FRANKFURT (Reuters) - German software maker SAP on Monday reported an accelerating shift by business customers to Internet-based cloud software as it eked out a 1 percent rise in operating profit for the fourth quarter, easing fears of further margin declines.
SAP shares extended gains to 5 percent by 1552 GMT following the announcement, leading the European technology index 1.7 percent higher.
Europe’s largest software firm reported operating profit, excluding special items, of 2.13 billion euros ($2.52 billion), which was broadly in line with average expectations of 2.15 billion euros, according to a Reuters poll of analysts.
SAP unnerved investors in October by cutting its profit forecast, blaming the higher initial investment costs required to deliver its software via the cloud, while revenues are realized over time rather than upfront as for packaged software.
The German company needs to boost the proportion of its software sold via the cloud to defend its customer base from purely cloud-based competitors such as Salesforce.com and Workday Inc and better compete with arch-rival Oracle Corp.
SAP said it had reached its full-year target for cloud-based software revenues, which rose 45 percent to 1.1 billion euros, suggesting that it can expand in the cloud market without further damaging its profit margins.
Reporting by Harro ten Wolde and Eric Auchard; Editing by Georgina Prodhan