IBM and SAP Are the Latest to Announce Layoffs, SAP to Shop Qualtrics

IBM and SAP have joined the cadre of IT giants planning to lay off thousands of their employees. News of the layoffs came as both companies reported their respective fourth-quarter earnings covering the period that ended Dec. 30.

During its investor webcast on Thursday, SAP said it would eliminate 3,000 jobs, amounting to 2.5% of its workforce. SAP also announced during the webcast that it had retained Morgan Stanley to explore the potential sale of Qualtrics.

For its part, IBM was more circumspect about its planned layoffs during its quarterly earnings webcast late Wednesday. IBM CFO James Kavanaugh briefly mentioned a $300 million charge for the current quarter to write off “stranded costs.”

While not explaining the layoffs during the webcast, Kavanaugh told Reuters that IBM would let go of 3,900 employees. The layoffs planned between this month and the end of March stem from IBM’s spinoff of Kyndryl and Watson Health. IBM’s job cuts come despite reporting Q4 revenues of $16.69 billion, that beat expectations of $16.4 billion.

IBM’s Arvind Krishna

“Looking back on the year, we are pleased with the progress we made,” chairman and CEO Arvind Krishna said. “We delivered revenue growth above our mid-single digit model, and we delivered free cash flow. I’ll acknowledge there is more to do this year. We will unlock more productivity, expand the strategic partnerships and put more investments in specific growth markets.”

IBM forecasts that 2023 revenue growth will remain in the single-digit range with $10.5 billion in free cash flow. “Our strategy continues to strongly resonate with clients and partners,” Krishna said, regarding IBM’s emphasis on AI and hybrid cloud.

SAP to “Sharpen” Its Portfolio

SAP’s Christian Klein

Like many companies that have hired extensively since 2020, SAP added nearly 7,000 employees last year. During SAP’s earnings webcast, CEO Christian Klein announced the company’s plan to lay off 3,000 employees. Klein said the layoffs result from SAP’s consolidation around its S/4 HANA and Business Technology Platform (BTP).

“In 2023, we intend to sharpen this portfolio focus further,” Klein said. “As we continue to build on our core strengths, we will be pivoting our CX and industry areas to be more focused on specific industries complemented by a strong ecosystem. This focus on our core, together with our ongoing optimization of SAP structure for cloud success, are behind the announcement we made today. The intent to carry out a targeted restructuring in select areas of the company.”

Klein also explained the decision to consider its options with Qualtrics, a company it acquired in 2018 for $8 billion. SAP already spun out part of Qualtrics in 2021 in an IPO. According to Klein, since SAP acquired Qualtrics, its revenues have grown 3x “and has significantly expanded its offerings and enterprise customer adoption.”

A possible sale, Klein said, “could unlock significant value for both companies for SAP to focus more on its core business and profitability and for Qualtrics to extend its leadership in the XM category that it pioneered.”