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Software AG Slumps as Large Project Delays Erode Earnings

Software AG, Germany’s second-biggest software maker, plunged in Frankfurt trading after project delays eroded second-quarter earnings, forcing the company to lower its full-year forecast. The shares fell as much as 19 percent.

Operating profit dropped 23 percent to 45 million euros ($61 million) as revenue at the Business Process Excellence division dropped to 85 million euros from 91.4 million euros, the Darmstadt-based company said in a preliminary earnings report last night. Sales at the consulting unit also declined as it stopped third-party services related to SAP SE products.

“The BPE business line was marked by a surprising reluctance by customers to commit to major infrastructure projects,” it said in the statement. “The group now expects full-year 2014 BPE revenue to remain approximately at the previous year’s level.

Software AG is concentrating on the development, distribution and service of its own products in an attempt to reverse two years of sagging earnings. The company needs more time to evaluate its 2018 goals as 2014 is a ‘‘learning curve’’ on customer behavior, Chief Executive Officer Karl-Heinz Streibich said on a conference call.

‘‘We cannot yet confirm the 2018 target,’’ Streibich said. ‘‘Our strategy is still valid and shows no indication of changing. However, our focus this time has been mainly on the second quarter, and less on long-term development.’’

Shares Slide

The shares fell as much as 19 percent to 19.99 euros, the biggest intraday decline since January 2012, and traded at 20.50 euros as of 11:42 a.m in Frankfurt. Software AG has fallen almost 20 percent this year compared with a 1.4 percent gain in the HDAX Index of 110 most highly capitalized stocks in Germany.

Investors including Ako Capital LLP, Marshall Wace LLP and Contour Asset Management LLC are short Software AG shares, meaning they are betting on a drop in price, according to data compiled by Bloomberg.

Ako Capital had a short position of 1.4 percent of the shares outstanding, according to a July 11 filing.

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