By Sara Germano
WALLDORF, Germany -- Business-software maker SAP SE said Tuesday it will restructure at a cost of nearly $1 billion as it continues to shift toward cloud-based computing.
Chief Executive William McDermott said roughly 4,400 employees are likely to be affected, though the company expects its current workforce of about 96,500 to grow by the end of 2019.
"We are going to move our people, and our focus, to the areas where the new economy needs SAP the most," he said in an interview, citing such opportunities as artificial intelligence, the Internet of Things, blockchain and quantum computing.
Mr. McDermott said there would be a mix of new assignments, early retirements and exit packages, and the company will continue to offer training.
"We are building a company that is a fighting machine, that is ready to go into the marketplace against any dot-com from America, and win," he said.
The cost of the restructuring, the company's first in four years, is expected to run between EUR800 million to EUR950 million ($915 million to $1 billion), with the majority being booked in the current quarter.
The company on Tuesday also reported its fourth-quarter profit fell 15% from a year earlier to EUR1.8 billion, despite a 9% rise in revenue to EUR7.4 billion. Analysts polled by FactSet anticipated profit of EUR1.86 billion on revenue of EUR7.2 billion.
SAP's shares fell 2.8% to EUR89.81.
The German company offers a range of products and services to businesses, including its Concur expense-management platform, IT-data platform SAP Hana, analytics, customer-experience software and digital supply-chain tools.
SAP has been expanding its cloud-computing business as growth in its core software division has slowed. Excluding the effect of currency fluctuations, fourth-quarter bookings in its cloud-services division grew 23% to EUR736 million, while cloud revenue for the full year rose 33% to EUR5 billion. The company's total revenue grew 5% to EUR24.7 billion in 2018.
Mr. McDermott said the company isn't expecting to feel the effects of a slowdown in China's economy, citing its cloud partnership with Alibaba Group Holding Ltd., which was expanded last year.
"I think I've been listening to how China is slowing down now for at least eight years," he said. "Don't be too short on China, would be my advice."
SAP said it expects strong revenue growth this year, with cloud subscriptions and support revenue rising by 33% to 39% to between EUR6.7 billion and EUR7 billion.
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