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SAP Sags on Estimate Shortfall

The company's results miss European expectations.
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Updated from 8:55 a.m. EDT

Strong sales in the U.S. helped


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grow revenue 18% over last year and beat Wall Street's earnings consensus for the first quarter.

However, the German software giant missed the slightly more aggressive expectations of European analysts, and in recent trading shares were off $1.16, or 2%, to $55.71. The decline also reflected a certain amount of profit-taking, said analysts, who noted that shares had run up strongly earlier in the month.

SAP earned 282 million euros, or 91 euro cents a share, in the March quarter, 11% greater than the last year's profit of 254 million euros, or 82 euro cents a share. Total revenue was 2.04 billion euros, compared wtih 1.73 billion euros a year ago.

Excluding stock-based compensation, and valuing the euro at 1.23 to the dollar, SAP earned a profit of $347 million, or 31 cents per ADS (American Depository Shares) on sales of $2.5 billion. Wall Street was looking for a profit of 30 cents on sales of $2.4 billion.

In the U.S., software-license revenue totaled $204 million, up 25% from a year ago. That gain helped pace a 47% rise in SAP's Americas division, to $280 million. The gain was more muted in its Europe, Middle East and Africa division, which rose 7% to $281.7 million.

CFO Werner Brandt said SAP, the world's largest seller of business-applications software, gained a small amount of share in the U.S. during the quarter and now owns 21.4% of the market, compared with 8.8% for


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and 4.4% for


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Worldwide software-license revenue totaled $662 million in the latest quarter, up 22% from a year ago.

SAP reiterated its earlier guidance for the balance of 2006. "We are pleased to say that we are off to a good start in 2006 with continued strong growth in software and product revenues for the first quarter," the company said. "This top-line growth led to increases in pro forma operating income and pro forma earnings per share of 20% and 22%, respectively, which indicates that we are on target to meet the respective outlook we provided for 2006."