FRANKFURT Germany's Software AG (SOWG.DE) urged investors to look beyond its quarterly figures to the value of its strategic partnerships after its announcement of a drop in license revenue sent the software company's shares to a three-month low.
The shares fell almost 12 percent on Friday after Software reported a 25 percent slump in operating income and an 8 percent slide in total sales - including a fall at its professed growth business.
The company said major deals with customers including automotive parts giant Bosch [ROBG.UL] had slipped into the fourth quarter.
The second-biggest German software company behind SAP (SAPG.DE) is betting on playing a key role in the so-called fourth industrial revolution as manufacturers seek to capitalize on vast amounts of data captured from ever smarter machines.
It urged investors to focus on the strategic value of partnerships with Bosch, and Italian insurance telematics provider Octo signed at the start of the fourth quarter, and confirmed its full-year sales and profit outlook.
"It's a very strong signal for follow-up business in future," Chief Financial Officer Arnd Zinnhardt told Reuters in a telephone interview.
Software shares partially recovered to trade 7.7 percent lower by 0950 GMT (0550 EDT) but were still the leading decliners in the German technology index .TECDAX, which was up 0.5 percent.
At the company's digital business platform (DBP) unit, where its industrial Internet activities are concentrated, license revenues - the driver of future service and maintenance streams - fell by 9 percent.
"While the 3Q16 license miss is a negative, we are encouraged by the early signing of DBP license deals worth 7.2 million euros in 4Q16 that were originally expected to close in 3Q16," Baader Bank analyst Knut Woller wrote, keeping his "buy" rating on the stock.
Software is trying to carve out a place in the fast-growing market for software that helps businesses capture and analyze streams of data gathered by networked sensors attached to objects, and turn them into operationally useful information.
Germany, Software's biggest market after the United States, is at the forefront of this trend, and Bosch - which also has a strategic partnership with SAP - is a leading player.
Software's chief commercial officer, Eric Duffaut, called the Bosch partnership "game-changing" and said Germany had seen 36 percent digital license sales growth in the third quarter.
Asked about Britain's vote to leave the European Union, executives said they had seen no major impact yet. Britain is Software's second-most important European market after Germany.
"I keep asking the question to British customers," Duffaut said on a conference call with analysts. "I remain cautiously optimistic that there will be no major impact."
($1 = 0.8928 euros)
(Additional reporting by Maria Sheahan; Editing by David Goodman and Mark Potter)