January 28, 2009 9:37 am

SAP to cut 3,000 staff amid gloomy outlook

SAP, the world’s largest maker of software used by businesses, on Wednesday said it would cut 3,000 staff, nearly 6 per cent of its workforce, as it expects revenues to fall this year from software sales, web services and maintenance software.

Léo Apotheker, co-chief executive, said the first job cuts in the German company’s history were a result of the “very exceptional” economic crisis.

SAP said it would incur restructuring costs of €200m-€300m ($265m-$397m) as a result of the cuts, while its sales margin would fall by three points to 24.5-25.5 per cent in 2009 as companies pulled back on software spending.

SAP’s intention to cut personnel costs comes a week after Microsoft announced its first job cuts. It shows how even software companies that found shelter from the dotcom bust are being rocked by the downturn.

The Walldorf-based company did manage to hit the full-year targets for 2008 that it set for itself in October, though these were well below initial goals for a year that Mr Apotheker had until late summer expected to turn in record profits.

SAP saw return on sales rise to 28.2 per cent from 27.3 per cent due to emergency cost cuts of €220m and full-year software and services sales of €8.6bn – a rise of 16 per cent, or 20 per cent when adjusted for currency moves.

“This year we expect to see software and software-related service sales at the 2008 level or slightly below,” Mr Apotheker said.

As a result, this autumn’s programme of cost cuts would go on and expand to include job cuts.

Mr Apotheker said the economic crisis had wrecked SAP’s initial goal of raising revenues from software sales, subscriptions and maintenance by 27 per cent to €9bn.

The year-end shocks saw companies spend less on applications, with SAP’s fourth quarter software sales falling 7 per cent to €1.3bn. Software and service revenues rose 9 per cent to €2.7bn thanks only to maintenance contracts.

Fourth quarter operating income rose 22 per cent to €1.4bn, almost entirely the result of cuts announced in October. This helped boost annual operating income 18 per cent to €3.3bn and net profit by 14 per cent to €2.2bn.

Mr Apotheker and co-chief executive Henning Kagermann expect SAP to emerge in better shape, not least as a result of annual personnel cost savings of up to €350m in and beyond 2010.

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