SAP said it would consider buying back shares to return cash to shareholders, sparking a skeptical response from analysts who said they would rather see the world's biggest maker of business software spend money on acquisitions.

Given SAP's strong free cash flow generation over the first nine months of 2011, the company plans to further evaluate buying back shares, the company said in a statement on Wednesday, without providing details.

SAP, which competes with Oracle, said free cash flow was 2.64 billion euros ($3.7 billion) in the first nine months, up 42 percent from last year and accounting for 27 percent of total revenue.

It is not a massive move but it certainly is one of the options to optimize the financials of the company, SAP's co-chief executive Jim Hagemann-Snabe told Reuters Insider TV.

SAP shares were down 0.9 percent at 42.61 euros by 0836 GMT, against a 0.1 percent fall in the main German index, but are up 12 percent this year. SAP is based in Walldorf, Germany.

Analysts said they were not too excited about the prospects of a share buyback.

Given SAP shares have performed relatively well this year, we would regard this (share buyback) as a rather negative use of shareholders' money, WestLB analyst Jonathan Crozier said.

BATTLE

Oracle this week announced the $1.5 billion acquisition of cloud computing developer RightNow Technologies, a rival of SAP.

Analysts suggested SAP would be better off spending its money on acquisitions as well.

The battle with Oracle seems to be hotting up, said analyst Mirko Maier at Landesbank Baden-Wuerttemberg.

Oracle is stepping up its game with the development of Oracle Excalytics and acquisition of RightNow, he pointed out.

But Hagemann-Snabe saw no reason to change the company's M&A strategy. We don't want to buy market share or consolidate the past, but innovate the future, and we are looking at companies of that future kind, he said.

SAP this month published third-quarter results, saying sales at its key software and software-related services business rose 16 percent to 2.69 billion euros, while group sales came in at 3.41 billion.

Underlying operating profit for the group jumped 23 percent from a year ago to 1.13 billion euros.

SAP said its pipeline is very strong as companies continue to invest in IT, but it was sticking to its outlook due to the ongoing uncertain macroeconomic environment.

The company expects to reach the high end of its 10-14 percent growth forecast for software and related services revenue, while operating profit would come in at the high end of between 4.45 billion euros and 4.65 billion.

SAP is betting on its mobile and so-called in-memory databank technology, designed to make analytical software more powerful by accessing data stored locally on a chip instead of on a server, which allows it to cater to a wider variety of clients.

It plans to fold this into its core software products, helping it reach revenue of 20 billion euros by 2015, up from 12.5 billion last year.