I believe it's 'small to medium enterprise' but i'm willing to stand corrected.
I for one have always taken it for granted, that the qotation stands for: small, medium, ENHANCED, and since lots of other qotations mention SME's versatility for utilisation in small and medium business (and other) ventures, I have never really had any reason to doubt this assumption.
But in the end, its still just that: An assumption.