SAP will assume restructuring costs of up to € 950 million.
SAP is the most valuable technology company in Europe.
Key indicators showed signs of weakness in the fourth quarter.

SAP will incur a restructuring charge of up to € 950 million ($ 1 billion) to reorganize after the slowdown in the growth of parts of the software company in the last three months.

SAP, Europe's most valuable technology group, will reallocate some employees and provide early retirement to others, but still expects its workforce to exceed 100,000 by the end of 2019, up from 96,500 at the beginning of the year.

"We are not reducing costs, we are a growing company," Chief Executive Bill McDermott told Reuters in an interview on SAP's large campus in Walldorf, Germany, adding that the restructuring was not a cost reduction exercise.

SAP will take costs of 800 to 950 million euros mainly in the first quarter. This seems a slight advantage in 2019 and savings of 750 to 850 million EUR from 2020.

The reshuffle follows SAP's announcement of 2018 results that met or exceeded the company's three times higher guidance on non-IFRS earnings and earnings at constant exchange rates.

However, key indicators showed signs of weakness in the fourth quarter, with growth in new cloud bookings falling to 37 percent from 37 percent in the third quarter.

Underlying non-IFRS operating margins, at constant exchange rates, were reduced by 1.5 percentage points during the quarter, to 33.2%, as a result of SAP's implementation of the accounting for hyperinflation for crisis markets in Latin America such as Venezuela.

The numbers illustrate the challenge that SAP continues to face as it moves from its traditional model of running processes such as finance or logistics to on-premise servers to hosting on remote data centres.

The legacy software licensing industry, which generates huge upfront costs, continues to generate profits.

The cloud is driving growth, but margins are tighter, with SAP seeking to expand and competing with competitors such as Salesforce and Oracle.

Client experience

McDermott, a 57-year-old American, has expressed concern that the weakening global economy and trade friction between the US and China is weighing down on SAP's business, saying his company is not as exposed the economic cycle as the players of the technological equipment.

"We do not see this, "McDermott said that the individual risk factors, such as the impending exit of Britain from the European Union, were offset by the company's global reach..

Shares fell 2.1% to 90.41 euros at 08:44 GMT, making them the worst-performing countries in the German DAX index.

"The only surprise for us is the announcement of a major restructuring program for fiscal year 19," said a Credit Suisse analyst. "It seems likely that the vast majority (cost savings) will be reinvested in the business," they said.

SAP, which has just completed its $ 8 billion acquisition of Qualtrics, a US-based company that monitors customer sentiment online, has amplified the impact of this deal on a revenue forecast for 2019 of 28.6 percent. to 29.2 billion euros.

However, it maintained its forecast of non-IFRS operating profit unchanged from 8.5 billion euros to 9.0 billion euros, up 7.5% to 11.5% year-on-year.

McDermott said Qualtrics would add a "customer experience" dimension to SAP's core strengths. The combination "21st century winner becomes the defining strategy for the company," he said.

Giving its first forecast for 2023 in anticipation of New York's Financial Markets Day on February 7, SAP said it was more than triple the revenue from cloud and support subscriptions.

Total revenues would reach 35 billion euros and operating profits would increase at an annual rate of 7.5 to 10%.

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