Oct. 19 (Bloomberg) -- SAP AG, the world's largest maker of business-management software, said third-quarter profit rose 16 percent on increased license sales in the U.S.

Net income climbed to 388 million euros ($486 million), or 1.27 euros a share, from 334 million euros, or 1.08 euros a share, a year earlier, Walldorf, Germany-based SAP said in a statement today. License revenue, a gauge of future fees from consulting and maintenance, rose 17 percent to 691 million euros.

Chief Executive Officer Henning Kagermann introduced software that manages payroll and billing more easily to attract clients and to fend off $20 billion in acquisitions by biggest rival Oracle Corp. SAP said today it's ``less likely'' to reach the upper end of its previous forecast ranges for 2006 software revenue growth and operating margin excluding some costs.

The ``downward tweak of expectations makes you think things may be a little tougher,'' said John Segrich, a London-based analyst at JPMorgan Chase & Co., who rates SAP shares ``underweight.''

The German company had been expected to report third-quarter net income of 381 million euros on 670 million euros in license sales, the median estimates of 17 analysts surveyed by Bloomberg News.

Sales, Margin Forecasts

SAP today kept a forecast for 2006 software license sales to rise by a range of 15 percent to 17 percent from last year. Operating margin, excluding stock-based compensation and acquisition-related costs, will still increase by 0.5 percentage point to 1 percentage point from 2005.

Still, SAP said it ``appears less likely'' that the increases in software revenue and operating margin will reach ``the upper end'' of the forecast ranges.

SAP said its 2006 pro forma earnings per share, which excludes charges for stock-based compensation and acquisition- related costs, will be ``slightly above'' its previous forecast range of 5.80 euros to 6 euros. Third-quarter earnings per share on that level rose to 1.32 euros from 1.09 euros a year earlier.

The announcement came before the start of trading in Germany. Shares of SAP have lost 8.6 percent in the past six months, compared with a 31 percent gain by Oracle. The stock fell almost 10 percent on July 13 after SAP's second-quarter software license sales missed analyst estimates.

SAP Vs. Oracle

Rivalry between SAP and Redwood City, California-based Oracle has escalated into verbal blows last month after Oracle reported profit for its fiscal first quarter that exceeded analyst estimates.

Oracle CEO Larry Ellison said on Sept. 20 that SAP is losing market share and ``rethinking'' its growth strategy. SAP, in return, said Oracle published ``misleading'' views on the market leader.

Oracle and SAP use discounts and special offers to lure clients. SAP is countering Oracle's ``Off-SAP'' sales drive with its ``Safe Passage '' program, which gives Oracle clients lower maintenance fees and credit toward new software if they switch. The offer targets companies concerned that Oracle may stop supporting software from companies it bought.

Oracle became the world's No. 2 maker of business-management software after buying PeopleSoft Inc. in January 2005 and Siebel Systems Inc. a year later.

`Needs Changes'

Software made by SAP is used by customers including Porsche AG and Home Depot Inc. and helps them run tasks such as billing, inventory management and payroll. SAP, founded in 1972 by five former International Business Machines Corp. employees, has more than 30,000 customers globally.

Third-quarter software sales in Americas rose 23 percent to 292 million euros at constant currency rates, compared with analysts' median estimate of 290 million euros. SAP already gets more software revenue in the U.S. than any other country by helping clients such as Gap Inc. and JPMorgan Chase & Co. run billing and payroll tasks.

SAP said today it kept its exchange-rate assumption of $1.23 for one euro unchanged. The euro has gained 6 percent against the dollar since January, when SAP made its sales forecasts.

A stronger euro reduces the value of revenue generated in the U.S. and analysts had expected SAP to cut its software sales forecast to reflect the stronger euro.

Regional Sales

In Europe, Middle East and Africa, software license sales grew 15 percent to 301 million euros, accelerating from a 3 percent increase in the second quarter.

Kagermann said last month SAP needs structural changes in Europe to help the region return to growth rates of more than 10 percent. SAP attributed the second-quarter slowdown in Europe to erratic order behavior from clients, which prevented it from closing some deals on time.

SAP executives will hold a conference call for journalists at 2 p.m. in Frankfurt today, followed by a call for analysts at 3 p.m.

To contact the reporter on this story: Kenneth Wong in Berlin at kwong11@bloomberg.net

Last Updated: October 19, 2006 02:08 EDT