2nd UPDATE: SAP Shares Fall After 1Q Earnings Miss Market Views

German business software company SAP AG's (SAP) shares fell Wednesday after the company reported first-quarter sales and earnings short of analysts' forecasts due to restructuring charges and challenging economic conditions, but it confirmed its outlook for 2009.

"While visibility for software revenues remains limited, we continue to take the necessary steps to protect our margin in this tough operating environment," SAP Co-Chief Executive Leo Apotheker said in a statement.

At 0855 GMT, SAP shares traded down 1.8% at EUR29.60, after falling as much as 4.4% in early trade.

Net profit in the quarter fell 16% to EUR204 million from EUR242 million in the prior year, missing a Dow Jones Newswires poll of 18 analysts which forecast net profit of EUR261 million. Revenue fell to EUR2.4 billion from EUR2.46 billion a year ago, below analysts' expectations of EUR2.55 billion.

Software revenue, a closely-watched indicator as it generates future revenue from maintenance and consulting services, plummeted 33% to EUR418 million. SAP cited a "difficult operating environment worldwide due to the global economic downturn," as a principal reason for the decline.

Still, analysts said the company's cost cutting and confirmed outlook were positive, giving it room to catch up later in the year despite disappointing earnings this time.

SAP shares have fallen about 8.5% over the past 12 months, outperforming a 35% fall in the Dow Jones Euro Stoxx Technology index.

SAP's earnings were hit by EUR160 million in restructuring charges related to previously announced job cuts affecting 2,200 staff in the first quarter. For 2009 it forecasts EUR200 million-EUR300 million in charges for total job cuts of 3,000, bringing its headcount to 48,500.

The program, started in October, is expected to save EUR300 million-EUR350 million annually from 2010.

The business software sector has been struggling as customers cut back on software upgrades and new products to cut costs due to the economic slowdown.

SAP, which competes with Oracle Corp. (ORCL) and Microsoft Corp. (MSFT), declined to give a full year outlook for its software and software-related service revenue, but reiterated its 2009 operating margin outlook.

The world's leading provider of business software by market share said it still targets a currency adjusted non-GAAP operating margin of 24.5%-25.5%, including restructuring costs but excluding charges related to its acquisition of France's Business Objects last year.

SAP also said its outlook assumes non-GAAP software and software-related services revenue to be flat or decline by 1% at constant currencies from 2008's EUR8.62 billion. SAP's first-quarter non-GAAP operating margin at constant currencies was 17.2%.

Commenting on Oracle's coming takeover of Sun Microsystems (JAVA) Apotheker said Wednesday in a television interview "we won't hesitate" should a sensible acquisition opportunity arise.

Last week, Oracle agreed to buy Sun Microsystems Inc. for $5.6 billion, but analysts said the move won't likely have any immediate impact on SAP's operations.

With regard to market talk of a possible takeover of SAP by International Business Machines Corp. (IBM), Apotheker said IBM is a solid partner but customers had signaled they want to see it remain independent.

Oracle's bid for Sun was favored over an earlier offer from IBM, people familiar with the matter say.

Company Web site: www.sap.com

-By Hilde Arends, Dow Jones Newswires; [phone]; [e-mail]