SAP Increases Outlook on Cost Cuts and Growth in Cloud Computing

Stefan Nicola, Bloomberg News

The SAP SE logo sits on a wall at the software company's headquarter campus building in Walldorf, Germany. , Bloomberg

(Bloomberg) -- German software maker SAP SE raised its operating profit outlook for the year as it pushes through a major restructuring program, bolstered by strong growth in its cloud business.

The company reported a 26 percent increase in new cloud bookings for the first quarter at constant currencies, picking up speed compared to the October-December period in the metric closely watched by analysts.

SAP also said Wednesday that it’s planning “new initiatives to accelerate operational excellence and value creation” and will brief investors and analysts on those plans during a special capital markets day in November. The company will evaluate a multi-year share buyback program and focus on “tuck-in” acquisitions.

Chief Executive Officer Bill McDermott is betting big on the cloud business as a source of future sales growth, and has spent more than $10 billion on U.S. cloud startups Qualtrics International Inc. and Callidus Software Inc. to better compete with Salesforce.com Inc. and Oracle Corp.

McDermott is reassigning jobs, training workers, and drawing up voluntary leave packages that the company expects about 3,000 employees to take -- a program that cost it 886 million euros ($994 million) in the first quarter. Overall sales grew to 6.1 billion euros, driven by a strong increase in cloud revenue.

They did so as SAP dealt with a management shakeup after the April 5 announcement that the president of its cloud business, 27-year SAP veteran Robert Enslin, was departing the company. It was later announced he’d left for Google. A day earlier, Chief Technology Officer Bjoern Goerke, another cloud expert based in the U.S., penned a blog post saying he’s leaving the company he joined as a student in 1988. Board member Bernd Leukert, a seasoned IT executive, left SAP in February.

The company said Wednesday that uptake of its flagship S/4 Hana software slowed in the January-March period, with the company adding about 400 customers. It said it now has about 10,900 total users. The software allows businesses to run tasks on their own machines or in a cloud-computing arrangement hosted by SAP or one of its partners.

To contact the reporter on this story: Stefan Nicola in Berlin at snicola2@bloomberg.net

To contact the editors responsible for this story: Rebecca Penty at rpenty@bloomberg.net, Nate Lanxon, Edwin Chan