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SAP Reports Double-Digit Growth in Software and Software Related Service Revenues for 2008

Posted on: Wednesday, 28 January 2009, 00:02 CST

Non-GAAP Operating Income Increased 24% at Constant Currencies

Non-GAAP Operating Margin Grew by 1.1 Percentage Points at Constant Currencies

Non-GAAP Earnings Per Share Increased 16%

Company Expects a Continued Challenging Environment in 2009

WALLDORF, Germany, Jan. 28 /PRNewswire-FirstCall/ -- SAP AG (NYSE: SAP) today announced its preliminary financial results for the fourth quarter and full-year ended December 31, 2008.

HIGHLIGHTS - Full-Year 2008

Business Objects is included in the results from January 21, 2008 onwards.

SAP - Full-Year 2008* U.S. GAAP Non-GAAP** % change euro % % constant million FY/2008 FY/2007 change FY/2008 FY/2007 change currency*** Software revenues 3,606 3,407 6 3,606 3,407 6 10 Software and software- related service revenues 8,457 7,427 14 8,623 7,427 16 20 Total revenues 11,567 10,242 13 11,733 10,242 15 19 Operating income 2,842 2,732 4 3,305 2,793 18 24 Operating margin (%) 24.6 26.7 -2.1pp 28.2 27.3 0.9pp 1.1pp Income from continuing operations 1,925 1,934 0 2,266 1,975 15 - Net income 1,888 1,919 -2 2,229 1,960 14 - Basic EPS from cont. operations (euro) 1.62 1.60 1 1.90 1.64 16 - * All figures are preliminary and unaudited and are based on the current status of the purchase price allocation for the Business Objects acquisition which is not yet final. ** Revenue line items are adjusted for the Business Objects support revenue that Business Objects would have recognized had it remained a standalone entity but that SAP is not permitted to recognize as revenue under U.S. GAAP as a result of business combination accounting rules. Adjustments in the operating expense line items are for acquisition-related charges. See Explanation of Non-GAAP Measures at the end of the financial section of the press release for explanations of the Non-GAAP measures used in this press release and for related reconciliations to U.S. GAAP. *** Constant currency Non-GAAP revenue and operating income figures are calculated by translating Non-GAAP revenue and Non-GAAP operating income of the current period using the average exchange rates from the previous year's respective period instead of the current period. Constant currency period-over-period changes are calculated by comparing the current year's Non-GAAP constant currency numbers with the Non-GAAP number of the previous year's respective period. See Explanation of Non-GAAP Measures at the end of the financial section of the press release for details.

Revenues

• Full-year 2008 U.S. GAAP software and software-related service revenues were euro 8.46 billion (2007: euro 7.43 billion), representing an increase of 14% compared to 2007. Non-GAAP software and software-related service revenues, which exclude a non-recurring deferred support revenue write-down from the acquisition of Business Objects of euro 166 million, for the full-year 2008 were euro 8.62 billion (2007: euro 7.43 billion). This represents an increase of 16% (20% at constant currencies) compared to 2007.
• Excluding the contribution from Business Objects, SAP's business contributed 6 percentage points to the constant currency growth of the Non-GAAP software and software-related service revenues for the 2008 full-year period.
• U.S. GAAP total revenues for the 2008 full-year period were euro 11.57 billion (2007: euro 10.24 billion), which was a year-over-year increase of 13%. Non-GAAP total revenues, which exclude a non-recurring deferred support revenue write-down from the acquisition of Business Objects of euro 166 million, for the full-year 2008 were euro 11.73 billion (2007: euro 10.24 billion), which was an increase of 15% (19% at constant currencies) compared to 2007.
• Full-year 2008 U.S. GAAP software revenues were euro 3.61 billion (2007: euro 3.41 billion), representing an increase of 6% (10% at constant currencies) compared to 2007.

Income

• U.S. GAAP operating income for the 2008 full-year period was euro 2.84 billion (2007: euro 2.73 billion), which was an increase of 4% compared to 2007. The full-year Non-GAAP operating income, which excludes a non-recurring deferred support revenue write-down from the acquisition of Business Objects and acquisition-related charges totaling euro 463 million, was euro 3.31 billion (2007: euro 2.79 billion), which was an increase of 18% (24% at constant currencies) compared to 2007.
• The U.S. GAAP operating margin for the 2008 full-year period was 24.6% (2007: 26.7%). The full-year Non-GAAP operating margin was 28.2% (2007: 27.3%), or 28.4% at constant currencies, representing an increase of 1.1 percentage points at constant currencies. Both the U.S. GAAP and the Non-GAAP operating margins were impacted by 1) euro 32 million of expenses resulting from the settlement of litigations (2007: euro 2 million) and 2) expenses associated with the integration of Business Objects (which are not acquisition-related charges) of approximately euro 35 million.

• U.S. GAAP income from continuing operations for the full-year period of 2008 was euro 1.93 billion (2007: euro 1.93 billion), which was flat compared to 2007. Non-GAAP income from continuing operations, which excludes a non-recurring deferred support revenue write-down from the acquisition of Business Objects and acquisition-related charges totaling euro 341 million, was euro 2.27 billion (2007: euro 1.98 billion), representing an increase of 15% compared to 2007.
• U.S. GAAP earnings per share from continuing operations for the full-year 2008 was euro 1.62 (2007: euro 1.60), which was an increase of 1% compared to 2007. Non-GAAP earnings per share from continuing operations for the 2008 full-year period was euro 1.90 (2007: euro 1.64), which was an increase of 16% compared to 2007.

Core Enterprise Applications Vendor Share

Based on U.S. GAAP fourth quarter 2008 software and software-related service revenues on a rolling four-quarter basis, SAP's worldwide share of Core Enterprise Applications vendors, which account for approximately $38.6 billion in software and software-related service revenues as defined by the Company based on industry analyst research, was 32.8% for the four-quarter period ended December 31, 2008. This represents a 4.4 percentage point increase compared to the four-quarter period ended December 31, 2007, of which approximately 0.9 percentage points came from organic growth and 3.5 percentage points from the acquisition of Business Objects.

"2008 can be described as a year having two completely opposite halves, where a strong first half performance was greatly disrupted late in the third quarter by the beginning of the worst economic and financial crisis the world has witnessed in decades. Nevertheless, in total we had a good year amid a very tough economic climate, posting full-year, double-digit growth in software and software related service revenues and gaining additional share against Core Applications Vendors," said Henning Kagermann, co-CEO of SAP. Mr. Kagermann continued, "When the crisis hit, we acted very quickly by taking the necessary steps to reduce costs. As a result, we were successful in exceeding our profitability targets."

Cash Flow

Operating cash flow from continuing operations for the full-year 2008 was euro 2.18 billion (2007: euro 1.95 billion). Free cash flow for the full-year 2008 was euro 1.84 billion (2007: euro 1.55 billion), which was 16% of total revenues (2007: 15%). At December 31, 2008, the Company had total group liquidity of euro 1.7 billion (December 31, 2007: euro 2.8 billion), which includes cash and cash equivalents, restricted cash and short term investments.

Share Buyback

For the full-year 2008, the Company bought back 14.6 million shares at an average price of euro 33.34 (euro 486.8 million). Of the total shares purchased for the year, 3.2 million shares were subsequently acquired from the Company by employees who exercised stock options under SAP's share-based compensation programs. The number of shares bought back for 2008 represented 1.2% of the total shares outstanding. At December 31, 2008, the Company held treasury stock in the amount of 38.5 million shares (approximately 3.1% of total shares outstanding) at an average price of euro 35.43. In the fourth quarter of 2008, the Company did not buy back any shares.

HIGHLIGHTS - Fourth Quarter 2008

SAP - Fourth Quarter 2008* U.S. GAAP Non-GAAP** % change euro % % constant million Q4/2008 Q4/2007 change Q4/2008 Q4/2007 change currency*** Software revenues 1,323 1,415 -7 1,323 1,415 -7 -6 Software and software- related service revenues 2,666 2,473 8 2,692 2,473 9 8 Total revenues 3,488 3,240 8 3,514 3,240 8 8 Operating income 1,276 1,109 15 1,374 1,128 22 22 Operating margin (%) 36.6 34.2 2.4pp 39.1 34.8 4.3pp 4.6pp Income from continuing operations 858 755 14 928 770 21 - Net income 850 752 13 920 767 20 - Basic EPS From cont. operations (euro) 0.72 0.62 16 0.78 0.64 22 - *All figures are preliminary and unaudited and are based on the current status of the purchase price allocation for the Business Objects acquisition which is not yet final. ** Revenue line items are adjusted for the Business Objects support revenue that Business Objects would have recognized had it remained a standalone entity but that SAP is not permitted to recognize as revenue under U.S. GAAP as a result of business combination accounting rules. Adjustments in the operating expense line items are for acquisition-related charges. See Explanation of Non-GAAP Measures at the end of the financial section of the press release for explanations of the Non-GAAP measures used in this press release and for related reconciliations to U.S. GAAP. *** Constant currency Non-GAAP revenue and operating income figures are calculated by translating Non-GAAP revenue and Non-GAAP operating income of the current period using the average exchange rates from the previous year's respective period instead of the current period. Constant currency period-over-period changes are calculated by comparing the current year's Non-GAAP constant currency numbers with the Non-GAAP number of the previous year's respective period. See Explanation of Non-GAAP Measures at the end of the financial section of the press release for details.

Revenues

• Fourth quarter 2008 U.S. GAAP software and software-related service revenues were euro 2.67 billion (2007: euro 2.47 billion), representing an increase of 8% compared to the fourth quarter of 2007. Non-GAAP software and software-related service revenues, which exclude a non-recurring deferred support revenue write-down from the acquisition of Business Objects of euro 26 million, for the fourth quarter of 2008 were euro 2.69 billion (2007: euro 2.47 billion). This represents an increase of 9% (8% at constant currencies) compared to the fourth quarter of 2007.
• Excluding the contribution from Business Objects, SAP's business contributed negative 6 percentage points to the constant currency growth of the Non-GAAP software and software-related service revenues for the fourth quarter of 2008.
• U.S. GAAP total revenues for the 2008 fourth quarter were euro 3.49 billion (2007: euro 3.24 billion), which was a year-over-year increase of 8%. Non-GAAP total revenues, which exclude a non-recurring deferred support revenue write-down from the acquisition of Business Objects of euro 26 million, for the fourth quarter of 2008 were euro 3.51 billion (2007: euro 3.24 billion), which was an increase of 8% (8% at constant currencies) compared to the fourth quarter of 2007.
• Fourth quarter 2008 U.S. GAAP software revenues were euro 1.32 billion (2007: euro 1.42 billion), representing a decrease of 7% (decrease of 6% at constant currencies) compared to the fourth quarter of 2007.

