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Software AG pins hopes on 2015 after mixed fourth quarter

FRANKFURT (Reuters) - Germany's Software AG promised on Wednesday that a transition of its business finalised last year will result in higher profitability, leading its shares to reverse losses after weak quarterly results.

Germany's second-largest business software maker after SAP said fourth-quarter earnings before interest and taxes (EBIT), excluding special items, rose 1 percent to 71.4 million euros (53 million pounds).

That was slightly below the average expectation of 72.7 million in a Reuters poll, with individual estimates ranging between 70.4 million euros and 74.9 million euros.

Software AG also said it expected a 2015 EBITA (EBIT also before amortisation) margin of between 27.5 and 28.5 percent, after 27.9 percent in 2014.

"We are starting 2015 in an excellent position to further increase Software AG's value," Chief Executive Karl-Heinz Streibich said, adding that margins would mainly be driven by a lower cost base.

Shares of the Darmstadt-based company reversed losses and rose as much as 4 percent to a 7-month high of 23.46 euros, after dropping as much as 4.7 percent. Trading volumes were almost double the 90 day average after two hours.

"Although fourth-quarter licence revenues fell again short of our and consensus estimates... Software AG confirmed our scenario of room for further margin improvement," said Knut Woller, an analyst at German Baader Bank, keeping his "buy" recommendation on the shares.

Software AG products include those that help companies such as Nissan Motor Co Ltd and Deutsche Telekom keep inventories at efficient levels, monitoring in real time how fast clients are being served, and those which help with retrieving data from outdated software systems.

The company has shifted its focus to tools that help companies deliver their software over the Internet using so-called cloud computing, and away from software installed on individual computers.

Yet this has been a painful transition that has weighed on the group's income for the past two years.

Revenue at its key business process unit, which includes big data solutions, dropped 10 percent in the quarter.

(Reporting by Harro ten Wolde and Ilona Wissenbach; Editing by Kirsti Knolle/Jeremy Gaunt)