SAP, Europe's biggest software company, has given a fillip to the beleaguered technology sector by announcing that sales are going better than expected.

SAP said licence sales will exceed 1bn euros ($890m, �620m) for the October to December quarter, which is well above analyst forecasts.

Shares in the software giant jumped 6% in early trade as investors welcomed the news.

In October SAP's shares had slumped after its profits fell during the third quarter, and it revised its sales growth forecast down from 20% to 15%.

SAP now says revenues are expected to have grown by 16% for the full year, while margins have been maintained at 20%.

"It's a very good performance to get 16% growth in such a difficult environment and the margins are pretty good as well," said Friederike Herkommer an analyst at HypoVereinsbank.

The news was also applauded by ING Barings, which raised its recommendation on SAP to "Buy" from "Hold".

Not out of the woods yet

Despite the positive news SAP's statement also warned that it expected the market to remain "challenging" in the short term.

"Based on current economic conditions the company anticipates that customers will continue to invest cautiously in e-business software solutions warned."

Over the past couple of years SAP has changed its focus to become Europe's leading internet-based business-to-business software company through its mySAP.com website.

It has changed from supplying software to companies to run corporate payrolls and accounts, to an internet-based strategy with software controlling purchasing and stock controls.