Income

• U.S. GAAP operating income for the fourth quarter was euro 1.28 billion (2007: euro 1.11 billion), which was an increase of 15% compared to the fourth quarter of 2007. Fourth quarter Non-GAAP operating income, which excludes a non-recurring deferred support revenue write-down from the acquisition of Business Objects and acquisition-related charges totaling euro 98 million, was euro 1.37 billion (2007: euro 1.13 billion), which was an increase of 22% (22% at constant currencies) compared to the fourth quarter of 2007.
• The U.S. GAAP operating margin for the fourth quarter of 2008 was 36.6% (2007: 34.2%). The fourth quarter Non-GAAP operating margin was 39.1% (2007: 34.8%), or 39.4% at constant currencies, representing an increase of 4.6 percentage points at constant currencies. Both the U.S. GAAP and the Non-GAAP operating margins were impacted by expenses associated with the integration of Business Objects (which are not acquisition-related charges) of approximately euro 10 million.
• U.S. GAAP income from continuing operations for the fourth quarter of 2008 was euro 858 million (2007: euro 755 million), representing an increase of 14% compared to the fourth quarter of 2007. Non-GAAP income from continuing operations, which excludes a non-recurring deferred support revenue write-down from the acquisition of Business Objects and acquisition-related charges totaling euro 70 million, was euro 928 million (2007: euro 770 million), representing an increase of 21% compared to the fourth quarter of 2007.
• U.S. GAAP basic earnings per share from continuing operations for the fourth quarter of 2008 was euro 0.72 (2007: euro 0.62), which was an increase of 16% compared to the same period in 2007. Non-GAAP earnings per share from continuing operations for the fourth quarter of 2008 was euro 0.78 (2007: euro 0.64), which was an increase of 22% compared to the same period in 2007.

Business Environment and Cost Containment Measures for 2009

The Company expects the 2009 operating environment to remain challenging. In addition, 2009 will no longer include the positive effects from the acquisition of Business Objects, and the 2009 first-half results will be a difficult comparison to the strong results reported in the first half of 2008, which was prior to the economic crisis that disrupted the global markets in the third quarter of 2008.

SAP will continue with its cost saving measures initiated in October 2008 and will take further steps to reduce expenses. SAP will continue to maintain tight cost controls on all variable expenses, including third-party related costs, as well as capital expenditures. Additionally, to enable the Company to adapt its size to today's market conditions and the broader impact of the global recession, SAP intends to reduce its workforce globally to 48,500 positions by year-end 2009, taking full advantage of attrition as a factor in reaching this goal (SAP will provide further information on its website at www.sap.com). The Company expects the reduction of positions to provide euro 300 million to euro 350 million in annual cost savings beginning in 2010.

"We believe the cost containment measures will allow us to adapt to the tough market conditions and ensure the long term competitiveness of the Company. Moreover, we expect 2009 to be a year of limited visibility, making it increasingly difficult to project sales in this environment," said Leo Apotheker, co-CEO of SAP. "In 2009, we will continue to deliver to customers products targeted at specific business processes to alleviate pain points caused by the challenging environment since customers need flexibility, agility and visibility into their businesses now more than ever. These products are designed for fast implementations and quick returns on investment."

Mr. Apotheker concluded, "This is not the first time we have experienced tough economic times and we believe we are well-prepared to endure it. With competitive products, a solid business model, a high percentage of recurring revenues and flexibility in the cost base, we expect to emerge from this challenging environment a stronger and more competitive company, while maintaining a firm hold on our industry leading position."

Business Outlook

The Company provided the following outlook for the full-year 2009.

Due to the continued uncertainty surrounding the economic and business environment, the Company will not provide a specific outlook for software and software-related service revenues for the full-year 2009. The Company expects its full-year 2009 Non-GAAP operating margin, which excludes a non-recurring deferred support revenue write-down from the acquisition of Business Objects of approximately euro 9 million and acquisition-related charges, to be in the range of 24.5% - 25.5% at constant currencies. This includes one-time restructuring charges between euro 200 million to euro 300 million expected to result from the reduction of the workforce, which negatively impacts the Non-GAAP operating margin outlook by approximately 2 - 3 percentage points. The 2009 Non-GAAP operating margin outlook is based on the assumption that 2009 Non-GAAP software and software-related service revenues, which exclude a non-recurring deferred support revenue write-down from the acquisition of Business Objects, will be flat to a decline of 1% at constant currencies (2008: euro 8.623 billion).

The Company projects an effective tax rate of 29.5% - 30.5% (based on U.S. GAAP income from continuing operations) for 2009 (2008: 30.1%).

IFRS Financial Data

The Company will discontinue its U.S. GAAP reporting and will only report financial data under IFRS from 2010 onwards. To prepare the capital markets for this change, IFRS financial data are provided in the financial section of this press release.

KEY EVENTS - Fourth Quarter 2008

• In the fourth quarter of 2008, SAP closed major contracts in several key regions including Alpha Bank S.A., Enel S.p.A., Mairie de Paris, Merck, Ministry of Finance of the Czech Republic in EMEA; Carhartt Inc, ITT Corporation, IXE Grupo Financiero, Vought Aircraft Corporation in Americas; and China Merchants Bank, Dai-Ichi Seiko Co. Ltd., Mapletree Investments Pte Ltd, North China Grid Company Limited, Sharp Corporation in the Asia Pacific Japan region.

• On December 10, 2008, Business Objects, a division of SAP, announced the next version of BusinessObjects BI OnDemand offerings. BI OnDemand is a complete suite of business intelligence capabilities, including a data warehouse, delivered on demand.

• On November 26, 2008, SAP named Chief Operating Officer Erwin Gunst labor relations director of SAP AG, effective January 1, 2009. He succeeds SAP Executive Board member Claus Heinrich, who will be leaving SAP at the end of May 2009 after 21 years with the company, and 13 thereof as a member of the Board. Gunst will also be responsible for human resources, information technology, and SAP Labs.

• On November 18, 2008, SAP announced its ongoing engagement in the SAP AMI Integration for Utilities software. The advanced metering infrastructure (AMI) software from SAP - a pioneer solution in this area - is envisioned to bring the utilities industry one step closer to solving one of the most important technological challenges it faces over the next decade: implementing and integrating smart meter technology to provide energy more intelligently and efficiently.

• On November 12, 2008, SAP unveiled SAP enhancement package 4, the latest set of innovations for SAP's flagship enterprise resource planning (ERP) application, SAP ERP. The enhancement package contains extended functionality for SAP ERP, which is delivered through a unique business software delivery model that offers customers the ability to adapt new functionality without the disruption of system upgrades.

• On November 11, 2008, SAP announced the release of its first sustainability report, which highlights the key measures of SAP's corporate environmental, social and governance performance, as well as its products and services that help enable more sustainable operations of its customers.

• On November 6, 2008, SAP announced a series of initiatives focused on enhancing value in the relationship between SAP and its customers. Effective November 6, 2008, SAP has extended its maintenance offering to provide a total of nine years of support, delivering maintenance for SAP's latest offerings through 2017.

• On October 29, 2008, SAP announced the launch of the "Best-Run Now" initiative, highlighting solution offerings that focus on optimizing operations and address pressing business needs. Available in select markets with varied configurations, the offerings combine SAP software, services and special financing terms to deliver rapid time to value.

• On October 21, 2008, SAP announced that it is further expanding the scope, versatility and built-in expertise of the SAP Business ByDesign solution. New and expanded early partnerships allow for four new add-on solutions from SAP's ecosystem, with customer-focused capabilities and expertise for payroll, payment reference data, business-to-business collaboration and tax management.

• On October 14, 2008, SAP announced the launch of SAP EcoHub, an online solution marketplace that makes it easier for customers to discover, evaluate and buy partner solutions to complement their SAP software installations.

• On October 14, 2008, SAP and Cisco announced the availability of a composite application to help organizations proactively enforce data privacy across the business network. The application is designed to help support continuous, demonstrable compliance with data privacy policies and to minimize risks.

• On October 8, 2008, Business Objects announced BusinessObjects XI 3.1, a unified business intelligence platform delivering all information to all people on one platform.

Use of Non-GAAP Financial Measures

This press release contains certain financial measures such as Non-GAAP revenues, Non-GAAP operating income, Non-GAAP operating margin, free cash flow, constant currency revenue and operating income measures, as well as U.S. Dollar based Non-GAAP revenue numbers. These measures are not prepared in accordance with U.S. GAAP and therefore are considered non-GAAP financial measures. Our non-GAAP financial measures may not correspond to non-GAAP financial measures that other companies report. The non-GAAP financial measures that we report should be considered as additional to, and not as a substitute for or superior to revenue, operating margin or our other measures of financial performance prepared in accordance with U.S. GAAP. See the financial section of this press release for additional information regarding the Non-GAAP measures included in this press release and for the reconciliations to the corresponding U.S. GAAP measures.

Core Enterprise Applications Vendor Share

The Company provides share data based on the vendors of Core Enterprise Applications solutions, which account for approximately $38.6 billion in software and software-related service revenues as defined by the Company based on industry analyst research. For 2008, industry analysts project approximately 5% - 6% year-on-year growth for Core Enterprise Applications vendors. For its quarterly share calculation, SAP assumed that this approximate 5% - 6% growth would not be linear throughout the year. Instead, quarterly adjustments are made based on the financial performance of a sub set of (approximately 40) Core Enterprise Application vendors.

Webcast/Supplementary Financial Information

SAP senior management will host a press conference in Frankfurt today at 10:00 AM (CET) / 9:00 AM (GMT) / 4:00 AM (Eastern) / 1:00 AM (Pacific), followed by an investor conference at 2:00 PM (CET) / 1:00 PM (GMT) / 8:00 AM (Eastern) / 5:00 AM (Pacific). Both conferences will be web cast live on the Company's website at http://www.sap.com/investor and will be available for replay. Supplementary financial information pertaining to the quarterly results can be found at http://www.sap.com/investor.

