SAP said in a statement released at a news conference in New York, but made available here, that while it turned in a profit at the bottom-line in the period from April to June, revenues fell as a result of the strong euro.

SAP booked net profit of 219 million euro (245 million dollars) in the second quarter, compared with a loss of 232 million euros a year earlier.

The figure was at the top end of analysts' forecasts.

However, the year-on-year comparison was made difficult by the fact that a year earlier, bottom-line earnings had been hit by 297 million euros in writedowns connected with the US company Commerce One, SAP noted.

Underlying earnings, as measured by operating profit, increased by 20 percent to 388 million euros and the operating margin, which measures operating profit as a proportion of sales, climbed by six percentage points to 24 percent.

The operating profit figure was even better than analysts had been expecting.

Nevertheless, sales proved disappointing, falling by eight percent to 1.6 billion euros in the April-June period.

The news sent SAP shares into a tailspin in Frankfurt, where they were showing a loss of 5.53 percent at 102.75 euros, pulling the overall market down by 1.45 percent.

SAP attributed the decline to the rise in the value of the euro. At constant exchange rates, sales would have risen by two percent year-on-year, it said.

It was the licensing revenues, a key gauge of the health of a company in this sector, that disappointed the most, falling by 13 percent to 431 million euros as customers continued to hold back on IT investment.

Even using unchanged exchange rates, sales in this area were down by five percent.

A regional breakdown of sales also spotlighted SAP's weak points.

In the Americas region, which comprises the all-important US market, sales slumped by 15 percent to 506 million euros, solely as a result of the dollar weakness.

"If operating earnings were better than expected, sales in America and licensing revenues came out below expectations," said Merck Finck analyst, Theo Kitz.

And it was that which investors were focussing on, said JP Morgan analyst, David Reynolds.

SAP nevertheless remained optimistic for the whole of 2003, predicting that its operating margin would increase by between 1.0 and 1.5 percent.

"The market environment remains difficult, but we've performed better than most of our rivals. And more importantly, we've attained our goal of lifting operating margin and increasing our market share," said chairman Henning Kagermann.

SAP said it has a 55-percent share of the global market for business sofware, up from 45 percent a year earlier.

Analysts were nevertheless sceptical about the forecasts.

"The guidance comments are interesting, as SAP has upped its full year operating margin target but has not shifted its earnings guidance, which suggests that it sees second half revenues softening," said JP Morgan's Reynolds.

SPACE.WIRE