Europe Lifts SAP

European software sales jump and the company reiterates 2004 guidance.
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Updated from 9:02 a.m. EDT

Driven by surprisingly strong sales growth in Europe and Asia, German software maker

SAP

(SAP) - Get Report

posted a 15% rise in third-quarter earnings.

SAP made its announcement before U.S. markets opened on Thursday and in recent trading, shares were up 86 cents, or 2.1%, to $42.12.

The company's performance and fourth-quarter guidance were generally in line with consensus. But analyst Richard Williams, of Garban Institutional Equities, said that without currency fluctuations, the company would have been slightly below Wall Street's expectations.

"I think we may see some reversal of those gains over the next few days as the markets take this in," Williams said in an interview.

SAP earned $358 million, or about $1.16 a share, in the latest quarter, compared with earnings of $310.1 million, or $1 a share, last year. Revenue was $2.19 billion in the 2004 quarter, compared with $2.03 billion a year ago.

Earnings in the latest quarter matched the Thomson First Call consensus estimate of 29 cents an American depositary share, as each ADS equals four SAP shares. The consensus revenue estimate was $2.19 billion.

SAP's third-quarter software revenue rose 13% to about $603.9 million, while maintenance revenue rose 10% to $885.6 million. Software sales in Europe and Asia rose 24% from a year ago to $306.3 million in the quarter, while software sales in the U.S. rose 6% to $183.3 million.

SAP reiterated full-year software revenue growth guidance of 10% over 2003 and said earnings should be $5.12 to $5.24 a share in 2004, roughly in line with the Thomson First Call consensus.

But France-based analyst Stephane Fraenkel of Oddo Securities noted that on a constant currency basis, SAP lowered its guidance for license growth from 15% to 12% for the full year.

"The group's license sales forecast for 2004 implies a year-on-year increase of 7% to 8% in Q4, whereas we were expecting a 13% rise previously," he said in a note to clients. License sales represent new business and are a key metric for enterprise software makers.

Fraenkel also said that he doesn't believe that SAP's relatively stronger performance in Europe signals a general upturn in IT spending on that continent. The comparable quarter last year was quite weak, he said in an interview. And the company noted that the same quarter in the United States was strong.

CEO Henning Kagermann claimed that his company has gained market share in the United States this year at the expense of both

PeopleSoft

(PSFT)

and

Oracle

(PSFT)

. "We will continue to grow by double digits in the years to come," he said during a call with analysts.