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Updated from 12:13 p.m. EDT

After a string of nothing but bad news for software investors,


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said Friday the company is doing better than expected as it wraps up the first half of the year.

In recent trading, shares of the German software giant were up $1.75, or 4.6%, to $39.41.

Operating income excluding stock-based compensation and acquisition-related charges will range from 420 million to 430 million euros, the company said. Analysts polled by


had forecast, on average, operating income of 426 million euros.

The company also said it expects second-quarter software revenue of around 495 million euros, representing an increase of 15% compared to the second quarter 2003. That's slightly better than consensus forecasts of around 484 million euros, according to



SAP converts currency values by using a weighted average of currencies in which it does business, so it wasn't possible to quickly give an accurate conversion to dollars.

SAP gives annual, not quarterly, guidance but the figures for the second quarter show the company is "on track at the very least, and possibly in a position to raise guidance for the year when it reports," said Jamie Friedman, who follows the company for Fulcrum Global Partners. Lowering guidance "seems very unlikely."

Although the upside doesn't appear to be very large, the preannouncement was a stark contrast to the recent parade of downside surprises in the software sector from companies such as

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Siebel Systems

( SEBL), and




"Given the series of preannouncements in the industry during the past week, SAP decided to release this preliminary information," the company said in a prepared statement.

Most of the companies that warned said closing sales was unexpectedly difficult during the crucial last few weeks of the quarter, but "SAP fared better due to continued market share gains, competitive displacements and some early wins of elephant-sized deals," Prudential analyst Brent Thill said in a note to clients published shortly after the company's announcement. (Prudential does not have a current banking relationship with SAP.)

Pro forma operating margins are expected to increase by 100 basis points, or one percentage point, the company said.

A spokesman for SAP at the company's headquarters in Walldorf, Germany, said SAP will not hold a conference call or comment further until it reports actual results for the quarter before the opening bell on July 22.

Friedman noted that SAP's business is very heavily weighted toward the fourth quarter of the year, meaning that first half results are indicative of a trend, but less crucial to the company's fortunes than would otherwise be the case. Fulcrum is an independent research house and does no banking.