About SAP

SAP is the world's leading provider of business software, offering applications and services that enable companies of all sizes and in more than 25 industries to become best-run businesses. With more than 82,000 customers in over 120 countries, SAP is listed on several exchanges, including the Frankfurt stock exchange and NYSE, under the symbol "SAP." (For more information, visit www.sap.com)

(*) SAP defines business software as comprising enterprise resource planning and related applications.

Any statements contained in this document that are not historical facts are forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995. Words such as "anticipate," "believe," "estimate," "expect," "forecast," "outlook," "intend," "may," "plan," "project," "predict," "should" and "will" and similar expressions as they relate to SAP are intended to identify such forward-looking statements. SAP undertakes no obligation to publicly update or revise any forward-looking statements. All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. The factors that could affect SAP's future financial results are discussed more fully in SAP's filings with the U.S. Securities and Exchange Commission ("SEC"), including SAP's most recent Annual Report on Form 20-F filed with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates.

Copyright (C) 2009 SAP AG. All rights reserved.

SAP, R/3, mySAP, mySAP.com, xApps, xApp, SAP NetWeaver and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP AG in Germany and in several other countries all over the world. All other product and service names mentioned are the trademarks of their respective companies. Data contained in this document serve informational purposes only. National product specifications may vary.

For more information, press only: Christoph Liedtke, +49 (6227) 7-50383, christoph.liedtke@sap.com, CET Guenter Gaugler +49 (6227) 7-65416, guenter.gaugler@sap.com, CET Andy Kendzie +1 (202) 312-3919, andy.kendzie@sap.com, EST For more information, financial community only: Stefan Gruber, +49 (6227) 7-44872, investor@sap.com, CET Martin Cohen, +1 (212) 653-9619, investor@sap.com, EST

