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SAP Shares Fall 10% on Weak Fourth Quarter Guidance

Software giant SAP missed market expectations and its own forecast for fourth-quarter license sales, as growth slowed in the United States, knocking its shares down more than 10%.

Fourth-quarter license sales -- which are key to future service and maintenance revenue -- were about 1.26 billion euros ($1.63 billion), less than the 1.348 billion euros average forecast in a Reuters poll of 23 analysts.

For all of 2006, license sales grew 11%, or 13.5% in constant currency, far short of the goal the company set of 15% to 17% in constant-currency growth.

SAP, which is the world's biggest maker of business software, but faces increasingly fierce competition from arch-rival Oracle, gave no reason in its preliminary results statement for the weaker performance.

But it said its license sales in the United States -- its traditional sales driver -- grew just 4%, or 15% at constant currencies. That compares with growth of 15%, or 20% at constant currencies, in the third quarter.

SAP makes much of its revenues in U.S. dollars, but has a large cost base in the euro zone, meaning the strong euro hurt its results.

But the company said its share of the core enterprise applications market rose 3 percentage points year-on-year to about 24.2% at the end of 2006.

SAP trades at about 23 times forecast 2007 earnings, according to Reuters Data, significantly more than Oracle's 16 times expected 2006-2007 earnings.

Oracle, a database specialist, has spent billions of dollars buying companies in the faster-growing software applications sector in recent years to better challenge SAP on its own ground, but that strategy is as yet unproven.

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