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Bad news for the enterprise software sector this afternoon, as SAP (SAP) just warned that fourth quarter software revenue growth came in short of previous guidance. This is a bit confusing, so bear with me. SAP reports product revenues, software revenues, and total revenues, and it reports on both an actual and constant-currency basis. But the bottom line is that software sales came up short for both the quarter and the full year.

Product revenues were 2.2 billion euros in the fourth quarter, up 8%, or 12% constant currency. For the year, product revenues were 6.64 billion euros, up 11%, or 13% constant currency.

Software revenues in the quarter were 1.26 billion, up 7%, or 12% constant currency; for the year, software revenues were 3.1 billion euros, up 11%, or 13.5% constant currency.

Total revenues in the quarter were 2.95 billion euros, up 7%, or 12% on a constant currency basis; for the full year, total revenue was 9.43 billion euros, up 11%, or 12% constant currency.

Product revenue growth for the full year of 13% was at the bottom of the previously forecast 13%-15% range. The issue was software revenue, which grew 13.5%, short of the previous guidance of 15%-17%.

The company said it had a 0.6-0.7 percentage point increase in operating margin for the year, toward the low end of the previously estimated range of 0.5 to 1.0.

Adjusted earnings per share of 1.59 euros is actually above the previously forecast 1.45-1.50 euros per share, but includes one-time gains from a lower effective tax rate.

The company asserted in the release that it had increased its share of the core enterprise application market by three percentage points in 2006 to 24.2%.

SAP shares, which were showing gains earlier in the day, are now down $5.29 to $48.84. Oracle (ORCL) shares have also taken a late dive, and are now down 38 cents, to $17.39.

Source: SAP Warns, Sending Shockwaves Through Enterprise Software