Appendix - Financial Information to Follow

Financial Information for the Fourth Quarter and Full Year 2008 - Condensed, Preliminary and Unaudited - page ---- U.S. GAAP Financial Information Financial Statements Statements of Income F1 and F2 Balance Sheets F3 Statements of Cash Flow F4 Supplementary Financial Information Reconciliations: Non-GAAP to U.S. GAAP F5 to F7 Revenue by Region F8 and F9 Share-based Compensation F10 Free Cash Flow F10 Headcount F10 Multi Quarter Overview F11 Explanation of Non-GAAP Measures F12 to F14 IFRS Financial Information Financial Statements Statements of Income (Operating Income section only) F15 Supplementary Financial Information Reconciliations: U.S. GAAP / IFRS / Non-GAAP / Non-IFRS F16 U.S. GAAP - IFRS Significant Differences F17 Explanation of Non-IFRS Measures F18 F1 -- CONSOLIDATED INCOME STATEMENT - FOURTH QUARTER (U.S. GAAP) Preliminary and unaudited ------------------ Three months ended euro millions, unless otherwise stated December 31 ------------------ 2008 2007 % change ---- ---- -------- Software revenue 1,323 1,415 -7 Support revenue 1,269 1,005 26 Subscription and other software- related service revenue 74 53 40 Software and software-related service revenue 2,666 2,473 8 Consulting revenue 668 603 11 Training revenue 111 110 1 Other service revenue 29 29 0 Professional services and other service revenue 808 742 9 Other revenue 14 25 -44 ------------- -- -- --- Total revenue 3,488 3,240 8 ------------- ----- ----- - Cost of software and software-related services -480 -391 23 Cost of professional services and other services -566 -560 1 Research and development -395 -409 -3 Sales and marketing -629 -639 -2 General and administration -145 -139 4 Other operating income/expense, net 3 7 -57 ------------------------ - - --- Total operating expenses -2,212 -2,131 4 ------------------------ ------ ------ - ---------------- Operating income 1,276 1,109 15 ---------------- ----- ----- -- Other non-operating income/expense, net -50 9 -656 Financial income/expense, net -29 21 -238 ------------------------------- --- -- ---- Income from continuing operations before income taxes 1,197 1,139 5 ------------- ----- ----- - Income taxes -339 -385 -12 Minority interests 0 1 -100 -------------------- - - ---- Income from continuing operations 858 755 14 --------------------------------- --- --- -- Loss from discontinued operations, net of tax -8 -3 167 ---------------------------------------- -- -- --- Net income 850 752 13 ---------- --- --- -- Earnings per Share (EPS) EPS from continuing operations - basic in euro 0.72 0.62 16 EPS from continuing operations - diluted in euro 0.73 0.63 16 EPS from net income - basic in euro 0.72 0.62 16 EPS from net income - diluted in euro 0.72 0.63 14 Weighted average number of shares* 1,187 1,201 Key Ratios Operating margin 36.6% 34.2% 2.4pp Effective tax rate from continuing operations 28.3% 33.8% * in millions, treasury stock excluded F2 -- CONSOLIDATED INCOME STATEMENT - FULL YEAR (U.S. GAAP) Preliminary and unaudited Twelve months ended euro millions, unless otherwise stated December 31 ------------------- 2008 2007 % change ---- ---- -------- Software revenue 3,606 3,407 6 Support revenue 4,593 3,838 20 Subscription and other software- related service revenue 258 182 42 Software and software-related service revenue 8,457 7,427 14 Consulting revenue 2,500 2,221 13 Training revenue 434 410 6 Other service revenue 106 113 -6 Professional services and other service revenue 3,040 2,744 11 Other revenue 70 71 -1 --------------- -- -- -- Total revenue 11,567 10,242 13 ------------- ------ ------ -- Cost of software and software-related services -1,646 -1,310 26 Cost of professional services and other services -2,297 -2,091 10 Research and development -1,631 -1,458 12 Sales and marketing -2,541 -2,162 18 General and administration -622 -506 23 Other operating income/expense, net 12 17 -29 ------------------------------------- -- -- --- Total operating expenses -8,725 -7,510 16 ------------------------ ------ ------ -- ---------------- ----- ----- - Operating income 2,842 2,732 4 ---------------- ----- ----- - Other non-operating income/expense, net -25 1 -2600 Financial income/expense, net -63 124 -151 ------------------------------- --- --- ---- Income from continuing operations before income taxes 2,754 2,857 -4 ------------ ----- ----- -- Income taxes -828 -921 -10 Minority interests -1 -2 -50 -------------------- -- -- --- Income from continuing operations 1,925 1,934 0 --------------------------------- ----- ----- - Loss from discontinued operations, net of tax -37 -15 147 ---------------------------------------- --- --- --- Net income 1,888 1,919 -2 ---------- ----- ----- -- Earnings per Share (EPS) EPS from continuing operations - basic in euro 1.62 1.60 1 EPS from continuing operations - diluted in euro 1.62 1.60 1 EPS from net income - basic in euro 1.59 1.59 0 EPS from net income - diluted in euro 1.59 1.59 0 Weighted average number of shares* 1,191 1,207 Key Ratios Operating margin 24.6% 26.7% -2.1pp Effective tax rate from continuing operations 30.1% 32.2% * in millions, treasury stock excluded F3 -- CONDENSED CONSOLIDATED BALANCE SHEETS (U.S. GAAP) Preliminary and unaudited December December euro millions 31, 2008 31, 2007 ------------ --------- --------- Assets Cash and cash equivalents 1,277 1,608 Restricted cash 3 550 Short-term investments 382 598 Accounts receivable, net 3,141 2,895 Other assets 577 541 Deferred income taxes 202 125 Prepaid expenses/deferred charges 84 76 Assets classified as held for disposal 0 15 Current assets 5,666 6,408 Goodwill 5,007 1,423 Intangible assets, net 1,127 403 Property, plant, and equipment, net 1,405 1,316 Investments 95 89 Accounts receivable, net 2 3 Other assets 567 555 Deferred income taxes 190 146 Prepaid expenses/deferred charges 24 23 Noncurrent assets 8,417 3,958 ------------ ------ ------ Total assets 14,083 10,366 ------------ ------ ------ December December euro millions 31, 2008 31, 2007 ------------ --------- --------- Liabilities, Minority interests and Shareholders' equity Accounts payable 538 715 Income tax obligations 243 341 Other liabilities 4,091 1,456 Provisions 161 154 Deferred income taxes 47 47 Deferred income 624 477 Liabilities associated with assets classified as held for disposal 0 9 Current liabilities 5,704 3,199 Accounts payable 5 10 Income tax obligations 283 90 Other liabilities 99 79 Provisions 518 369 Deferred income taxes 157 73 Deferred income 61 42 Noncurrent liabilities 1,123 663 Total liabilities 6,827 3,862 Minority interests 2 1 Common stock, no par value 1,226 1,246 Treasury stock -1,362 -1,734 Additional paid-in capital 320 347 Retained earnings 7,729 7,159 Accumulated other comprehensive loss -659 -515 Shareholders' equity 7,254 6,503 ----------------------------------------- ------ ------ Total liabilities, Minority interests and Shareholders' equity 14,083 10,366 ------------------------------------------ ------ ------ Days Sales Outstanding 71 66 ---------------------- -- -- F4 -- CONSOLIDATED STATEMENTS OF CASH FLOWS - FULL YEAR (U.S. GAAP) Preliminary and unaudited Twelve months ended euro millions December 31 ------------ 2008 2007 ---- ---- Net income 1,888 1,919 Net loss from discontinued operations 37 15 Minority interests 1 2 Income from continuing operations before minority interests 1,926 1,936 Adjustments to reconcile income from continuing operations before minority interests to net cash provided by operating activities: Depreciation and amortization 548 261 Losses from equity investees -1 1 Losses on disposal of intangible assets and property, plant, and equipment 5 1 Gains on disposal of investments -15 -2 Writeups/downs of financial assets 15 8 Allowances for doubtful accounts 76 0 Impacts of hedging for cash-settled share-based payment plans 39 21 Stock-based compensation including income tax benefits 18 13 Excess tax benefit from share-based compensation -7 0 Deferred income taxes -68 8 Change in accounts receivable -64 -521 Change in other assets 10 -322 Change in accrued and other liabilities -380 423 Change in deferred income 81 123 --------------------------- -- --- Net cash provided by operating activities from continuing operations 2,183 1,950 ---------------------------------------------- ----- ----- Acquisition of minority interests in subsidiaries 0 -48 Business combinations, net of cash and cash equivalents acquired -3,773 -672 Repayment of acquirees' debt in business combinations -450 0 Purchase of intangible assets and property, plant, and equipment -339 -401 Proceeds from disposal of intangible assets and property, plant, and equipment 44 27 Cash transferred to restricted cash -451 -550 Reduction of restricted cash 1,001 0 Purchase of investments -380 -768 Sales of investments 579 1,025 Purchase of other financial assets -16 -20 Sales of other financial assets 16 15 --------------------------------- -- -- Net cash used in investing activities from continuing operations -3,769 -1,392 ----------------------------------------------------- ------ ------ Dividends paid -594 -556 Purchase of treasury stock -487 -1,005 Proceeds from reissuance of treasury stock 85 156 Proceeds from issuance of common stock (share-based compensation) 13 44 Excess tax benefit from share-based compensation 7 0 Proceeds from short-term and long-term debt 3,859 47 Repayments of short-term and long-term debt -1,571 -48 Proceeds from the exercise of equity-based derivative instruments (STAR hedge) 24 75 Purchase of equity-based derivative instruments (hedge for cash-settled share-based payment plans) -47 0 ----------------------------------------------------- --- - Net cash provided by / used in financing activities from continuing operations 1,289 -1,287 ---------------------------------------------------- ----- ------ ------------------------------------------------- -- --- Effect of foreign exchange rates on cash and cash equivalents -9 -49 ------------------------------------------------- -- --- Net cash used in operating activities from discontinued operations -25 -12 Net cash used in investing activities from discontinued operations 0 -1 Net cash used in financing activities from discontinued operations 0 0 -------------------------------------------- - - Net cash used in discontinued operations -25 -13 ---------------------------------------- --- --- Net change in cash and cash equivalents -331 -791 --------------------------------------- ---- ---- Cash and cash equivalents at the beginning of the period 1,608 2,399 ------------------------------------------------- ----- ----- Cash and cash equivalents at the end of the period 1,277 1,608 -------------------------------------------------- ----- ----- F5 --- Reconciliations from Non-GAAP Numbers to U.S. GAAP Numbers - Fourth Quarter Preliminary and unaudited The following table presents a reconciliation from our 'Non-GAAP' numbers (including our 'Non-GAAP at Constant Currency' numbers) to the respective most comparable U.S. GAAP numbers. Note: Our non-GAAP numbers are not prepared under a comprehensive set of accounting rules or principles. Please see section "Explanation of Non-GAAP Measures" for more information on our non-GAAP numbers. euro millions, unless otherwise stated Three months ended December 31 ---------------------------------------------- 2008 ---------------------------------------------- Non-GAAP Currency constant U.S. GAAP Adj.* Non-GAAP* impact** currency** Non-GAAP Revenue Numbers ================ Software revenue 1,323 0 1,323 5 1,328 Support revenue 1,269 26 1,295 -17 1,278 Subscription and other software- related service revenue 74 0 74 -2 72 Software and software-related service revenue 2,666 26 2,692 -14 2,678 Consulting revenue 668 0 668 -7 661 Training revenue 111 0 111 1 112 Other service revenue 29 0 29 0 29 Professional services and other service revenue 808 0 808 -6 802 Other revenue 14 0 14 0 14 Total revenue 3,488 26 3,514 -20 3,494 ------------- ----- -- ----- --- ----- Non-GAAP Operating Expense Numbers ================== Cost of software and software-related services -480 51 -429 Cost of professional services and other services -566 0 -566 Research and development -395 -1 -396 Sales and marketing -629 22 -607 General and administration -145 0 -145 Other operating income/ expense, net 3 0 3 Total operating expenses -2,212 72 -2,140 21 -2,119 ---------- ------ -- ------ -- ------ Non-GAAP Income Numbers =============== Operating income 1,276 98 1,374 1 1,375 Other non-operating income/expense, net -50 0 -50 Financial income/ expense, net -29 0 -29 Income from continuing operations before income taxes 1,197 98 1,295 Income taxes -339 -28 -367 Minority interests 0 0 0 Income from continuing operations 858 70 928 Loss from discontinued operations, net of tax -8 0 -8 Net income 850 70 920 ---------- --- -- --- Non-GAAP Key Ratios =================== Earnings per Share (EPS) EPS from continuing operations - basic in euro 0.72 0.78 EPS from continuing operations - diluted in euro 0.73 0.78 EPS from net income - basic in euro 0.72 0.77 EPS from net income - diluted in euro 0.72 0.77 Weighted average number of shares*** 1,187 1,187 Operating margin 36.6% 39.1% 39.4% Effective tax rate from continuing operations 28.3% 28.3% Three months ended December 31 ------------------------------------------------ 2007 % change ------------------- ----------------------- Non-GAAP U.S. Non- U.S. Non- constant GAAP Adj.