Sage cautious on mid-term growth, shares fall

* Sticks to 2015 target of 6 pct revenue growth for next 2-3 years

* Says was slow to move to online products

* Shares (Berlin: DI6.BE - news) down 4.2 pct (Adds CEO comments, shares)

By Paul Sandle

LONDON, June 24 (Reuters) - British software company Sage will achieve steady revenue growth for the next two to three years, it said on Wednesday, after it acknowledged that it had been slow to respond to changes in the technology sector.

Ahead of his first strategy update to analysts, new Chief Executive Stephen Kelly said Sage could be the leading provider of small-business software if it focused on products delivered online to start-ups and small and medium-sized enterprises.

"We failed to execute very well, we were a bit slow to the Cloud, we could have done way better on cross selling," said Kelly, a former chief operating officer for the British government.

"Our ambition has risen significantly, there's a tremendous potential for Sage to be the No.1 globally."

Chief Financial Officer Steve Hare said Sage's 2015 target of organic revenue growth of 6 percent a year, with an operating margin of 28 percent, would be a floor for the next few years while more of its six million customers moved to subscription-based services. The company expects subscription sales eventually to account for 85-90 percent of revenue, up from a percentage in the low seventies currently, Hare added.

"Once we get through the transitional period, and we get to the targeted level of recurring revenue, then the growth rate will pick up," Hare said. "The same is true of our operating margin."

The cautious guidance failed to impress investors and shares in Sage were down 4.2 percent at 525.5 pence by 1244 GMT.

The market for products from Sage and competitors NetSuite Inc and Microsoft Corp is growing in countries such as Britain and the United States. A record 580,000 businesses launched in Britain last year, according to the Centre for Entrepreneurs.

(Editing by David Goodman)