SAP CEO Bill McDermott Unexpectedly Departs
The SAP partner ecosystem will remain a key priority for the company’s new co-CEOs Christian Klein and Jennifer Morgan, who today took the software giant’s helm in wake of Bill McDermott’s unexpected decision to step down as chief executive.
On a conference call this morning with analysts to discuss the abruptly announced changing of the guard, Morgan, a 15-year company veteran and president of SAP’s cloud business, said partner growth and alignment are one of three top priorities.
“We have the most expansive partner ecosystem which we are excited to continue to build and evolve in new ways with new communities,” said Morgan, during prepared remarks on the call, alongside Klein and McDermott. “We have long-standing partners and new partners looking to go to market together for SAP.”
McDermott, who joined SAP back in 2002 at the bottom of the dotcom crash when the company’s future was in question, has served as CEO and previously co-CEO over the past nine years. As SAP’s TechEd Barcelona conference concluded yesterday, the company issued the surprise announcement of McDermott’s departure, effective immediately. McDermott will serve as an adviser through the end of the year, although he didn’t announce his future plans. “Even as I am retiring my SAP responsibilities, I am of course opening the door to a new chapter of my own journey,” he said.
During this morning’s investor call, McDermott said that he had recently decided not to renew his contract with SAP and informed chairman and co-founder Hasso Plattner of his decision. As part of a succession plan created a year ago, SAP had already determined that Klein, who was chief controlling officer and has worked his entire career at SAP, and Morgan would take over as co-CEOs in the event of McDermott’s departure for any reason.
“Well, as some might say, what must be done eventually should be done immediately,” McDermott said on the call. Apparently looking to show that the transition isn’t tied to forthcoming negative financial news, SAP issued a preliminary Q3 2019 earnings report, which projected total revenue for the quarter rose 10% in constant currencies with cloud revenues up 33%. Cloud bookings were even higher, 38%, McDermott emphasized. “This is significantly faster than growth by many other stand-alone cloud companies,” he said.
SAP shares rallied after the announcement. Still, SAP’s profits and stock price have declined compared to the company’s peers in the industry. Earlier this year, hedge fund giant and activist investor Elliott Management acquired a $1.3 billion stake in SAP. Shortly thereafter, SAP announced a target of 2023 to improve operating margins by 5%. In yesterday’s preliminary Q3 release, the company reported a 1.5% (in constant currency) operating margin improvement.
“This is what you’ve all been waiting for and now it’s here,” said McDermott, insisting that Elliott Management had no role in his departure. “Elliott Management has been an excellent investor and an excellent adviser,” he told CNBC this morning. “We have many excellent investors and advisers and Elliott has been a total…