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UPDATE 3-SAP bucks software trend with caution at Q3

* Q3 operating profit 716 million euros, vs forecast 803 mln

* Q3 software and software related service revenue up 20 pct

* Shares down over 3 pct; top German blue chip loser

(Adds Co-CEO comment on targets, HP, share price)

By Nicola Leske

FRANKFURT, Oct 27 (Reuters) - German business software maker SAP AG SAPG.DE stuck to its full-year targets in third-quarter results, dashing investor hopes that had been raised by solid results from North American peers.

SAP shares fell 3.4 percent by 0731 GMT to 37.01 euros, making them the biggest losers in Germany’s slightly weaker blue-chip index.

“Some investors might have hoped that SAP could raise its SSRS (software-related service revenue) guidance which has not happened,” DZ Bank’s Oliver Finger said. “This indicates that SAP remains cautious for Q4 as the consensus is already near the upper end of the guidance.”

But Co-CEO Jim Hageman Snabe told Reuters Insider TV the company did not see any reason to lift its targets, arguing they were ambitious enough.

“We have set very ambitious goals... Q4 is the big quarter in front of us and we don’t see a reason to change the guidance, we are very optimistic,” Snabe said.


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SAP said third-quarter operating profit rose 16 percent to 716 million euros ($999 million). Software and software-related service revenue rose 20 percent to 2.32 billion.

Operating profit was forecast at 803 million euros on SSRS sales of 2.30 billion euros in a Reuters poll. [ID:nLDE69E1MA]

SAP stuck to its 2010 growth forecast for non-IFRS key software and software-related service revenue in a 9-11 percent range. That includes contributions of 6-8 percentage points from U.S. database company Sybase, which SAP acquired in May.

It also reiterated its full-year target for a non-IFRS operating margin of 30-31 percent.

Technology bellwether Oracle ORCL.O, which is SAP's fiercest rival, Blackberry maker Research In Motion RIM.TO, and IBM IBM.N have reported solid results, easing investor concerns about tech spending. [ID:nN16154992] [ID:nN16189389] [ID:nN18152165]

“Top-line numbers are better than expected and this is obviously important,” Heino Ruland of Ruland Research said.

“In reality though, they may not reflect overall growth but perhaps positive currency impacts, for example, in the U.S. Generally the results are surely not bad, but in terms of profitability there is certainly room for improvement.”

SAP said it had increased provisions for its defunct U.S. unit, TomorrowNow, to $160 million from $100 million.

The unit is at the centre of an upcoming trial in an intellectual property theft case brought by Oracle which accuses SAP -- through TomorrowNow -- of stealing software data and confidential information.

SAP has accepted liability for copyright infringement. The lawsuit set to begin Nov. 1 will determine how much SAP should pay in damages.

SAP's former CEO Leo Apotheker, who was named the new head of Hewlett-Packard HPQ.N last month, may testify at the trial.

Apotheker’s appointment has given rise to speculation that HP may take over SAP.

Asked if he could squash those rumours, Snabe said: “I don’t believe this (the takeover) will happen.”

SAP is valued at 16.3 times 12-month forward earnings, according to Thomson Reuters StarMine, which weights analysts’ forecasts according to their track record. Oracle and IBM trade at 13.9 times and 11.3 times respectively. (Additional reporting by Josie Cox and Andrea Lentz in Frankfurt; Editing by Andrew Callus) ($1 = 0.7166 euro)