SOFTWARE giant Sage will announce 1,000 job cuts alongside its interim results this week.

The FTSE-100 company, which provides software and IT support to small and medium-sized businesses across the globe, is expected to say it will make 600 cuts this year on top of 400 job losses last year. About 200 of the cuts will be in the UK.

The cost-cutting exercise will save the Tyneside-based group about £50m a year, according to analysts.

The job losses represent about 8% of the 14,500-strong global workforce at Sage. The group is expected to say all the cuts will be achieved through voluntary redundancies and by not replacing people who leave rather than compulsory job losses.

All of Sage’s 2,200 UK staff have been offered the chance to apply for voluntary redundancy. Just before Easter staff were handed a letter “offering Sage people the opportunity to take voluntary redundancy that is incentivised as a way to minimise the risk of future compulsory redundancies”.

Sage is the last of its sector peers to announce a big cost-savings programme to adapt to the slowdown in the economy. The exercise is likely to be painted as a prudent measure in the weak economic climate.

The group – which has expanded through buying businesses at home and overseas – is also expected to slash its spending on acquisitions this year to save costs.

Shares in the business have underperformed the FTSE-100 index over fears its customers will go bust or spend less on new software products to help support their business.

However, the group is expected to reiterate that 60% of its revenues are generated from yearly maintenance and IT-support contracts, for which demand has proved resilient despite the recession.

Positive news on maintenance and support spending will cheer the City, which had grown nervous that customers would cancel their contacts. But analysts who follow Sage believe small companies are relying on IT back-up from an external provider more, not less, during the downturn.

Sage customers pay £300 to £1,200 a year for support contracts, which often works out cheaper than having full-time IT staff or paying accountants for their work by the hour.

Analysts are forecasting that revenue and earnings will still grow this year. Cazenove has pencilled in £1.45 billion of turnover in 2009 – up from £1.3 billion last year and underlying earnings of £321.5m, up from £299.8m last year.

The solid performance comes despite difficulties in its US healthcare business, which has remained a drag on profits and has yet to prove its worth.

Turning this division round remains a priority for Sage’s recently-appointed chief executive for North America.

Sage was formed by Graham Wylie in 1981 and went from strength to strength, becoming one of only two technology stocks in the FTSE-100.

Wylie has since left the firm to pursue his interest in horse-racing, as well as investing in Newcastle-based firm Technology Services Group in 2003.

The business is currently run by Paul Walker and has almost 6m customers.

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