from January 21 last year from SAP's acquisition of French business intelligence software vendor Business Objects. The majority of the growth in revenue from software and software-related services came from Business Objects products, CFO Werner Brandt said during the conference call.
One product from which SAP is still struggling to extract the margin it wants is Business ByDesign, its on-demand offering, for which the cost of hosting and delivering the service was higher than expected.
"Our main focus is reducing operating costs," said Apotheker. "It's not just a product but also a process of supplying that product through the network, so we are adapting the value chain so that we can be profitable everywhere. Adapting takes some time."
Apotheker glossed over complaints from some user groups about the company's recent increase in maintenance fees, saying that the new price is "customary" for the industry, for a level of service that is "unusual." The company's new products and services will help it gain market share, he said.