* GAAP* GAAP GAAP* currency** Non-GAAP Revenue Numbers ================ Software revenue 1,415 0 1,415 -7 -7 -6 Support revenue 1,005 0 1,005 26 29 27 Subscription and other software- related service revenue 53 0 53 40 40 36 Software and software- related service revenue 2,473 0 2,473 8 9 8 Consulting revenue 603 0 603 11 11 10 Training revenue 110 0 110 1 1 2 Other service revenue 29 0 29 0 0 0 Professional services and other service revenue 742 0 742 9 9 8 Other revenue 25 0 25 -44 -44 -44 Total revenue 3,240 0 3,240 8 8 8 ------------- ----- - ----- - - - Non-GAAP Operating Expense Numbers ================== Cost of software and software- related services -391 16 -375 23 14 Cost of professional services and other services -560 1 -559 1 1 Research and development -409 -1 -410 -3 -3 Sales and marketing -639 3 -636 -2 -5 General and administration -139 0 -139 4 4 Other operating income/ expense, net 7 0 7 -57 -57 Total operating expenses -2,131 19 -2,112 4 1 0 --------------- ------ -- ------ - - - Non-GAAP Income Numbers =============== Operating income 1,109 19 1,128 15 22 22 Other non-operating income/expense, net 9 0 9 -656 -656 Financial income/ expense, net 21 0 21 -238 -238 Income from continuing operations before income taxes 1,139 19 1,158 5 12 Income taxes -385 -4 -389 -12 -6 Minority interests 1 0 1 -100 -100 Income from continuing operations 755 15 770 14 21 Loss from discontinued operations, net of tax -3 0 -3 167 167 Net income 752 15 767 13 20 ---------- --- -- --- -- -- Non-GAAP Key Ratios =================== Earnings per Share (EPS) EPS from continuing operations - basic in euro 0.62 0.64 16 22 EPS from continuing operations - diluted in euro 0.63 0.63 16 24 EPS from net income - basic in euro 0.62 0.63 16 22 EPS from net income - diluted in euro 0.63 0.64 14 22 Weighted average number of shares*** 1,201 1,201 Operating margin 34.2% 34.8% 2.4pp 4.3pp 4.6pp Effective tax rate from continuing operations 33.8% 33.6% * adjustments in the revenue line items are for the Business Objects support revenue that Business Objects would have recognized had it remained a stand-alone entity but that SAP is not permitted to recognize as revenue under U.S. GAAP as a result of business combination accounting rules. Adjustments in the operating expense line items are for acquisition-related charges. See section "Explanation of Non-GAAP Measures" for details ** constant currency revenue and operating income figures are calculated by translating revenue and operating income of the current period using the average exchange rates from the previous year's respective period instead of the current period. Constant currency period-over- period changes are calculated by comparing the current year's non- GAAP constant currency numbers with the non-GAAP number of the previous year's respective period. See section "Explanation of Non- GAAP Measures" for details *** in millions, treasury stock excluded F6 -- Reconciliations from Non-GAAP Numbers to U.S. GAAP Numbers - FULL YEAR Preliminary and unaudited The following table presents a reconciliation from our 'Non-GAAP' numbers (including our 'Non-GAAP at Constant Currency' numbers) to the respective most comparable U.S. GAAP numbers. Note: Our non-GAAP numbers are not prepared under a comprehensive set of accounting rules or principles. Please see section "Explanation of Non-GAAP Measures" for more information on our non-GAAP numbers. euro millions, unless otherwise stated Twelve months ended December 31 ------------------------------------------ 2008 ------------------------------------------ Non-GAAP Currency constant U.S. Non- impact currency GAAP Adj.* GAAP* ** ** Non-GAAP Revenue Numbers ======================== Software revenue 3,606 0 3,606 139 3,745 Support revenue 4,593 166 4,759 155 4,914 Subscription and other software-related service revenue 258 0 258 2 260 Software and software-related service revenue 8,457 166 8,623 296 8,919 Consulting revenue 2,500 0 2,500 92 2,592 Training revenue 434 0 434 18 452 Other service revenue 106 0 106 5 111 Professional services and other service revenue 3,040 0 3,040 115 3,155 Other revenue 70 0 70 2 72 Total revenue 11,567 166 11,733 413 12,146 ------------- ------ --- ------ --- ------ Non-GAAP Operating Expense Numbers ================== Cost of software and software-related services -1,646 193 -1,453 Cost of professional services and other services -2,297 0 -2,297 Research and development -1,631 17 -1,614 Sales and marketing -2,541 86 -2,455 General and administration -622 1 -621 Other operating income/expense, net 12 0 12 Total operating expenses -8,725 297 -8,428 -268 -8,696 ---------- ------ --- ------ ---- ------ Non-GAAP Income Numbers =============== Operating income 2,842 463 3,305 145 3,450 Other non-operating income/expense, net -25 0 -25 Financial income/ expense, net -63 0 -63 Income from continuing operations before income taxes 2,754 463 3,217 Income taxes -828 -122 -950 Minority interests -1 0 -1 Income from continuing operations 1,925 341 2,266 Loss from discontinued operations, net of tax -37 0 -37 Net income 1,888 341 2,229 ---------- ----- --- ----- Non-GAAP Key Ratios ============ Earnings per Share (EPS) EPS from continuing operations - basic in euro 1.62 1.90 EPS from continuing operations - diluted in euro 1.62 1.90 EPS from net income - basic in euro 1.59 1.87 EPS from net income - diluted in euro 1.59 1.87 Weighted average number of shares*** 1,191 1,191 Operating margin 24.6% 28.2% 28.4% Effective tax rate from continuing operations 30.1% 29.5% euro millions, unless otherwise stated Twelve months ended December 31 ----------------------------------------------- 2007 % change ------------------- ------------------------- Non-GAAP constant U.S. Non- U.S. currency GAAP Adj.* GAAP* GAAP Non-GAAP* ** Non-GAAP Revenue Numbers ======================== Software revenue 3,407 0 3,407 6 6 10 Support revenue 3,838 0 3,838 20 24 28 Subscription and other software- related service revenue 182 0 182 42 42 43 Software and software-related service revenue 7,427 0 7,427 14 16 20 Consulting revenue 2,221 0 2,221 13 13 17 Training revenue 410 0 410 6 6 10 Other service revenue 113 0 113 -6 -6 -2 Professional services and other service revenue 2,744 0 2,744 11 11 15 Other revenue 71 0 71 -1 -1 1 Total revenue 10,242 0 10,242 13 15 19 ------------- ------ - ------ -- -- -- Non-GAAP Operating Expense Numbers ================== Cost of software and software-related services -1,310 53 -1,257 26 16 Cost of professional services and other services -2,091 2 -2,089 10 10 Research and development -1,458 0 -1,458 12 11 Sales and marketing -2,162 6 -2,156 18 14 General and administration -506 0 -506 23 23 Other operating income/expense, net 17 0 17 -29 -29 Total operating expenses -7,510 61 -7,449 16 13 17 ---------- ------ -- ------ -- -- -- Non-GAAP Income Numbers =============== Operating income 2,732 61 2,793 4 18 24 Other non- operating income/ expense, net 1 0 1 -2600 -2600 Financial income/ expense, net 124 0 124 -151 -151 Income from continuing operations before income taxes 2,857 61 2,918 -4 10 Income taxes -921 -20 -941 -10 1 Minority interests -2 0 -2 -50 -50 Income from continuing operations 1,934 41 1,975 0 15 Loss from discontinued operations, net of tax -15 0 -15 147 147 Net income 1,919 41 1,960 -2 14 ---------- ----- -- ----- -- -- Non-GAAP Key Ratios =================== Earnings per Share (EPS) EPS from continuing operations - basic in euro 1.60 1.64 1 16 EPS from continuing operations - diluted in euro 1.60 1.63 1 17 EPS from net income - basic in euro 1.59 1.62 0 15 EPS from net income - diluted in euro 1.59 1.62 0 15 Weighted average number of shares*** 1,207 1,207 Operating margin 26.7% 27.3% -2.1pp 0.9pp 1.1pp Effective tax rate from continuing operations 32.2% 32.2% * adjustments in the revenue line items are for the Business Objects support revenue that Business Objects would have recognized had it remained a stand-alone entity but that SAP is not permitted to recognize as revenue under U.S. GAAP as a result of business combination accounting rules. Adjustments in the operating expense line items are for acquisition-related charges. See section "Explanation of Non-GAAP Measures" for details ** constant currency revenue and operating income figures are calculated by translating revenue and operating income of the current period using the average exchange rates from the previous year's respective period instead of the current period. Constant currency period-over-period changes are calculated by comparing the current year's non-GAAP constant currency numbers with the non-GAAP number of the previous year's respective period. See section "Explanation of Non-GAAP Measures" for details *** in millions, treasury stock excluded F7 --- Reconciliations from Non-GAAP Revenue in U.S. Dollar to U.S. GAAP Revenue in Euro - FOURTH QUARTER AND FULL YEAR Preliminary and unaudited The following table presents a reconciliation from our non-GAAP revenue numbers in U.S. dollar to the respective most comparable U.S. GAAP Revenue numbers in euro. Note: Our non-GAAP numbers in U.S. dollar are company- specific and not prepared under a comprehensive set of accounting rules or principles. Please see section "Explanation of Non-GAAP Measures" for more information on our non-GAAP numbers in U.S. dollar. Three months ended December 31 ------------------------------------------- Software and Software- Related Service Software Revenue Revenue ---------------- ---------------------- 2008 2007 % change 2008 2007 % change ---- ---- -------- ---- ---- -------- U.S. GAAP revenue in euro millions 1,323 1,415 -7 2,666 2,473 8 Respective measure in US$ millions 1,768 2,061 -14 3,537 3,595 -2 Adjustment* in US$ millions 0 0 0 35 0 - Non-GAAP revenue in US$ millions 1,768 2,061 -14 3,572 3,595 -1 --------------------------- ----- ----- --- ----- ----- -- * adjustments in the revenue line items are for the Business Objects support revenue that Business Objects would have recognized had it remained a stand-alone entity but that SAP is not permitted to recognize as revenue under U.S. GAAP as a result of business combination rules. See section "Explanation of Non-GAAP Measures" for details Twelve months ended December 31 ----------------------------------------- Software and Software- Related Service Software Revenue Revenue ---------------- ---------------------- 2008 2007 % change 2008 2007 % change ---- ---- -------- ---- ---- -------- U.S. GAAP revenue in euro millions 3,606 3,407 6 8,457 7,427 14 Respective measure in US$ millions 5,238 4,756 10 12,342 10,276 20 Adjustment* in US$ millions 0 0 0 248 0 - Non-GAAP revenue in US$ millions 5,238 4,756 10 12,590 10,276 23 --------------------------- ----- ----- -- ------ ------ -- * adjustments in the revenue line items are for the Business Objects support revenue that Business Objects would have recognized had it remained a stand-alone entity but that SAP is not permitted to recognize as revenue under U.S. GAAP as a result of business combination rules. See section "Explanation of Non-GAAP Measures" for details Note: Differences may exist due to rounding F8 -- REVENUE BY REGION - FOURTH QUARTER Preliminary and unaudited The following table presents our U.S. GAAP and non-GAAP revenue by region. The table also presents a reconciliation from our non-GAAP revenue (including our non-GAAP revenue at constant currency) to the respective most comparable U.S. GAAP revenue. Note: Our non-GAAP revenues are not prepared under a comprehensive set of accounting rules or principles. Please see section "Explanation of Non-GAAP Measures" for more information on our non-GAAP revenue. euro millions Three months ended December 31 ----------------------------------------- 2008 ----------------------------------------- Non- GAAP U.S. Non- Currency constant GAAP Adj.* GAAP* impact** currency** Software revenue by region*** EMEA 765 0 765 17 782 Americas 381 0 381 -5 376 Asia Pacific Japan 178 0 178 -8 170 -------------------- --- - --- -- --- Software revenue 1,323 0 1,323 5 1,328 ------------------- ----- - ----- - ----- Software and software-related service revenue by region*** Germany 467 1 468 0 468 Rest of EMEA 1,028 8 1,036 34 1,070 Total EMEA 1,495 9 1,504 34 1,538 United States 605 14 619 -53 566 Rest of Americas 230 1 231 23 254 Total Americas 835 15 850 -30 820 Japan 137 0 137 -31 106 Rest of Asia Pacific Japan 199 1 200 14 214 Total Asia Pacific Japan 336 1 337 -17 320 - ------------------------ --- - --- --- --- Software and software-related service revenue 2,666 26 2,692 -14 2,678 ------------------------------ ----- -- ----- --- ----- Total revenue by region*** Germany 648 1 649 0 649 Rest of EMEA 1,291 8 1,299 42 1,341 Total EMEA 1,939 9 1,948 42 1,990 United States 827 14 841 -71 770 Rest of Americas 302 1 303 30 333 Total Americas 1,129 15 1,144 -41 1,103 Japan 168 0 168 -39 129 Rest of Asia Pacific Japan 252 1 253 19 272 Total Asia Pacific Japan 420 1 421 -20 401 -------------------------- --- - --- --- --- Total revenue 3,488 26 3,514 -20 3,494 --------------- ----- -- ----- --- ----- euro millions Three months ended December 31 -------------------------------------------- 2007 % change -------------------- ---------------------- Non-GAAP U.S. U.S. Non- constant GAAP Adj.