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SAP to cut 3,000 jobs as part of €1bn restructuring plan

Written on Tuesday, 29 January 2019 13:34

German software behemoth SAP has stunned staff by announcing that it will cut 3,000 jobs as part of a €1bn restructuring plan after profits stagnated in 2018.

However, the upbeat company insists it is still on track to grow revenues and earnings for this year, but that a restructuring of its overall operations and practices are necessary.

SAP’s CFO, Luka Mucic said the company expects a higher number of employees to leave that during its last job cull which occurred in 2015. He said, “We are talking about a completely voluntary program, we expect a number slightly higher than in 2015 of employees to leave.”

In 2015, SAP cut around 2,200 positions in a move that was described at that time as the company’s transition away from traditional software towards cloud computing. SAP plan to spend between 800m and 1bn on restructuring the company in an effort to simplify its structures and processes.

CEO Bill McDermott acknowledged that the job cuts are painful but reiterated that they were necessary in order to pave the way for SAP to make new investments in emerging growth areas within the software ecosystem.

The SAP CEO said, “We are going to move our people and our focus to the areas SAP needs the most, AI (artificial intelligence), blockchain, internet of things, quantum computing.  We currently have 95,000 people in the company, if we talk in a few years it will be more.”

Despite the messaging from SAP that the job cuts are necessary in order to create capital to invest in new areas, it’s clear the stagnation of profits and stunting of growth have heightened the pressure on the German software leader.

SAP announced that its net profits had grown by just 1% last year reaching 4.1bn euros.  In 2018, SAP continued its transformation away from the perception that it’s a traditional one-off sales’ of business software licenses to cloud computing, under which it charges customers a subscription fee to process data on the firm's computers.

Revenue from cloud subscriptions and support grew 32 percent over the year, to almost 3.8 billion euros. Meanwhile software licenses and support revenue shrank one percent, although it remains a far bigger source of income for now at almost 15.8 billion euros.

Epiroc, a leading productivity partner for the mining, infrastructure and natural resources industries, has signed a cooperation agreement with Ericsson to jointly help mining companies achieve optimal wireless connectivity in their operations through LTE and 5G technologies.

Mining companies are increasingly seeking to digitalize and automate their operations to increase productivity, enhance operator safety and lower cost. This includes, for example, remotely operating machines from a control room, and collecting machine performance data to optimize use of the equipment. This creates a need for reliable, high-performance wireless connectivity at the mines. Epiroc and Ericsson have agreed to work together to provide mining customers with high-performing LTE (Long-Term Evolution) and 5G mobile technology solutions.

Helena Hedblom, Epiroc’s Senior Executive Vice President Mining and Infrastructure, says: “We are happy to team up with Ericsson so that our mining customers can get the most reliable and high-performing wireless connectivity possible. This is a crucial step in our ongoing work to ensure mining customers reap all the benefits, including higher productivity and better safety, made possible by digitalization and automation.”

Åsa Tamsons, Ericsson’s Senior Vice President and Head of Business Area Technologies & New Businesses, says: “Cellular technology and the introduction of 5G is critical to realize the full value of digitalization and automatization for smart industries. This will open up for new business models and ecosystems across the mining industry, telecom services providers in each market, and Ericsson. By combining our expertise in connectivity and Epiroc’s cutting-edge technology in mining equipment, we will be able to ensure stable and secure mining operations, leading to increased utilization, improved productivity and reduced costs.”

Key advantages of LTE and 5G solutions compared with other wireless solutions include better coverage, higher reliability and stronger security, especially when machines are in the same area and share information.  The technology, which is for both underground and open pit mines, has already been tested on Epiroc’s machines at the company’s test mine in Kvarntorp, Sweden. Further testing will be done before providing the solutions to customers. 

Italian telecommunications incumbent Telecom Italia has appointed a new general manager – in a move that sees its largest shareholder tighten its grip on the operator. Vivendi’s Amos Genish will now run the company’s day-to-day operations.

Vivendi has a 24% stake in Telecom Italia, and the new appointment comes just days after CEO Flavio Cattaneo departed the company after just sixteen months at the helm, following a number of clashes with the French shareholder.

