July 26, 2011 – By Harro ten Wolde and Georgina Prodhan
FRANKFURT/LONDON (Reuters) - Germany's SAP AG <SAPG.DE> expects to reach the high end of its 2011 forecasts after a strong second quarter, confounding fears of a slowdown in economically fragile Europe and lifting its shares.
Echoing comments from peer IBM <IBM.N>, the world's biggest maker of business software said on Tuesday its visibility for the rest of the year had improved, raising hopes for a good year for the corporate technology sector.
SAP shares surged 6.9 percent in New York <SAP.N> by 1740 GMT (5:40 p.m. EDT) and closed up 6.1 percent on the Frankfurt stock exchange <SAPG.F>.
Co-Chief Executive Jim Hagemann Snabe told journalists on a conference call SAP had won market share from all competitors in its core businesses thanks to new products that enable mobility, cloud computing and faster data retrieval.
Software sales grew strongly in all regions.
Addressing concerns about a debt crisis in Europe, Snabe said: "I see strong commitment from the main leaders in Europe to see that the euro is stable." Snabe said he could not predict what effect a possible U.S. debt default would have on SAP.
Investors had feared that technology sales would slow in the second half, hurt by the economic uncertainty in Europe and Japan, as well as a drop in government spending.
SAP's sales of software and related services, which are key to future lucrative maintenance revenue streams, grew 20 percent at constant currencies in the year to end-June, helped by growth in all regions, although Europe grew the least.
SAP said it now expected to reach the high end of its 10 to 14 percent growth 2011 forecast for software and related services, which were 9.87 billion euros ($14.3 billion) last year.
It also said it expected its 2011 operating profit to come in at the high end of the previously given range of between 4.45 billion euros and 4.65 billion, after operating profit grew 26 percent in the second quarter, raising its margin by 1.5 percentage points.
SAP bases its key outlook figures on non-international financial reporting standards, which exclude acquisition-related and other charges, saying it allows investors a better comparison of year-on-year operating performance.
Last week, IBM said signings of new business at its services division surged 16 percent in the second quarter, and SAP's arch-rival Oracle <ORCL.O> reported last month that software sales rose 19 percent in its fiscal fourth quarter.
(Editing by David Holmes)