Oct. 28 (Bloomberg) -- SAP AG, the world's biggest maker of business-management software, withdrew its 2008 sales forecast and lowered its profit-margin target, citing the economic slump.

The adjusted operating margin will be about 28 percent, Walldorf, Germany-based SAP said yesterday. SAP previously forecast the operating margin would be 28.5 percent to 29 percent. SAP slumped as much as 16 percent in Frankfurt trading.

SAP is cutting research and development spending and plans to freeze hiring and restrict travel expenses to help weather the global credit crisis. On Oct. 6, the company reported lower-than- anticipated software and related service revenue for the third quarter, citing a ``very sudden and unexpected drop in business activity'' as customers put orders on hold.

``I am surprised that SAP blames everything on the financial crisis, I don't especially like that,'' said Stefan Mueller, a managing partner at Proprietary Partners AG in Frankfurt. ``The figures are all right considering the market environment but right now the markets are mainly concentrating on negative points.''

SAP fell as much 3.83 euros to 20.75 euros and traded at 24.52 euros as of 2:09 p.m. Before today, SAP shares had lost 31 percent this year, compared with a 42 percent drop in the Bloomberg Europe Technology Index.

Struggling Economy

The company previously predicted sales of software and related services would grow 12 percent to 14 percent this year, excluding currency swings and the purchase of Business Objects SA. Almost half of large companies worldwide cut technology budgets for the next year, Forrester Research Inc. said in a report last month.

SAP is considering divesting some parts of its hosting business, which allows customers to save data on SAP computer systems, as it's not part of the company's ``core'' operations, Kagermann told reporters on a conference call today.

The German economy is struggling to recover from a second- quarter contraction after the global financial crisis froze credit markets, sapped consumer spending and damped demand for European exports. SAP has more than 46,100 customers, including Porsche SE and Hewlett-Packard Co., in more than 120 countries.

In the third quarter, SAP's software license sales growth slowed to 7 percent from 11 percent a year earlier, SAP said. Growth had been seen at 4.2 percent, the median of 23 analyst estimates compiled by Vara Research GmbH on behalf of SAP.

Net income fell 5 percent to 388 million euros from 408 million euros a year earlier, missing the 417.4 million-euro average of 11 analyst estimates compiled by Bloomberg. The company made the announcement after the U.S. stock market closed. The report had been scheduled for this morning Frankfurt time.

Software Sales Growth

Software and related service sales were 1.99 billion euros in the quarter, up 15 percent from a year earlier, SAP said. The company's stock fell 16 percent on Oct. 6, when SAP said software and related service sales for the quarter missed estimates.

SAP said the lowered margin forecast depends on whether the company will be able to deliver 20 percent to 22 percent growth of software and related services sales, excluding currency effects. Previously, the company had projected growth on that basis at the upper end of a range of 24 percent to 27 percent. It also depends on whether the company manages to cut costs by 10 percent, company spokesman Guenter Gaugler said.

Profit Warning

The cost-reduction plans won't lead to job cuts, Chief Financial Officer Werner Brandt said on the conference call.

``As we had the profit warning already earlier this month, the outlook is not too bad a surprise,'' said Oana Floares, an analyst at SEB AG in Frankfurt who rates the stock ``buy.'' ``Against the background of what we see in terms of profit warnings with other companies, the outlook of 20-22 percent growth of software sales is still rather strong.''

SAP Chief Executive Officer Henning Kagermann said in a Bloomberg Television interview that he doesn't anticipate 2009 to be better than this year. He said customers are ``rethinking'' their spending plans.

Oracle Corp., the world's second-largest software maker, said Sept. 18 fiscal first-quarter profit advanced 28 percent as clients bought more products and renewed support contracts. Sales of new software licenses, an indicator of future growth, gained 14 percent in the period.

DSAG, an industry association representing more than 2,000 SAP users, said last month that customers will look at other offerings after SAP increased maintenance fees.

Maintenance Program

SAP plans to move all customers to its Enterprise Support maintenance program as of Jan. 1. By 2012, support costs will be raised incrementally to 22 percent of the license fee, with SAP aiming to start increasing prices in January. The existing SAP Standard Support, costing 17 percent of the license fee, will be phased out.

Kagermann, who was paid 5.9 million euros last year, plans to retire in May, and SAP promoted sales chief Apotheker to co-CEO in April. Kagermann ran SAP with company co-founder Hasso Plattner before Plattner moved to the supervisory board in 2003.

SAP was founded in 1972 by five former employees of International Business Machines Corp. Three of the founders, Hasso Plattner, Dietmar Hopp and Klaus Tschira, remain the biggest shareholders with a combined 30 percent stake.

To contact the reporter on this story: Andreas Hippin in Frankfurt at ahippin@bloomberg.net.

Last Updated: October 28, 2008 09:12 EDT