FRANKFURT, Germany – Shares in German software giant SAP fell as much as 9.5 percent on Friday after SAP missed expectations for the fourth quarter, wiping as much as 5.1 billion euros ($6.6 billion) off the company’s value.
Slowing growth in the United States, the world’s biggest software market, compounded by an unfavorable development of the euro-dollar rate, meant SAP missed not only market expectations but also its own forecast for licence-sales growth.
By 1009 GMT, SAP shares were down 8.2 percent at 38.81 euros with more than 20 million shares having traded just two hours into the Frankfurt trading day — almost three times the 30-day and 90-day averages.
The stock was by far the biggest decliner in a flat German blue-chip DAX index, and the heavyweight dragged the DJ Sox European technology index down 1.4 percent.
In the second shock SAP has delivered to the markets in the space of six months, SAP said late on Thursday its 2006 licence sales rose 13.5 percent in constant-currency terms, against its target of 15 to 17-percent growth.
In the fourth quarter, licence sales — which are key to future service and maintenance revenues — were about 1.26 billion euros ($1.63 billion), missing the lowest forecast in a Reuters poll of 23 analysts, which averaged 1.348 billion euros.
“It’s a pretty bad miss,” said J.P. Morgan analyst John Erich. “While Europe is improving, the U.S. has certainly slowed, and the U.S. has been the engine of growth for SAP.”
In the United States — the world’s biggest software market where SAP makes about 30 percent of its licence sales — licence sales grew by just 4 percent, compared with 15 percent in the third quarter.
Goldman Sachs removed the stock from its “conviction buy” list, downgraded it to “neutral” and cut its price target to 39 euros from 49 euros, saying SAP’s premium was not sustainable.
SAP trades at 24.3 times expected 2007 earnings, according to Reuters Data, a 50-percent premium to U.S.-based arch-rival Oracle.
“SAP’s strong growth had supported a premium valuation which is likely to erode near-term as investors trim growth rate expectations. We would expect SAP to take a more cautious approach to guidance when full results are reported,” Goldman said in a note.
SAP is due to report full results for 2006 on January 24.