soared nearly 10% Wednesday after it
reported a strong fourth quarter and predicted a bullish 2006.
The news followed a string of disappointing financial results from major technology players including
, and apparently gave a modest boost to shares of software rival
SAP earned $759 million, or $2.46 a share, in the latest quarter, up 14% from $667 million, or $2.14 a share, a year ago. Sales were $3.38 billion in the most recent quarter compared with $2.95 billion a year ago. Software revenue rose 18% from a year ago to $1.45 billion in the latest quarter.
Significantly, the company said it expects software license revenue to grow between 15% and 17% during 2006, well above the forecasts of most analysts. It also forecast that margins will grow by 50 to 100 basis points, compared with consensus expectations of a 50-point expansion, according to Bear Stearns analyst Toby McCullagh.
Pro forma earnings will be $7.13 to $7.38 a share, but SAP did not give total revenue guidance.
With SAP locked in a down-and-dirty struggle with Oracle for dominance of the software applications world, the bullish forecast was welcomed by investors. "We had been concerned that SAP would provide disappointing guidance due to its need to invest heavily in 2006 to compete with Oracle... In fact, SAP guided to stronger-than-expected revenue growth, offsetting the impact of its higher investment," wrote JMP analyst Patrick Walravens.
Like Microsoft, which flirted with the idea of buying the company two years ago, SAP will be launching a basket of new products in 2006, including a new version of its hosted software suite, aimed at competing with hosted offerings by Oracle and
Walravens, whose company does not have an investment banking relationship with SAP, noted that SAP's product schedule means it plans to deliver its next-generation business resources planning suite about a year ahead of the Fusion Suite from Oracle.
Fusion is Oracle's attempt to
unify applications and software infrastructure inherited from its numerous acquistions.
In recent trading, shares of SAP were up $4.45, or $9.8%, to $49.90, while Oracle was gaining 29 cents, or 2.4%, to $12.49.