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SAP gains on Net sales
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January 24, 2000: 7:54 a.m. ET
German business software leader posts solid earnings; stock-option plan drags
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LONDON (CNNfn) - SAP, Europe's largest business software publisher, rebounded from a third-quarter profits warning to post an 18 percent increase in 1999 earnings Monday, led by a strong performance from its Internet arm.
However, the company warned that its first-quarter earnings would be hit by the spiraling cost of an employee stock program.
SAP said pretax profits last year rose to 1.12 billion euros ($1.13 billion) as sales grew 18 percent to 5.11 billion euros. The company said it would take a 150 million euro charge to pay for the distribution of stock to senior staff, designed to discourage key people from quitting.
By midday, SAP shares were 1.4 percent ahead at 750 euros, having fallen as low as 680 earlier in the session.
The cost of the employee stock plan was inflated by the recent rise in SAP's share price after it revealed a strong fourth-quarter performance by its portal, MySap.com. This allows clients to access and download software over the Web. SAP said half of its sales this year would come through the portal, which was launched last October.
"The outlook is fairly positive -- though the first quarter might be a disappointment to some investors expecting higher profitability," Sal. Oppenheim analyst Alla Gorelova told Reuters.
The switch in business to MySAP.com is expected to hit profit margins in the first part of the year as SAP pumps extra investment in the portal. "In the first part of 2000, SAP expects that service revenue growth will probably be slower than seen in the past," the company said in a statement.
Net income for the final quarter of 1999 more than doubled to 317 million euros. Sales jumped 30 percent to 1.65 billion euros, while license revenues from mySAP.com were 129 million euros -- 16 percent of total group sales of 1.65 billion euros.
The company confirmed its forecast that revenue for 2000 will be twice the level achieved in 1998. 
-- from staff and wire reports
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SAP
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