SAP Slashes Sales Forecast, Shares Slide

Updated from 4:36 a.m. EDT

WALLDORF, Germany (TheStreet) -- Shares of enterprise-software maker SAP(SAP Quote) were trading lower by almost 7% in Frankfurt Wednesday after the company said it expects services revenue to decline about 6% to 8% for the full year.

Earnings for SAP in the third quarter rose as margins improved despite a big drop in software revenue.

SAP said third-quarter net income under U.S. GAAP rules rose to 435 million euros ($644.5 million) from 389 million euros a year earlier.

Total revenue in the quarter fell 9% to 2.51 billion euros from 2.76 billion euros a year earlier. Software revenue fell 31% to 525 million euros.

Operating margin in the quarter rose to 24.2% from 22.2% a year earlier.

"We are pleased to report another quarter of increasing margins despite a decline in revenues. This demonstrates our continued success in maintaining tight cost controls," said SAP Chief Financial Officer Werner Brandt, in a statement Wednesday. "While we are seeing signs of stabilization in the general environment, the market remains difficult. Third-quarter software and software-related service revenues came in lower than we expected mainly because of a particularly challenging environment in the emerging markets and Japan."

SAP said it was still seeing small deals, despite tight market conditions, and that it was driving multiyear agreements with customers to ensure software and service revenue for longer periods. But the software company said it expects service revenue to decline by about 6% to 8% for the full year from service revenue of 8.6 billion euros last year.

-- Reported by Joseph Woelfel in New York .

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