* Non-GAAP* GAAP GAAP* currency** Software revenue by region*** EMEA 779 0 779 -2 -2 0 Americas 456 0 456 -16 -16 -18 Asia Pacific Japan 180 0 180 -1 -1 -6 -------------------- --- - --- -- -- -- Software revenue 1,415 0 1,415 -7 -7 -6 ------------------- ----- - ----- -- -- -- Software and software-related service revenue by region*** Germany 514 0 514 -9 -9 -9 Rest of EMEA 878 0 878 17 18 22 Total EMEA 1,392 0 1,392 7 8 10 United States 560 0 560 8 11 1 Rest of Americas 217 0 217 6 6 17 Total Americas 777 0 777 7 9 6 Japan 109 0 109 26 26 -3 Rest of Asia Pacific Japan 195 0 195 2 3 10 Total Asia Pacific Japan 304 0 304 11 11 5 -------------------- --- - --- -- -- - Software and software- related service revenue 2,473 0 2,473 8 9 8 ---------------------- ----- - ----- - - - Total revenue by region*** Germany 675 0 675 -4 -4 -4 Rest of EMEA 1,126 0 1,126 15 15 19 Total EMEA 1,801 0 1,801 8 8 10 United States 779 0 779 6 8 -1 Rest of Americas 274 0 274 10 11 22 Total Americas 1,053 0 1,053 7 9 5 Japan 135 0 135 24 24 -4 Rest of Asia Pacific Japan 251 0 251 0 1 8 Total Asia Pacific Japan 386 0 386 9 9 4 -------------------- --- - --- - - - Total revenue 3,240 0 3,240 8 8 8 --------------- ----- - ----- - - - * adjustments in the revenue line items are for the Business Objects support revenue that Business Objects would have recognized had it remained a stand-alone entity but that SAP is not permitted to recognize as revenue under U.S. GAAP as a result of business combination accounting rules. Adjustments in the operating expense line items are for acquisition-related charges. See section "Explanation of Non-GAAP Measures" for details ** constant currency revenue figures are calculated by translating revenue of the current period using the average exchange rates from the previous year's respective period instead of the current period. Constant currency period-over-period changes are calculated by comparing the current year's non-GAAP constant currency numbers with the non-GAAP number of the previous year's respective period. See section "Explanation of Non-GAAP Measures" for details *** based on customer location Note: Differences may exist due to rounding F9 -- REVENUE BY REGION - FULL YEAR Preliminary and unaudited The following table presents our U.S. GAAP and non-GAAP revenue by region. The table also presents a reconciliation from our non-GAAP revenue (including our non-GAAP revenue at constant currency) to the respective most comparable U.S. GAAP revenue. Note: Our non-GAAP revenues are not prepared under a comprehensive set of accounting rules or principles. Please see section "Explanation of Non-GAAP Measures" for more information on our non-GAAP revenue. Twelve months ended December 31 euro millions --------------------------------------- 2008 --------------------------------------- Non-GAAP U.S. Non- Currency constant GAAP Adj.* GAAP* impact** currency** Software revenue by region*** EMEA 1,845 0 1,845 47 1,892 Americas 1,184 0 1,184 75 1,259 Asia Pacific Japan 578 0 578 16 594 -------------------- --- - --- -- --- Software revenue 3,606 0 3,606 138 3,745 ------------------- ----- - ----- --- ----- Software and software-related service revenue by region*** Germany 1,515 4 1,519 1 1,520 Rest of EMEA 3,060 61 3,121 102 3,223 Total EMEA 4,575 65 4,640 103 4,743 United States 1,976 84 2,060 131 2,191 Rest of Americas 748 6 754 39 793 Total Americas 2,724 90 2,814 170 2,984 Japan 410 3 413 -32 381 Rest of Asia Pacific Japan 748 7 755 56 811 Total Asia Pacific Japan 1,158 10 1,168 24 1,192 -------------------------- ----- -- ----- -- ----- Software and software-related service revenue 8,457 166 8,623 296 8,919 ------------------------------ ----- --- ----- --- ----- Total revenue by region*** Germany 2,194 4 2,198 1 2,199 Rest of EMEA 4,012 61 4,073 128 4,201 Total EMEA 6,206 65 6,271 129 6,400 United States 2,882 84 2,966 201 3,167 Rest of Americas 990 6 996 51 1,047 Total Americas 3,872 90 3,962 252 4,214 Japan 515 3 518 -40 478 Rest of Asia Pacific Japan 974 7 981 73 1,054 Total Asia Pacific Japan 1,489 10 1,499 33 1,532 -------------------------- ----- -- ----- -- ----- Total Revenue 11,567 166 11,733 413 12,146 --------------- ------ --- ------ --- ------ euro millions Twelve months ended December 31 ------------------------------------------- 2007 % change ------------------ ----------------------- Non-GAAP constant U.S. Non- U.S. Non- currency GAAP Adj.* GAAP* GAAP GAAP* ** Software revenue by region*** EMEA 1,697 0 1,697 9 9 11 Americas 1,228 0 1,228 -4 -4 3 Asia Pacific Japan 482 0 482 20 20 23 -------------------- --- - --- -- -- -- Software revenue 3,407 0 3,407 6 6 10 ------------------- ----- - ----- - - -- Software and software-related service revenue by region*** Germany 1,432 0 1,432 6 6 6 Rest of EMEA 2,541 0 2,541 20 23 27 Total EMEA 3,973 0 3,973 15 17 19 United States 1,838 0 1,838 8 12 19 Rest of Americas 657 0 657 14 15 21 Total Americas 2,495 0 2,495 9 13 20 Japan 340 0 340 21 21 12 Rest of Asia Pacific Japan 619 0 619 21 22 31 Total Asia Pacific Japan 959 0 959 21 22 24 -------------------- --- - --- -- -- -- Software and software- related service revenue 7,427 0 7,427 14 16 20 ---------------------- ----- - ----- -- -- -- Total revenue by region*** Germany 2,004 0 2,004 9 10 10 Rest of EMEA 3,386 0 3,386 18 20 24 Total EMEA 5,390 0 5,390 15 16 19 United States 2,706 0 2,706 7 10 17 Rest of Americas 871 0 871 14 14 20 Total Americas 3,577 0 3,577 8 11 18 Japan 447 0 447 15 16 7 Rest of Asia Pacific Japan 828 0 828 18 18 27 Total Asia Pacific Japan 1,275 0 1,275 17 18 20 -------------------- ----- - ----- -- -- -- Total Revenue 10,242 0 10,242 13 15 19 --------------- ------ - ------ -- -- -- * adjustments in the revenue line items are for the Business Objects support revenue that Business Objects would have recognized had it remained a stand-alone entity but that SAP is not permitted to recognize as revenue under U.S. GAAP as a result of business combination accounting rules. Adjustments in the operating expense line items are for acquisition-related charges. See section "Explanation of Non-GAAP Measures" for details ** constant currency revenue figures are calculated by translating revenue of the current period using the average exchange rates from the previous year's respective period instead of the current period. Constant currency period-over-period changes are calculated by comparing the current year's non-GAAP constant currency numbers with the non-GAAP number of the previous year's respective period. See section "Explanation of Non-GAAP Measures" for details *** based on customer location ------------------------------ Note: Differences may exist due to rounding F10 --- SHARE-BASED COMPENSATION - FULL YEAR (U.S. GAAP) Preliminary and unaudited ------------------- Twelve months ended euro millions December 31 ------------------- 2008 2007 % change ---- ---- -------- Share-based compensation per expense line item Cost of software and software-related services 6 9 -33 Cost of professional services and other services 12 20 -40 Research and development 18 29 -38 Sales and marketing 15 20 -25 General and administration 12 17 -29 Other operating income/expense, net 0 0 0 ------------------------------------- - - - Total Share-Based Compensation 63 95 -34 ------------------------------ -- -- --- Note: The share-based compensation expenses do not differ between SAP's U.S. GAAP and non-GAAP measures FREE CASH FLOW - FULL YEAR Preliminary and unaudited Twelve months ended euro millions December 31 ------------------- 2008 2007 % change ---- ---- -------- Net cash provided by operating activities from continuing operations 2,183 1,950 12 Purchase of long-lived assets excluding additions from business combinations -339 -401 -15 ------------------------------------------ ---- ---- --- Free Cash Flow 1,844 1,549 19 -------------- ----- ----- -- HEADCOUNT Preliminary and unaudited in Full-Time Equivalents - from continuing December December operations 31, 2008 31, 2007 ------------------------------------------- --------- --------- Headcount by Region Germany 15,582 14,749 Rest of EMEA 11,243 8,905 Total EMEA 26,825 23,654 United States 9,214 7,832 Rest of Americas 4,243 2,797 Total Americas 13,457 10,629 Japan 1,413 1,344 Rest of Asia Pacific Japan 9,841 8,234 Total Asia Pacific Japan 11,254 9,578 -------------------------- ------ ----- Total 51,536 43,861 ----- ------ ------ Headcount by Functional Area Software and software related services 6,458 5,831 Professional services and other services 14,051 12,785 Research and development 15,547 12,951 Sales and marketing 10,701 8,282 General and administration 3,244 2,797 Infrastructure 1,535 1,215 ---------------- ----- ----- Total 51,536 43,861 ----- ------ ------ F11 --- MULTI QUARTER SUMMARY (U.S. GAAP and Non-GAAP) Preliminary and unaudited euro millions, unless otherwise stated Q4/2008 Q3/2008 Q2/2008 Q1/2008 -------------------- ------- ------- ------- ------- Software revenue (U.S. GAAP) 1,323 763 898 622 Revenue adjustment* 0 0 0 0 Software revenue (Non-GAAP) 1,323 763 898 622 Support revenue (U.S. GAAP) 1,269 1,167 1,099 1,058 Revenue adjustment* 26 41 52 47 Support revenue (Non-GAAP) 1,295 1,208 1,151 1,105 Subscription and other software- Related service revenue (U.S. GAAP) 74 64 64 56 Revenue adjustment* 0 0 0 0 Subscription and other software- related service revenue (Non-GAAP) 74 64 64 56 Software and software-related service revenue (U.S. GAAP) 2,666 1,994 2,061 1,736 Revenue adjustment* 26 41 52 47 Software and software-related service revenue (Non-GAAP) 2,692 2,035 2,113 1,783 Total revenue (U.S. GAAP) 3,488 2,761 2,858 2,460 Revenue adjustment* 26 41 52 47 Total revenue (Non-GAAP) 3,514 2,802 2,910 2,507 Operating income (U.S. GAAP) 1,276 614 593 359 Revenue adjustment* 26 41 52 47 Expense adjustment* 72 76 66 83 Operating income (Non-GAAP) 1,374 731 711 489 Operating margin (U.S. GAAP) 36.6% 22.2% 20.7% 14.6% Operating margin (Non-GAAP) 39.1% 26.1% 24.4% 19.5% Effective tax rate from continuing operations (Non-GAAP) 28.3% 30.9% 30.7% 29.0% EPS from continuing operations - basic in euro (U.S. GAAP) 0.72 0.35 0.34 0.21 EPS from continuing operations - diluted in euro (U.S. GAAP) 0.73 0.34 0.34 0.21 EPS from continuing operations - basic in euro (Non-GAAP) 0.78 0.41 0.42 0.29 EPS from continuing operations - diluted in euro (Non-GAAP) 0.78 0.41 0.42 0.29 Headcount** 51,536 51,863 51,447 51,274 ----------- ------ ------ ------ ------ euro millions, unless otherwise stated Q4/2007 Q3/2007 Q2/2007 Q1/2007 --------------------- ------- ------- ------- ------- Software revenue (U.S. GAAP) 1,415 714 716 562 Revenue adjustment* 0 0 0 0 Software revenue (Non-GAAP) 1,415 714 716 562 Support revenue (U.S. GAAP) 1,005 975 944 914 Revenue adjustment* 0 0 0 0 Support revenue (Non-GAAP) 1,005 975 944 914 Subscription and other software- related service revenue (U.S. GAAP) 53 46 44 39 Revenue adjustment* 0 0 0 0 Subscription and other software- related service revenue (Non-GAAP) 53 46 44 39 Software and software-related service revenue (U.S. GAAP) 2,473 1,735 1,704 1,515 Revenue adjustment* 0 0 0 0 Software and software-related service revenue (Non- GAAP) 2,473 1,735 1,704 1,515 Total revenue (U.S. GAAP) 3,240 2,419 2,421 2,162 Revenue adjustment* 0 0 0 0 Total revenue (Non-GAAP) 3,240 2,419 2,421 2,162 Operating income (U.S. GAAP) 1,109 606 581 436 Revenue adjustment* 0 0 0 0 Expense adjustment* 19 18 13 11 Operating income (Non-GAAP) 1,128 624 594 447 Operating margin (U.S. GAAP) 34.2% 25.1% 24.0% 20.2% Operating margin (Non-GAAP) 34.8% 25.8% 24.5% 20.7% Effective tax rate from continuing operations (Non-GAAP) 33.8% 35.1% 25.8% 33.5% EPS from continuing operations - basic in euro (U.S. GAAP) 0.62 0.35 0.37 0.26 EPS from continuing operations - diluted in euro (U.S. GAAP) 0.63 0.34 0.37 0.26 EPS from continuing operations - basic in euro (Non-GAAP) 0.64 0.36 0.38 0.26 EPS from continuing operations - diluted in euro (Non-GAAP) 0.63 0.36 0.38 0.26 Headcount** 43,861 42,601 41,736 40,318 ----------- ------ ------ ------ ------ * adjustments in the revenue line items are for the Business Objects support revenue that Business Objects would have recognized had it remained a stand-alone entity but that SAP is not permitted to recognize as revenue under U.S. GAAP as a result of business combination accounting rules. Adjustments in the operating expense line items are for acquisition-related charges. See section "Explanation of Non-GAAP Measures" for details ** in Full-Time-Equivalents - from continuing operations

