SAP ups 2005 target after forecast-beating Q3

FRANKFURT (Reuters) - German software maker SAP raised its full-year outlook on Thursday after third-quarter licence sales grew by a forecast-beating 20 percent, extending SAP's lead over arch-rival Oracle.

SAP, the world's biggest maker of business software, said it would now target 12 to 14 percent growth in licence sales this year, based on an adjusted dollar/euro rate of US$1.25.

It had previously forecast a 10 to 12 percent rise in licence sales -- an important indicator of future revenues -- based on a dollar/euro rate of US$1.30.

SAP estimated its global market share increased to 60 percent at the end of September from 58 percent at end-June.

It measures its share of the market for business software, which helps companies manage processes from supply-chain management to human resources, against the comparable business units of Microsoft, Oracle and Siebel Systems.

Chief executive Henning Kagermann said the result was a vindication of SAP's strategy of organic growth -- in contrast to Oracle, which has been on an acquisition spree as it strives to overtake SAP's lead in business applications software.

"What sets us apart is that we have a clear and defined roadmap for the future of our software investments and we are investing wisely -- spending on more efficient organic growth and on smart, fill-in acquisitions," he said in a statement.


Sharp US rise

SAP's third-quarter licence sales totalled 590 million euros (US$705 million), easily beating the average estimate of 552 million in a Reuters poll of 23 analysts.

The result was driven by a 34 percent increase in the United States, the world's biggest software market. In Europe, a 6 percent rise was helped by growth of 12 percent in SAP's home market, Germany.

"What's surprising is SAP's strong growth in the United States," said Landesbank Rheinland-Pfalz analyst Thomas Hofmann.

SAP's total third-quarter sales rose 13 percent to 2.01 billion euros, broadly in line with forecasts.

Pro-forma operating income -- excluding charges relating to acquisitions and employee stock options -- rose 9 percent to 520 million euros, also in line with the average poll estimate.

In the first nine months, free cash flow was 832 million euros, compared with 1.22 billion in the year-ago period.

"Given the company's strong free cash flow generation, SAP plans to continue to evaluate opportunities to buy back shares in the future," the company said.

SAP currently has authorisation to buy back up to 10 percent of its outstanding stock, around 30 million shares. It said it bought back 2.8 million shares in the first nine months of the year at an average price of 126.07 euros.

SAP trades at 26 times estimated 2006 earnings, almost twice as expensive as Oracle's 14 times estimated earnings for its fiscal year to May 2007. The stock has performed broadly in line with the DJ Stoxx European technology index this year.

Additional reporting by Andrea Lentz and Ralf Banser.

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