SAP revenue hit by strong dollar

Shares of German software maker SAP fell 5 per cent on Tuesday after the company reported that its fourth quarter software revenue declined by 3 per cent compared with the same period last year.

The company, the largest seller of software for automating bookkeeping, manufacturing and other business operations, blamed the revenue shortfall on the rising strength of the euro against the dollar and said it expects to exceed its profit targets.

JMP securities analyst Pat Walravens in a research note called the results "mildly disappointing" and reduced the firm's 2004 earnings estimate for SAP.

SAP's software revenue for the quarter, ended 31 December, was €930m ($1.2bn). Software revenue, which excludes revenue from consulting and maintenance services, is generally viewed as a key measure of a software company's core business. Had currency rates remained the same, software revenue would have climbed by 4 per cent, SAP said.

In November, after the company reported a sharp rise in third quarter US sales, SAP CEO Henning Kagermann set a bullish goal of double-digit revenue growth over the next year. To meet that goal, SAP would need a dramatic reversal of fortune from 2003, a year in which total revenue declined by 5 per cent.

On the bright side, SAP's pro forma operating margin in 2003 climbed 4 per cent over 2002 to reach 27 per cent, the company said.

SAP plans to release more financial details on 22 January.

Alorie Gilbert writes for CNET News.com.