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October 29, 2009

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Shares dip despite improved SAP result

GERMAN business software maker SAP AG said yesterday third-quarter net income rose 12 percent, as a drop in revenue was partly offset by a lower tax rate and better profit margins.

However, a negative outlook sent the company's shares down sharply.

SAP, based in Walldorf, said net income reached 435 million euros (US$644 million), up from 389 million euros in the July-September period of 2008.

The firm said total revenue fell to 2.5 billion euros from 2.8 billion euros in the third quarter of 2008, a 9 percent decrease. Software revenue declined 31 percent, while service revenue fell 3 percent.

While the company had a number of charges, including restructuring costs related to job cuts, it saw an increase in operating income as it reversed provisions it had set up for an acquisition.

The net effect of the nonrecurring items was a contribution to operating profit of 2 million euros.

SAP said it expected a tax rate for the full year of about 27 percent to 28 percent, lower than the previously expected 29.5 percent to 30.5 percent.

It expects service revenue to decline by about 6 percent to 8 percent for the full year, from 8.6 billion euros last year.

Earlier this year, the company had suggested revenue from software and software-related services would improve between 4 percent and 6 percent in 2009.

The downward revision of the outlook sent SAP shares more than 7 percent lower to 31.83 euros in Frankfurt morning trading.

During the first nine months of this year, the company reported a 3 percent decline in software and service revenue to 5.6 billion euros from 5.8 billion euros a year ago.

"We are pleased to report another quarter of increasing margins despite a decline in revenues," Werner Brandt, SAP's chief financial officer, said in the company's report.



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