Software giant SAP saw its market valuation drop by €25 billion (£27.8bn) after it announced plans to go "all-in" on cloud computing during its third-quarter earnings call.
The German firm is on track for its worst trading day in 12 years, according to CNBC, after slashing its revenue forecast for 2020.
Fearing that lockdown restrictions would affect demand for its business relations and customer management software into 2021, the tech giant has announced plans to go "all-in" on cloud computing. The announcement means that SAP is abandoning medium-term profitability targets which could take longer than expected to recover from the coronavirus pandemic.
"As the CEO of SAP, I have to be focused on the long-term value creation of this company," SAP CEO Christian Klein told CNBC's "Squawk Box Europe" on Monday. "So I cannot trade the success of our customers and the significant revenue potential of SAP against short-term margin optimisation."
Investors reacted badly to the announcement, dumping shares and wiping €25 million off SAP's market value. However, some will point to a year of turmoil following the exit of long-term CEO Bill McDermott and the less than successful 'tandem' leadership that ended in April when Klein became the company's sole CEO.
At that point, with the coronavirus pandemic starting to hit global operations, SAP had focused on medium-term "ambition'' which was favoured by McDermott on the estimates that it would lead to profit margins growing by at least a percentage point up to 2023.
The change, however, effectively means that profit margins will stagnate over the next three years. But cloud revenue, from subscription-based services, is now expected to triple to €22 billion by 2025. As such, total adjusted revenue is being forecast at €36 billion with an operating profit of €11.5 billion.
-
Enterprises can’t keep a lid on surging cyber incident costsNews With increasing threats and continuing skills shortages, AI tools are becoming a necessity for some
-
UK software developers are still cautious about AI, and for good reasonNews Experts say developers are “right to take their time” with AI coding solutions given they still remain a nascent tool
-
UK firms are pouring money into AI, but they won’t see a return on investment unless they address these key issuesNews An SAP report projects increased AI investment, but cautions that too many organizations are taking a fragmented approach
-
Intel makes high-level hires while factory workers are warned of layoffsNews The company is appointing four senior executives as part of efforts to refocus on engineering and customer relationships
-
UiPath names Simon Pettit as new AVP for UK and IrelandNews The seasoned leader will spearhead region-specific transformation projects as UiPath looks to drive operational growth and customer engagement
-
How to empower employees to accelerate emissions reductionin depth With ICT accounting for as much as 3% of global carbon emissions, the same as aviation, the industry needs to increase emissions reduction
-
Worldwide IT spending to grow 4.3% in 2023, with no significant AI impactNews Spending patterns have changed as companies take an inward focus
-
Report: Female tech workers disproportionately affected by industry layoffsNews Layoffs continue to strike companies throughout the tech industry, with data showing females in both the UK and US are bearing the brunt of them more so than males
-
How can small businesses cope with inflation?Tutorial With high inflation increasing the cost of doing business, how can small businesses weather the storm?
-
How to deal with inflation while undergoing digital transformationIn-depth How can organizations stave off inflation while attempting to grow by digitally transforming their businesses?