The new general manager has enjoyed a decorated career, he was CCO at Vivendi, and he formerly headed the Brazilian subsidiary of Spanish operator Telefonica, and also founded GVT, a leading Brazilian mobile operator. Genish, a 57 year-old former Israeli captain will now oversee all of the company’s operations and will be based in Rome.

Cattaneo is the second CEO to leave Telecom Italia in less than just two years after he repeatedly locked horns with the French group which is led by billionaire Vincent Bollore. He has previously expressed an ambition to establish a southern European media powerhouse. Vivendi CEO, Arnaud de Puyfontaine who also acts as Telecom Italia’s executive chairman - will assume the responsibilities of CEO on a temporary basis.

In addition to this, it was also disclosed that further announcements on governance will be made in September. Analysts have claimed that many investment funds that have shares in Telecom Italia, remain unflustered by the latest leadership reshuffle, and are confident that Genish can reinvigorate the operator with a number of deals, which may include a possible sale of the Brazilian unit to a spin-off of the Italian fixed-line network.

De Puyfontaine has admitted that he plans to establish a joint-venture between Telecom Italia and Vivendi’s pay TV unit Canal+, which would play into the French company’s vision of expanding its content distribution across platforms. The Italian operator’s only asset abroad remains its Brazilian unit, and de Puyfontaine said it was doing a good job, but remained coy in relation to a potential sale.

The idea of TIM exiting Brazil has been gaining traction among investors since Vivendi became a top shareholder, because the French group sold its own Brazilian operations before investing in Italy.

Published in Telecom Operators

US tech company Uber is fighting a legal battle following a decision by a Spanish judge in 2015 to ban the company from operating in the country. He referred the case to the European Court of Justice at the time to decide how to define Uber’s service. At the core of the European Court case is whether or not Uber can be defined as a transportation company or a digital platform. The American company, which has its HQ in San Francisco - was founded in 2009 and recognizes itself as a digital platform.

However, that assessment has been disputed by those who believe Uber are using labels so they don’t have to comply with national laws if it is defined as a transportation company - that would ultimately impact Uber’s growth in Europe. A lawyer for the Spanish Taxi association who initially filed the complaint against Uber argued that they can’t allow a business model to develop in Europe that could undermine the rights of consumers.

The American company has been accused of aggressively pushing itself into overseas markets, and has often in the past clashed heads with law makers and taxi associations who say Uber flouts transportation and competition rules. That is what occurred in Spain which subsequently led to this long-awaited trial in the European Court of Justice which will go a long way in determining the future of the US firm in Europe.

Uber has expanded its operations into more than 300 countries and is worth an estimated $68 billion.However, Europe’s legal challenge is a direct attack on how Uber operates in the region, one of its most important markets – but it also raises questions regarding the company’s future growth plans as it looks to expand beyond the transportation of people to food delivery and other online services.

At the hearing the company defended itself by framing an argument that it was a new player in Europe’s often lacklustre digital economy, which was offering users and drivers new ways to connect which would also support cities’ existing transportation networks.“Uber’s services can’t be reduced to merely a transport service,” Cani Fernández, Uber’s lawyer, told the Court of Justice during a lengthy session here that also included arguments from the European Commission, the executive arm of the European Union, and several European countries.

“The reduction of unnecessary barriers to information society services is critical in the development of the digital single market,” Ms. Fernández said, in reference to the commission’s goal to reduce national barriers that prevent Europeans from gaining access to e-commerce platforms, streamed television content and other online services.

One of the critical aspects of the legal dispute is actually not whether or not Uber can be defined as a transportation service or digital platform – instead it could well be its blurry stance on consumer rights. At the hearing yesterday afternoon, several of the European judges questioned Uber in relation to its relationship with drivers and about who should be held responsible if a passenger was hurt?

Such consumer protection issues were not part of the original case referred from the Spanish judge but it is now clear that it could form part of the final decision when it is made next year and could be a central topic for the prosecution in this case. “What liability does the platform have?” asked Daniel Svaby, one of the European judges. “The customer doesn’t know the driver who will pick her up. What can a user do to protect herself from harm?”

The trial continues at the European Court of Justice in Luxembourg today.

 

Published in Government