F12

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Explanation of Non-GAAP Measures

This document discloses certain financial measures, such as non-GAAP revenues, non-GAAP expenses, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, non-GAAP earnings per share, free cash flow, constant currency revenue and operating income measures as well as U.S. dollar based revenue numbers that are not prepared in accordance with U.S. GAAP and are therefore considered non-GAAP financial measures. Our non-GAAP financial measures may not correspond to non-GAAP financial measures that other companies report. The non-GAAP financial measures that we report should be considered as additional to, and not as substitutes for or superior to, revenue, operating income, cash flows, or other measures of financial performance prepared in accordance with U.S. GAAP. Our non-GAAP financial measures included in this document are reconciled to the nearest U.S. GAAP measure in the tables on the pages F5 to F11 above.

We believe that it is of interest to investors to receive certain supplemental historical and prospective non-GAAP financial information used by our management in running our business and making financial, strategic and operational decisions - in addition to financial data prepared in accordance with U.S. GAAP - to attain a more transparent understanding of our past performance and our future results. Beginning in 2008, we use these non-GAAP measures as defined below consistently in our planning, forecasting, reporting, compensation and external communication. Specifically,

• Our management uses these non-GAAP numbers rather than U.S. GAAP numbers as the basis for financial, strategic and operating decisions
• The variable remuneration components of our board members and employees that are tied to our company's growth and operating performance are based on SAP's achievement of its targets for non-GAAP operating income, non-GAAP software and software-related revenue growth at constant currencies, and non-GAAP operating margin at constant currencies.
• The annual budgeting process involving all management units is based on non-GAAP revenues and non-GAAP operating income numbers rather than U.S. GAAP numbers.
• All monthly forecast and performance reviews with all senior managers globally are based on these non-GAAP measures rather than U.S. GAAP numbers.
• Both, company-internal target setting and guidance provided to the capital markets are based on Non-GAAP revenues and Non-GAAP income measures rather than U.S. GAAP numbers.

We believe that our non-GAAP measures are useful to investors for the following reasons:

• The non-GAAP measures provide investors with insight into management's decision- making since management uses these non-GAAP measures to run our business and make financial, strategic and operating decisions.
• The non-GAAP measures provide investors with additional information that enables a comparison of year-over-year operating performance by eliminating certain direct effects resulting from the acquisition of Business Objects.

Our non-GAAP financial measures reflect adjustments based on the following items, as well as the related income tax effects:

Non-GAAP revenue:

Revenues in this document identified as "non-GAAP revenue" have been adjusted from the respective U.S. GAAP numbers by including the full amount of Business Objects support revenues that would have been reflected by Business Objects had it remained a stand-alone entity but which are not permitted to be reflected as revenues under U.S. GAAP as a result of fair value accounting for Business Objects support contracts in effect at the time of the Business Objects acquisition.

Under U.S. GAAP we record at fair value the Business Objects support contracts in effect at the time of the acquisition of Business Objects. Consequently, our U.S. GAAP support revenues, our U.S. GAAP software and software-related service revenues and our U.S. GAAP total revenues for periods subsequent to the Business Objects acquisition do not reflect the full amount of support revenue that Business Objects would have recorded for these support contracts absent the acquisition by SAP. Adjusting revenue numbers for this one-time revenue impact provides additional insight into our ongoing performance because the support contracts are typically one-year contracts and any renewals of these contracts are expected to result in revenues that are not impacted by the business combination related fair value accounting. However, we cannot provide absolute assurance that these contracts will in fact be renewed.

Non-GAAP operating expense:

We exclude acquisition-related charges, which are defined as follows:

• Amortization expense of intangibles acquired in business combinations and certain standalone acquisitions of intellectual property;
• Expense from purchased in-process research and development; and
• Restructuring expenses as far as incurred in connection with a business combinations

Although acquisition-related charges include recurring items from past acquisitions, such as amortization of acquired intangible assets, they also include an unknown component, relating to current-year acquisitions. We cannot accurately assess or plan for that unknown component until we have finalized our purchase price allocation. Furthermore acquisition-related charges may include one-time charges that are not reflective of our ongoing operating performance.

Non-GAAP operating income, non-GAAP operating margin, non-GAAP net income and non-GAAP earnings per share

Operating income, operating margin, net income and earnings per share in this document identified as "non-GAAP operating income", "non-GAAP operating margin", "non-GAAP net income and "non-GAAP earnings per share have been adjusted from the respective operating income, operating margin, net income and earnings per share numbers as recorded under U.S. GAAP by adjusting for the above mentioned non-GAAP revenues and expenses.

We include these non-GAAP revenues and exclude these Non-GAAP expenses for the purpose of calculating non-GAAP operating income, non-GAAP operating margin, non-GAAP net income and non-GAAP earnings per share when evaluating the continuing operational performance of the Company because these expenses generally cannot be changed or influenced by management after the acquisition other than by disposing of the acquired assets. As management at levels below the Executive Board has no influence on these expenses we generally do not consider these expenses for purposes of evaluating the performance of management units. As we believe that our Company-wide performance measures need to be aligned with the measures generally applied by management at varying levels throughout the Company we exclude these expenses when making decisions to allocate resources, both, on a Company level and at lower levels of the organization. In addition, we use these Non-GAAP measures to gain a better understanding of the Company's comparative operating performance from period-to-period and as a basis for planning and forecasting future periods. Considering that management at all levels of the organization is heavily focused on our non-GAAP measures in our internal reporting and controlling, we believe that it is in the interest of our investors that they are provided with the same information.

We believe that our non-GAAP financial measures described above have limitations, which include but are not limited to the following:

• The eliminated amounts may be material to us.
• Without being analysed in conjunction with the corresponding U.S. GAAP measures the non-GAAP measures are not indicative of our present and future performance, foremost for the following reasons:

• The additional insight into our potential future financial performance that our non-GAAP revenue numbers are intended to provide assumes that Business Objects customers renew their maintenance contracts. Projections of our future revenues made based on these numbers would be overstated if such maintenance renewals do not occur.
• While our non-GAAP income numbers reflect the elimination of certain acquisition-related expenses, no eliminations are made for the additional revenues that result from the acquisitions.
• The acquisition-related one-time charges that we eliminate in deriving our non-GAAP income numbers are likely to recur should SAP enter into material business combinations in the future.

• The acquisition-related amortization expense that we eliminate in deriving our non-GAAP income numbers are recurring expenses that will impact our financial performance in future years.
• While our non-GAAP revenue numbers are adjusted for a one-time impact only, our non-GAAP expenses are adjusted for both one-time and recurring items. Additionally, the revenue adjustment for the fair value accounting for Business Objects support contracts and the expense adjustment for one-time and recurring acquisition-related charges do not arise from a common conceptual basis as the revenue adjustment aims at improving the comparability of the initial post-acquisition period with future post-acquisition periods while the expense adjustment aims at improving the comparability between post-acquisition periods and pre-acquisition periods. This should particularly be considered when evaluating our non-GAAP operating income and non-GAAP operating margin numbers as these combine our non-GAAP revenues and non-GAAP expenses despite the absence of a common conceptual basis.

We believe, however, that the presentation of the non-GAAP measures in conjunction with the corresponding GAAP measures provide useful information to management and investors regarding present and future business trends relating to our financial condition and results of operations. We therefore do not evaluate our growth and performance without considering both non-GAAP measures and U.S. GAAP measures. We caution the readers of this document to follow a similar approach by considering our non-GAAP measures only in addition to, and not as a substitute for or superior to, revenues or other measures of our financial performance prepared in accordance with U.S. GAAP.

Free Cash Flow

We believe that free cash flow is a widely accepted supplemental measure of liquidity. Free cash flow measures a company's cash flow remaining after all expenditures required to maintain or expand the business have been paid off. We calculate free cash flow as operating cash flow from continuing operations minus additions to long-lived assets excluding additions from acquisitions. Free cash flow should be considered in addition to, and not as a substitute for or superior to, cash flow or other measures of liquidity and financial performance prepared in accordance with U.S. GAAP.

Constant Currency Period-over-Period Changes

We believe it is important for investors to have information that provides insight into our sales. Revenue measures determined under U.S. GAAP provide information that is useful in this regard. However, both sales volume and currency effects impact period-over-period changes in sales revenue. We do not sell standardized units of products and services, so we cannot provide relevant information on sales volume by providing data on the changes in product and service units sold. To provide additional information that may be useful to investors in breaking down and evaluating changes in sales volume, we present information about our revenue and various values and components relating to operating income that are adjusted for foreign currency effects. We calculate constant currency year-over-year changes in revenue and operating income by translating foreign currencies using the average exchange rates from the previous (comparator) year instead of the report year.

