German software giant SAP plans major restructuring despite strong growth in 2018

Source: Xinhua| 2019-01-29 22:26:27|Editor: xuxin
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BERLIN, Jan. 29 (Xinhua) -- German software giant SAP plans to invest up to 950 million euros (1.09 billion U.S. dollars) in restructuring measures in 2019 despite registering strong growth last year, the company announced on Tuesday.

"In 2018, SAP hit or exceeded all guidance metrics even after multiple raises," said CEO Bill McDermott.

SAP aims to "further simplify company structures" with the first company-wide restructuring program since 2015 in order to ensure that its organizational structure, competencies and resource allocation will continue to "meet evolving customer demand."

SAP's revenues totaled 25.96 billion euros in 2018, exceeding the target of 25.5 billion euros projected last October. The company's operational profits amounted to 7.48 billion euros in 2018.

For 2019, SAP expects operational profits to grow by up to 11.5 percent. While not providing figures for sales expectations, SAP announced that sales would grow but at a weaker rate than operational profits.

Investors, however, were disappointed with SAP's balance sheet figures. SAP is among the biggest losers on Germany's DAX index, which tracks the top 30 companies on the Frankfurt Stock Exchange, with its shares falling almost 3 percent after the announcement.

Analysts with Baader Bank maintained their Buy rating for SAP with the price target set to 112 euros. The software manufacturer had strongly ended 2018, analyst Knut Woller wrote in a first reaction on Tuesday.

Cloud-based services have become one of the most important business areas for SAP. At the end of 2018, orders in cloud-related businesses increased by 30 percent and exceeded 10 billion euros. New orders for cloud business and software licenses increased by 18 percent in the fourth quarter of 2018 compared to the previous year.

"This stellar business momentum sets us up perfectly for continued strong profitable growth in 2019 and beyond, while we expect our cloud growth will continue to outperform our business software cloud peers," said Luka Mucic, CFO of SAP.

By 2023, SAP expects to more than triple its revenues from cloud subscription and support, and forecasts its total revenues to increase to 35 billion euros. (1 euro = 1.14 U.S. dollars)

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