SAP reported a 10% rise in revenue for the fourth quarter, but earnings fell 6% compared to a year earlier, dragged down in part by the cost of launching Business ByDesign, a new offering for the mid-market, the company said Wednesday.

Revenue for the fourth quarter totalled €3.24 billion ($4.77 billion as of Dec. 31, the last day of the period reported), up 10% from €2.95 billion a year earlier, but net income fell 6% to €756 million.

Software and related services revenue grew at 13% year on year, while consulting activities, representing around a fifth of SAP's revenue, remained stagnant.

For the full year, revenue rose to €10.25 billion, up 9% from €9.39 billion, while net income rose to €1.92 billion, up 3% from €1.87 billion.

The results do not include any revenue gains from SAP's $6.8 billion acquisition of French business intelligence software vendor Business Objects, which the companies only completed on Jan. 16, 2008, although they do include €61 million in acquisition-related costs.

SAP's operating margin for the year fell from 27.4% in 2006 to 26.7% in 2007, but if the effects of exchange rate fluctuations and the company's investment in Business ByDesign were excluded, the operating margin would have risen to 28.2%, CFO Werner Brandt said in a conference call.

Developing Business ByDesign cost the company €125 million in 2007, €40 million of it in the fourth quarter, and the company expects to spend at least a further €175 million in 2008. An additional €50 million of expenditure will fall in late 2008 or early 2009.

Sales and related services for subscription-based products such as the new ByDesign contributed just €53 million in the fourth quarter, up 47% year on year.

Looking ahead, CEO Henning Kagermann expects mid-market products like ByDesign to boost growth in 2008, he said during the conference call.

Another growth driver will be SAP's acquisition of Business Objects, which will help the company increase its penetration of the business user sector, Kagermann said.

SAP expects full-year revenue from software and software-related services to grow at between 24% and 27%. Excluding the contribution of Business Objects, SAP's existing activities will contribute between 12 and 14 percentage points, the company said.

The IDG News Service is a Network World affiliate.