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Business software company SAP AG (SAP) said Wednesday fourth quarter net profit rose 13% on consolidation effects and cost savings, boosting its shares, but said it will cut 3,000 jobs as it continues to control costs.

Net profit for the quarter ending Dec. 31 was EUR850 million compared with EUR752 million in the same period a year earlier.

Software and software-related service revenue, a closely watched figure, was up 8% on year at EUR2.67 billion, while total revenue for the period also rose 8% to EUR3.49 billion.

In common with rival firms that make business software, SAP has experienced falling demand from customers in certain areas due to the economic downturn. SAP said late last yearthat its business had already been hit by the economic downturn, when third-quarter sales missed expectations.

At that time, SAP implemented cost saving measures that paid out in the fourth quarter, boosting the bottom line, a company spokesman said. Net profit also benefitted from the acquisition of France's Business Objects, which SAP acquired last January in a EUR4.8 billion deal.

SAP shares rose as a result, closing up 5.3% at EUR27.60, outperforming a 4.5% rise in the DAX.

"It looks like SAP delivered more cost savings than expected," said UniCredit analyst Knut Woller, who has a buy rating on the share with a target price of EUR33.

SAP said Wednesday it will reduce its global work force to 48,500 from 51,500, the first time it has cut jobs. It said the cuts would lead to annual cost savings of EUR300 million to EUR350 million from 2010. SAP expects restructuring charges of EUR200 million to EUR300 million related to the job losses.

"We believe the cost containment measures will allow us to adapt to the tough market conditions and ensure the long term competitiveness of the company," said SAP Co-CEO Leo Apotheker.

Walldorf, Germany-based SAP competes with Microsoft Corp. (MSFT), Accenture Ltd. (ACN) and Oracle Corp. (ORCL), which has moved into more direct competition with SAP following a string of acquisitions in business software.

"Compared with its peers and given the economic downturn, SAP could have been worse," said Gartner analyst Tim Payne.

Oracle's second-quarter revenue missed Wall Street expectations on the strong dollar and weaker IT expenditure from its customers, particularly big-ticket software applications. Earlier this month, the Wall Street Journal reported that Oracle plans to cut 500 jobs.

SAP, meanwhile, said it expects to post a non-GAAP operating of 24.5%-25.5% for full-year 2009, including restructuring costs but excluding charges related to the Business Objects acquisition, and at constant currencies. SAP also said that outlook is based on the assumption that non-GAAP software and software-related services revenue will be flat or decline by 1% at constant currencies from 2008's EUR8.62 billion. SAP's 2008 non-GAAP operating margin at constant currencies was 28.4%.

Co-CEO Apotheker said SAP retained its target to reach a 35% margin mid-term, but didn't specify a timeframe.

Chief Financial Officer Werner Brandt said SAP doesn't intend to resume its share buy back program in 2009, having bought back 14.6 million shares for a total amount of EUR486.8 million in the first nine months of 2008.

Company Web site: www.sap.com

-By Archibald Preuschat, Dow Jones Newswires, +49 69 297 25 505, archibald.preuschat@dowjones.com

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