SAP Growth, Upbeat 2008 Outlook Lifts Shares

SAP posted solid second-quarter results despite global economic turmoil and gave an upbeat 2008 outlook, sending shares in the world's biggest business software maker more than 6 percent higher on Tuesday.

Vladislav Bezrukov

"We are watching the market very carefully and from all I can see, we can be optimistic," Chief Executive Henning Kagermann, who will hand over to co-CEO Leo Apotheker next year, told CNBC Europe TV.

Kagermann also brushed off new claims by U.S. rival Oracle that SAP management had been aware of corporate theft at its TomorrowNow unit.

Oracle accuses SAP of illegally using customer log-ins to steal copyrighted material from its password-protected website and is seeking damages from SAP that could top $1 billion.

SAP stock hit a seven-month high, gaining 9.7 percent to 37.26 euros, the leading gainer on Germany's blue-chip index DAX, which gained 0.8 percent.

Business software makers are less likely to suffer from a weakening economy because their products are designed to help companies become more efficient and save costs, Kagermann said.

Analysts were pleased with the results and said the outlook should strengthen investor confidence.

Brokerage Cheuvreux called the results "stellar" and said in a note the shares were inexpensively valued at 15 times pro-forma earnings and 9 times 2009 EBITDA.

Merck Finck analyst Theo Kitz applauded business development in the United States: "Confidence seems to be based especially on the U.S. business, where year-on-year growth (currency-adjusted, non-US GAAP) almost doubled from 20 percent in Q1 to 39 percent in Q2, an impressive performance in a weakening economy."

Software, Germany's second-biggest software company after SAP, last week stuck to its full-year forecast despite tough market conditions, while Oracle and smaller rival Lawson Software have given cautious outlooks, citing economic uncertainties.

Aiming for Top of the Range

SAP's second-quarter software and software-related service revenues, an important indicator of future maintenance revenue streams, beat market expectations with a 21 percent increase to 2.06 billion euros ($3.24 billion).

Earnings before interest and tax (EBIT) rose 2 percent to 593 million euros.

Kagermann told Bloomberg TV in regard to new orders: "Our pipeline is good."

He told CNBC Europe he was confident that SAP could surpass its 100,000 customer target for 2010.

Following its strong quarter, SAP said it now expects to reach the upper end of its full-year 2008 software and software-related service revenue growth range of 24-27 percent at constant currencies.

The outlook excludes a revenue writedown from last year's acquisition of Business Objects -- its biggest ever -- of around 180 million euros.

SAP -- whose software helps customers automate, integrate and manage their businesses -- said its SAP business, excluding the contribution from Business Objects, will contribute 12-14 percentage points to this growth.

SAP also said it aims to meet the upper end of its operating margin forecast of an increase to 28.5-29.0 percent this year.

By comparison, database market leader Oracle made an operating margin of 36 percent last quarter.

Microsoft , which is expanding software offerings for companies as well as consumers, made a margin of 31 percent.