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SALT LAKE CITY — Is German software giant SAP constructing its Utah exit scenario?
SAP rose dramatically within the local business vernacular back in November 2018 when it inked a mammoth deal to acquire Utah-born customer experience innovator Qualtrics for $8 billion.
At the time, it stood as the highest-valued acquisition ever for a venture-backed software company and, adding to the drama of the moment, the deal was announced just days before Qualtrics was scheduled to launch its own IPO.
Following news of the acquisition, Clint Betts, executive director of the Lehi-based tech industry advocacy group Silicon Slopes, called the impact of the Qualtrics deal "monumental."
"Silicon Slopes is thrilled to welcome SAP to our community," Betts said in a statement. "Ryan Smith and Qualtrics just put an $8 billion exclamation point on the most consequential year in Utah tech history. With this record-shattering deal, Ryan and Qualtrics have cemented their legacy as Silicon Slopes legends.
"Just as impressive, I'm confident you'll never find more humble or dedicated leaders. This is a monumental day for Silicon Slopes and Utah."
Qualtrics was founded in 2002 by Ryan and Jared Smith based on technology first developed by Ryan and his father, BYU researcher and professor Scott Smith, amid the elder Smith's fight (it was successful) against throat cancer. Initially conceived of as a survey tool for academics, Qualtrics morphed into a set of tools and deep data analysis optimized for assessing clients' business vitality, as viewed through the eyes of their clients and/or employees. This new set of analytics and insight theory has grown to become its own business category, and Qualtrics is both the progenitor and leader of the customer experience realm.
Back in 2018, some market watchers criticized SAP for overpaying, noting Qualtrics' pre-IPO valuation estimates were coming in around the $4.5 billion to $5 billion range.
But just two years later, that naysaying was rendered moot when SAP spun Qualtrics off in an IPO that raised $1.5 billion in fresh capital on a valuation north of $15 billion.
Qualtrics' IPO redux in 2021 came just weeks after co-founder and current executive chairman Ryan Smith was announced as the new majority owner of the Utah Jazz after closing a deal rumored to be worth $1.6 billion.
Smith kept a stake in Qualtrics following the IPO, and is reportedly the biggest individual shareholder while SAP retained a majority interest in the company.
Now, however, it appears SAP could be set to remove the flag it planted in the Utah tech scene in such dramatic fashion just over four years ago.
In a report on its positive fourth quarter financial results on Thursday, SAP shared details on plans to reduce its global workforce by thousands, refocus on its core business ventures and put its 71% share of Qualtrics stock up for sale.
"We are further focusing our portfolio in areas where we are strongest to continue our accelerated growth," said Christian Klein, CEO of SAP, during the company's fourth quarter 2022 earnings call, per CNBC. "This led us to announce today that we intend to carry out a very targeted restructuring in select areas of the company that will impact up to 3,000 positions and include a headcount reduction of about 2.5%."
Klein added, "What this is really about is a very targeted effort to further streamline our portfolio and concentrate investments on the areas where we clearly can have the most positive impact."
Those areas do not, apparently, include maintaining the company's controlling interest in Qualtrics.
On the same call, SAP's chief financial officer, Luka Mucic, said while the company pursues liquidation of its position in Qualtrics, it would remain partners with the company which is co-headquartered in Provo and Seattle.
"We have had a very successful collaboration on the go-to market and technology front with Qualtrics and we absolutely will continue this," Mucic said.
In a Thursday press release, SAP said both it and Qualtrics stand to benefit from a potential stock sale.
"SAP believes that this potential transaction could unlock significant value for both companies and their shareholders: for SAP, to focus more on its core cloud growth and profitability; for Qualtrics, to extend its leadership in the XM category that it pioneered," the release read.
SAP reports that since it acquired Qualtrics, the company has increased annual revenues by 3.5x to approximately $1.5 billion "while delivering profitability, and has significantly expanded its offerings and enterprise customer adoption."
In a statement shared with the Deseret News via email, Qualtrics CEO Zig Serafin said SAP's stock sale, should it happen, would lead to further growth opportunities for Qualtrics.
"This is another step in our journey with SAP, one that has the potential to give Qualtrics an even greater opportunity to accelerate our growth and our category leadership in Experience Management," Serafin said. "It's a win-win situation, where we can continue our partnership with SAP and unlock new value for both of our companies and our shareholders."
On Wednesday, Qualtrics released its own fiscal reporting for the fourth quarter of 2022 with results and revenue guidance that exceeded analysts' forecasts, according to CNBC.
