Capital Calls: SAP, Abrdn

- SAP’s layoffs

- Abrdn

SAPed. Germany’s SAP is proving that artificial intelligence (AI) is creating room for more job cuts in tech. The $190 billion software company, which counts chipmaker Nvidia as a key client, announced on Tuesday it will cut 8,000 jobs – or 7% of its global workforce – because deep learning algorithms are allowing its staff to do more tasks, and quicker. CEO Christian Klein says AI can enable faster coding, contract checking, sales pitches and more, reducing the number of needed employees.

The restructuring, which is larger than SAP’s previous job-cutting plan announced in January 2023, will cost 2 billion euros ($2.2 billion), making room for new investment in areas from IT to automation to feed growth in AI-related businesses. Investors pushed shares up 6% on the announcement, even though SAP expects net savings to be just 0.5 billion euros in 2025. SAP’s move may herald more job cuts in a segment that is already downsizing. Many tech companies over-hired during the peak of a pandemic recovery in 2021, leading to over 400,000 job cuts in 2022 and 2023, per website layoffs.fyi. As the global economy slows and the buzz around AI gets stronger, IT workers look increasingly vulnerable. (By Yawen Chen)

Not a match. Abrdn is giving potential suitors multiple reasons to swipe left. The 3 billion pound British fund manager suffered 12.4 billion pounds of net outflows in the second half of 2023, more than doubling the previous six months’ level. After already halving redundancy payouts and reducing the length of paid parental leave by about a third, boss Stephen Bird is now axing 500 jobs – about 10% of the company’s total workforce. These efforts aim to cut 150 million pounds’ worth of costs by 2025.

Lower expenses are sorely needed – Abrdn’s costs have been over 80% of its income, higher than peers. A PwC report last year also predicted 16% of existing asset and wealth managers would either go out of business or be bought up by bigger groups by 2027 because of high interest rates and pressure on fees. With Bird’s shares off 25% since July, he ought to be looking for a buyer.

Yet Abrdn still trades at 15 times earnings for the next 12 months, while Schroders and Legal & General are at 12 and 9 times. Its valuation has long implied minimal value to the asset management arm. And Bird’s Interactive Investor business, a direct-to-consumer platform acquired in 2021, has been undermined by a UK regulatory clampdown on the scope of managers to trouser some of the proceeds earned on customers’ cash balances. It’s not obvious who that appeals to. (By Pamela Barbaglia)