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SAP Guides Higher

License revenue grew by 18%.
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German software giant


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preannounced better-than-expected fourth-quarter results Tuesday, but is taking a hit on Wall Street as investors apparently decided to sell on the good news.

SAP said sales grew by15% to 2.75 billion euros. Estimates by analysts based in Europe called for sales of 2.63 billion euros, according to Richard Williams, director of software research for Garban Institutional Equities. When currency fluctuations are discounted, however, the growth rate was just 6%, the company said.

License revenue, a key growth metric for software companies, grew by 18% (12% in constant currencies) to 1.18 billion euros; analysts were looking for 1.13 billion euros.

SAP continued its strong U.S. performance, growing software revenue by 35% (21% at constant currencies).

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SAP did not give an earnings estimate for the quarter but said it expects its 2005 pro forma operating margin to be at the top end of its earlier guidance.

For the full year, license revenue grew by 18% to $2.78 billion euros, well above the company's earlier guidance of growth ranging from 12% to 14%.

SAP will release final earnings on Jan. 25 before the opening bell.

When the market opened, shares of SAP traded off, along with most tech stocks, but rallied briefly on the announcement. That motion quickly reversed, and in recent trading shares were down $1.50, or 3%, to $47.31.

Williams said the selloff was not really surprising: "The stock is priced for perfection, building in Wall Street's high-end estimates for years ahead." Before today's decline, SAP was trading at 24 times forward earnings, while bitter rival


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sports a P/E ratio of just 14. Garban does not have an investment-banking relationship with SAP.