Displaying items by tag: restructuring

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.

Swedish telecoms equipment giant Ericsson suffered an “unsatisfactory and mixed” Q1, says CEO Borje Ekholm, as the vendor recorded a net loss of SEK10.9 billion ($1.2 billion) and an 11 percent year-on-year decline in sales. Ekholm said during a conference call that the company’s performance has been affected by restructuring costs, as well as a faster than anticipated decline in sales of its legacy portfolio.

Ericsson is going to increase its cost-saving efforts, according to the company’s earnings call which the CEO participated in. He said Ericsson also needs to increase the speed of its new product pipeline and business development initiatives. Ericsson will be assessing its contract procedures and discounts offered to customers, as part of an ongoing business review, to boost its margins.

The network business has been strong despite lower than expected sales, said the CEO, but the decline in Ericsson legacy media product sales and IT and Cloud business segments has made a significant impact. “It was tough, but it was mixed,” said Ekholm discussing Ericsson’s Q1 performance. “We have a very stable networks business that is performing well. We have IT and cloud and media with big significant losses. We are taking actions so we can turn that around and reach our long-term ambitions.”

In January, Ekholm pledged to guide the beleaguered company through what he labeled a “period of intense change”. The Swedish telecoms giant has endured some major setbacks, and was forced to lay off more than 3,000 of its Swedish staff last year. What’s more, the company has been forced to fight off bribery allegations after former executives of Ericsson told the US Securities and Exchange Commission (SEC) that they had engaged in multiple counts of bribery in different regions all over the world in an effort to secure major contracts.

However, Ekholm insisted that under his tenure the company will come through this intensely difficult period, and will emerge as an “even stronger leader” in the industry. In a statement, Ekholm pointed to Ericsson’s position in the development of 5G as a reason to be optimistic for the future, and reiterated his desire to return the company to success.

The company has suffered continued losses, in Q1 reporting SEK13.4 billion of restructuring costs, asset write-downs and what has been described as “provisions and adjustments related to certain customer projects.” Ericsson sales dropped from SEK2.2 billion in Q1 2016 to SEK46.4 billion in the recent quarter.

Ericsson says it is “not satisfied with the cost structure of the company and the existing cost and efficiency program is not yielding sufficient results.” The vendor said in a statement, “Based on current profitability, we will intensify our efforts to reduce cost with focus on structural changes to generate lasting efficiency gains and increase cost competitiveness.”

Eekholm expects the company will make a profit in 2018, with a target to double its underlying 2016 operating margin by 2019. Earlier this month Ericsson said it will “pursue a more focused business strategy to revitalize technology and market leadership, improve group profitability and enable customer success.” The overall strategy is to “enable service providers to expand their business across industries and into new profit pools.”

The company says it will drive the development of market-leading solutions, fully leveraging the potential of 5G, IoT and cloud. Restoring profitability is key for Ericsson and it will start by focusing the portfolio to fewer areas and securing effectiveness and efficiency in operations.

Ericsson also says it will increase emphasis on solutions across the company, combining products and services, to drive efficiency and better meet customer needs and requirements. This will also be reflected in a simplified organization. In parallel, Ericsson will accelerate investments both in R&D and services capabilities in selected core areas to ensure that it can offer customers leading solutions. 

Published in Telecom Vendors

India’s second largest telecom operator has been forced to restructure its management team following the departures of a number of key executives from the organization. Some industry analysts have suggested the emergence and impact of 4G start-up Reliance Jio was the main reason behind the restructuring process.

The former CEO of Vodafone Czech Republic, Balesh Sharma has been appointed COO of Vodafone India’s commercial and enterprise units, replacing Naveen Chopra who held this position for a period of two years. He will remain with the company and is expected to be named in a new role soon.

Representatives of Vodafone India have played down the significance of the restructuring – and dismissed suggestions that the reshuffle was a reactive measure taken due to rival Reliance Jio extending its free voice and data offers.

A spokesman for Vodafone India stated it was ‘business as usual’ and the purpose of the restructuring was in order to make decisions faster and integrate its commercial strategy with operational teams in a much more effective manner.

Other high-profile changes within the company will see Head of M-Pesa, Suresh Sethi – the figure behind its payment bank initiative is expected to depart soon– while the telecom operator named Rahul Bhagat as an adviser. Ravi Santhanam, who was in charge of customer value management, a role that reported to the CMO, resigned.

The entry of Reliance Jio to the market in India has forced the country’s top three mobile players, Bharit Airtel, Vodafone and Idea Celluar to follow Jio’s lead with generous free voice and data offers, which subsequently sparked a price war in the region.

Reports emerged last week that Vodafone Group had entered merger negotiations with its rival Idea in a bid to fend off and combat the increased competition in the hugely competitive market.

Vodafone CEO Vittorio Colao said a plan to merge its Indian business with Idea is not a sign the company is exiting the market or backing away from a fight with Jio.

However, Vodafone India isn’t the only player looking to gain scale via a merger. It has been reported that Telenor India has expressed its interest in exploring a merger through a share swap with Aircel and Reliance Communications, which are themselves trying to merge to create the country’s third largest operator.

Published in Telecom Operators

A regulatory filing with the U.S. Securities and Exchange Commission recently revealed that Microsoft is planning to layoff approximately 2,850 staff over the next 12 months. The job cuts will be primarily across the company’s dwindling smartphone business, marking the fourth significant workforce reduction in this area for Microsoft.

These latest job cuts, representing 2.5 percent of Microsoft’s global workforce, were announced just a few months after the company announced 1,850 layoffs in May, which were also from its struggling smartphone business. Microsoft has been cutting its smartphone division since 2014, when the company cut 18,000 jobs (it’s largest layoff to date), with majority of staff cut from its Nokia Devices and Services Division. Microsoft acquired Nokia’s handset business in 2013 for $7.2 billion.

Following the 2014 job cuts, in 2015, Microsoft approved a restructuring plan to cut 7,800 jobs worldwide, primarily in its smartphone division. According to a report by Information Week, the restructuring at the time was aimed at streamlining Microsoft’s handset business. But the company never really managed to do so.

“We periodically evaluate how to best deploy the company’s resources. In the fourth quarter of 2016, management approved restructuring plans that would result in job eliminations, primarily across our smartphone hardware business and global sales,” Microsoft states in its regulatory filing, referencing the 1,850 layoffs announced in May and the 2,850 cuts that will be added as an extension of those earlier announced cuts.

“We are focusing our phone efforts where we have differentiation, with enterprises that value security, manageability and our continuum capability, and consumers who value the same,” said Microsoft CEO Satya Nadella.

Some Microsoft employees have expressed respect for the company and its process of letting staff go. For example, in a post on TheLayoff.com, a user states: “900 have been notified, so in a week all 2,850 will know. It’s an old Microsoft layoff style – they do it swiftly and the layoff packages are great.”

Published in Finance