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SAP ups 2016 operating profit guidance, expects strong fourth quarter

Europe's biggest software company SAP raised the lower end of its 2016 operating profit forecast range, it said on Friday, anticipating a strong fourth quarter due to healthy orders for its products.

Third-quarter operating profit, excluding special items, rose 1 percent to 1.64 billion euros ($1.79 billion), SAP said on Friday, slightly below the average analysts' expectation of 1.69 billion in a Reuters poll.

SAP said it expected full-year operating profit to be between 6.5 billion and 6.7 billion euros, compared with a previous forecast for 6.4 billion to 6.7 billion.

Employees work on desk top computers inside the headquarters of SAP
Krisztian Bocsi | Bloomberg | Getty Images

Analysts polled by Reuters forecast a 2016 profit of 6.68 billion euros, with individual estimates of 17 analysts ranging from 6.42 billion to 7.01 billion euros.

SAP's finance chief Luka Mucic said in a statement he was confident about delivering a strong fourth quarter based on a robust order pipeline.

SAP shares were indicated to open 0.4 percent lower, according to brokerage Lang & Schwarz, slightly underperforming the German blue chip index which is seen opening unchanged.

SAP, whose customers include many of the world's biggest multinational corporations, specialises in business applications ranging from accounting to human resources to supply-chain management.

It and its established rivals such as Oracle and IBM are racing to fend off pure cloud software rivals like Salesforce.com and Workday in the market for running complex business operations.

Still, SAP's classical software licenses and support business held up well during the third quarter, rising with a slightly better-than-expected 5 percent to 3.69 billion euros.

On Thursday Microsoft said its flagship cloud product doubled in its first quarter, propelling earnings above analysts' estimates and sending its shares to an all-time high.

SAP also raised the lower end of its 2016 guidance for revenue from its cloud business, which it now sees growing to at least 3 billion euros up from 2.95 billion euros earlier.

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