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Updated from 11:56 a.m. EST

German software giant



overcame the weak dollar and was able to boost fourth-quarter software revenue by 11% to $1.37 billion, the company said as it preannounced quarterly and annual results on Tuesday. But weak sales in Europe kept license revenue a bit below expectations, and investors responded with a mild selloff.

In recent trading, shares were off $1.67, or 3.9%, to $41.67 on very heavy volume.

SAP said fourth-quarter software revenue will be about 1 billion euros, compared with estimates of 1.02 billion euros. Full-year license revenue will grow by 10%, or 13% on a constant currency basis, to 2.36 billion euros. (SAP typically does the lion's share of its business in the last quarter of the year.)

Although growth was a bit less than some bulls hoped, the still-solid uptick in license revenue does not bode well for its competition, said Bernstein analyst Charlie Di Bona. "Over the long term, we believe that SAP is the strongest of the enterprise applications vendors in our coverage," he wrote in a note to clients.

But at current valuations, he added, Di Bona does not think the company will outperform, and he suggested that investors wait for a more attractive entry point. (His company does not have an investment banking relationship with SAP.)

SAP said it expects to meet its previously published pro forma operating margin target of 27.8% -- an increase of 100 basis points -- and slightly exceed the high end of the previously published target range for pro forma earnings per share of 4.20 to 4.30 euros ($5.50 to $5.63) for 2004.

In the U.S., software revenue for the fourth quarter is expected to increase by 30% to $318 million.

Until recently, SAP's performance in the U.S. was disappointing, but a major shakeup in management more than a year ago has galvanized its performance. The company is the world's largest provider of business software applications, followed by



now that it has acquired PeopleSoft, which is no longer traded.

Total revenue for the fourth quarter is expected to be 2.4 billion euros, a year-over-year increase of 8%. Discounting the increased strength of the euro vs. the dollar, revenue was up 12%.