Is SAP’s Restructuring Program a Hit or a Miss?
In terms of share price, SAP’s shares have risen five percent. Shares rose up to 196 EUR—a new record high—the day after SAP released their financial figures. In SAP’s Q2, there has been an increase in revenue by ten percent to the current figure of 8.3 billion EUR. This quarter also benefitted from an increased interest in cloud products, which rose 25 percent to the current figure of 4.2 billion EUR.
The emphasis on cloud has been part of Christian Klein’s growth strategy for several years now. “More and more customers are moving to the cloud and our portfolio is becoming ever more attractive thanks to SAP’s business AI capabilities,” said SAP CEO Christian Klein.
Restructuring program
SAP announced that it expects to see more improvement in profitability. By next year (2025), the prognosis is expected to be 200 million higher than previously forecast, at 10.2 billion EUR. This is due to the drastic turn of SAP’s restructuring program. Earlier this year, SAP had announced that eight thousand jobs would be cut. Now, the number is even higher, around nine to ten thousand. Management has estimated the restructuring costs at 3 billion EUR, 600 million of which were included in the second quarter.
CFO Dominik Asam explained that this high number of departures is due to many employees opting to join SAP’s early retirement and severance programs, particularly in Germany. This implies a good number of personnel have actively chosen to leave. This is not surprising, considering the restructuring is having a negative impact on the mood within the company. Not only will this program be costly for SAP, but the index that measures employee satisfaction has dropped, according to Handelsblatt, a German business magazine. Employee commitment on the index has fallen by six percentage points to a range of 70 to 74 percent.
