SAP on a major cost cutting measures

CIOL Bureau
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FRANKFURT: Europe's biggest software maker SAP AG told staff earlier this month it had to make a major effort to cut costs to hit its margin targets or face an uncertain future, a spokeswoman said on Wednesday.

SAP cut its 2002 revenue target in July, saying it expected full-year sales to grow by 5-10 percent, compared with an earlier forecast of 15 percent. But it kept its operating margin target of at least 21 percent, up one percentage point on 2001.

The Wall Street Journal quoted an internal memo from the company underlining the importance of the cost savings goal.

"There won't be much of a future for SAP if we can't meet this goal," co-Chief Executive Henning Kagermann was quoted as saying in the memo, according to the WSJ.

The spokeswoman said Kagermann, Chief Financial Officer Werner Brandt and board member Claus Heinrich met staff at SAP's Walldorf headquarters on September 12 and stressed the need to cut costs.

"It was basically to get the message across to staff that we're serious about cutting costs," she said. "It wasn't intended as a warning to the markets. There's no change to our guidance and we're sticking by our goals."

SAP shares, which have lost more than a third of their value since late August, were up 4.16 percent at 55.80 euros by 0822 GMT, as the German DAX jumped after the latest Info survey pointed to a slight improvement in business conditions.

Analysts have been sceptical about whether SAP can meet its goals given the severe slump in investment spending that has hit technology companies worldwide but Kagermann said as recently as September 5 that there was as yet no reason to change forecasts.

SAP has been one of the few big technology companies to avoid significant layoffs during the current downturn, although it has said it will adjust staffing in some areas. It has repeatedly said it does not want to make major cuts in areas like research and development.

© Reuters