We believe that data on constant currency period-over-period changes have limitations, particularly as the currency effects that are eliminated constitute a significant element of our revenues and expenses and may severely impact our performance. We therefore limit our use of constant currency period-over-period changes to the analysis of changes in volume as one element of the full change in a financial measure. We do not evaluate our results and performance without considering both constant currency period-over-period changes on the one hand and changes in revenues, expenses, income, or other measures of financial performance prepared in accordance with U.S. GAAP on the other. We caution the readers of this document to follow a similar approach by considering data on constant currency period-over-period changes only in addition to, and not as a substitute for or superior to, changes in revenues, expenses, income, or other measures of financial performance prepared in accordance with U.S. GAAP.

U.S. Dollar-based Non-GAAP Revenue Measures

Substantially all of our major competitors report their financial performance in U.S. dollars. Thus changes in exchange rates, particularly in the U.S. dollar to euro rates, affect the financial statements of our competitors differently than our euro-based financial statements. We therefore believe that U.S. dollar-based revenues for SAP provide investors with useful additional information that enables them to better compare SAP's revenue growth with SAP's competitors' revenue growth irrespective of movements in exchange rates.

Our U.S. dollar non-GAAP revenues are determined as if SAP's reporting currency was the U.S. dollar. In fact, the reporting currency of our U.S. GAAP and IFRS consolidated financial statements as filed in Germany and in the U.S. with the U.S. Securities and Exchange Commission (SEC) is the euro. Additionally, our U.S. dollar non-GAAP revenue numbers have been adjusted from the respective U.S. GAAP revenues by the same support revenue fair value adjustment than our non GAAP revenues explained above.

SAP's management uses our U.S. dollar non-GAAP revenues to gain a better understanding of SAP's operating results compared to SAP's major competitors.

We believe that our U.S. dollar non-GAAP revenues have limitations, particularly because the impact of currency exchange rate fluctuations and the eliminated amounts may be material to us. We therefore do not evaluate our growth and performance without considering both non-GAAP revenues and euro-based U.S. GAAP revenues. We caution the readers of this document to follow a similar approach by considering our U.S. dollar non-GAAP revenues only in addition to, and not as a substitute for or superior to, revenues or other measures of our financial performance prepared in accordance with U.S. GAAP and reported in euro.

F13 --- ABBREVIATED CONSOLIDATED INCOME STATEMENTS - FULL YEAR (IFRS - Operating Section Only) Preliminary and unaudited euro millions, unless Twelve months ended otherwise stated December 31 ------------------------ 2008 2007 % change ---- ---- -------- Software revenue 3,606 3,407 6 Support revenue 4,602 3,852 19 Subscription and other software-related service revenue 258 182 42 Software and software- related service revenue 8,466 7,441 14 Consulting revenue 2,500 2,221 13 Training revenue 434 410 6 Other service revenue 107 113 -5 Professional services and other service revenue 3,041 2,744 11 Other revenue 70 71 -1 ------------- -- -- -- Total revenue 11,577 10,256 13 ------------- ------ ------ -- Cost of software and software-related services -1,712 -1,350 27 Cost of professional services and other services -2,286 -2,091 9 Research and development -1,627 -1,461 11 Sales and marketing -2,546 -2,173 17 General and administration -624 -499 25 Other operating income/ expense, net -51 16 -419 ----------------------- --- -- ---- Total operating expenses -8,846 -7,558 17 ------------------------ ------ ------ -- ---------------- ----- ----- - Operating profit 2,731 2,698 1 ---------------- ----- ----- - Operating margin 23.6% 26.3% -2.7pp F14 --- Reconciliation from our U.S. GAAP and non-GAAP to our IFRS and non-IFRS numbers - FULL YEAR Preliminary and unaudited The following table provides a reconciliation from our U.S. GAAP and non- GAAP numbers to the respective most comparable IFRS and non-IFRS numbers. Note: Our non-GAAP and non-IFRS numbers are not prepared under a comprehensive set of accounting rules or principles. Please see the section "Explanation of Non-IFRS Measures" for more information on our Non-GAAP and Non-IFRS numbers. euro millions, unless otherwise stated Twelve months ended December 31 ------------------------------- 2008 2007 ---------------------- --------------------- IFRS vs. IFRS vs. U.S. U.S. U.S. GAAP U.S. GAAP GAAP Diff. IFRS GAAP Diff. IFRS ------------------- Non-GAAP / Non-IFRS Revenue =================== U.S.GAAP / IFRS software and software- related service revenue 8,457 9 8,466 7,427 14 7,441 Discontinued operations* 0 -9 -9 0 -14 -14 Deferred revenue write-down** 166 0 166 0 0 0 Non-GAAP / Non-IFRS software and software- related service revenue 8,623 0 8,623 7,427 0 7,427 U.S.GAAP / IFRS total revenue 11,567 10 11,577 10,242 14 10,256 Discontinued operations* 0 -10 -10 0 -14 -14 Deferred revenue write-down** 166 0 166 0 0 0 Non-GAAP / Non-IFRS total revenue 11,733 0 11,733 10,242 0 10,242 ------------------- ------ - ------ ------ - ------ ----------------- Non-GAAP / Non-IFRS Operating Income =================== U.S.GAAP / IFRS operating income 2,842 -111 2,731 2,732 -34 2,698 Discontinued operations* 0 71 71 0 31 31 Deferred revenue write-down** 166 0 166 0 0 0 Acquisition related charges*** 297 39 336 61 1 62 Non-GAAP / Non-IFRS operating income 3,305 -1 3,304 2,793 -2 2,791 ------------------- ----- -- ----- ----- -- ----- ----------------- Non-GAAP / Non-IFRS Operating Margin =================== U.S.GAAP / IFRS operating margin 24.6% 23.6% 26.7% 26.3% Non-GAAP / Non-IFRS operating margin 28.2% 28.2% 27.3% 27.3% ------------------- ---- ---- ---- ---- euro millions, unless Twelve months ended otherwise stated December 31 ------------------- % change -------- U.S. GAAP IFRS --------------------------- Non-GAAP / Non-IFRS Revenue =========================== U.S.GAAP / IFRS software and software- related service revenue 14% 14% Discontinued operations* Deferred revenue write-down** Non-GAAP / Non-IFRS software and software-related service revenue 16% 16% U.S.GAAP / IFRS total revenue 13% 13% Discontinued operations* Deferred revenue write-down** Non-GAAP / Non-IFRS total revenue 15% 15% --------------------------------- -- -- ------------------------------------ Non-GAAP / Non-IFRS Operating Income ==================================== U.S.GAAP / IFRS operating income 4% 1% Discontinued operations* Deferred revenue write-down** Acquisition related charges*** Non-GAAP / Non-IFRS operating income 18% 18% ------------------------------------ -- -- ------------------------------------ Non-GAAP / Non-IFRS Operating Margin ==================================== U.S.GAAP / IFRS operating margin -2.1pp -2.7pp Non-GAAP / Non-IFRS operating margin 0.9pp 0.9pp ------------------------------------- ----- ----- * adjustments are for the discontinued operations of the Tomorrow Now entities which do not qualify for separate presentation under IFRS. The adjustment differs from the result from discontinued operations under U.S.GAAP due to differences in the valuation of accrued liabilities. ** adjustments are for the Business Objects support revenue that Business Objects would have recognized had it remained a stand-alone entity but that SAP is not permitted to recognize as revenue under both U.S. GAAP and IFRS as a result of business combination accounting rules. See section "Explanation of Non-IFRS Measures" for details. *** adjustments are for the effects of restructuring accruals (Non-IFRS), in-process R&D (Non-GAAP), amortization of intangibles identified as part of a purchase price allocation (Non-GAAP and IFRS). See section "Explanation of Non-IFRS Measures" for details.

F15

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U.S. GAAP - IFRS SIGNIFICANT DIFFERENCES WITH IMPACT ON INCOME

Acquisition-related restructuring expense

In certain circumstances, U.S. GAAP requires that restructuring expense incurred in connection with a business combination be shown as an assumed liability, and therefore it does not normally affect income. However, this restructuring expense must be shown as a current expense under IFRS.

Acquired in-process research and development

Under U.S. GAAP, all in-process research and development acquired in connection with a business combination must be amortized immediately. Under IFRS, if certain criteria are met, it must be shown as an asset and, once completed and ready for market, amortized over its normal useful life.

Discontinued Operations

SAP's U.S. GAAP income statement shows the revenue and income of our TomorrowNow subsidiary's activities separately because we discontinued its operation. IFRS does not allow us to show them separately because TomorrowNow is not a material operation. This leads to the only difference between our presentation of revenue under U.S. GAAP and IFRS.

Provisions for litigation costs

Under U.S. GAAP, we report attorneys' fees and other legal costs associated with litigation and claims when we incur them. Under IFRS, where appropriate and except to the extent it is virtually certain that we will recover them, we include an estimated amount for the litigation costs in a provision we create for the litigation.

Deferred taxes

Where differences between our IFRS financial statements and our U.S. GAAP financial statements arise out of tax-relevant transactions that result in temporary differences between the financial statements and our tax accounts, they also result in differences in the deferred tax in our IFRS financial statements and our U.S. GAAP financial statements.

F16

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Explanation of Non-IFRS Measures

Since 2007, we have been required by German and European law to prepare consolidated financial statements in accordance with IFRS. We have not, however, discontinued preparing financial statements under U.S. GAAP but have prepared consolidated financial statements under both U.S. GAAP and IFRS.

Despite the adoption of IFRS, our focus has continued to be on our U.S. GAAP financial figures and non-GAAP measures derived from them:

• The non-GAAP numbers have continued to be the key performance measures in our internal management reporting, planning, and forecasting, and in the variable compensation for our management and employees.
• We have maintained the focus of our external communication (for example, our business outlook) on U.S. GAAP numbers and non-GAAP numbers derived from them.

We plan to fully migrate to IFRS and discontinue the preparation of U.S. GAAP financial information with effect from the end of 2009. During 2009, we plan to continue to report our financial information according to both IFRS and U.S. GAAP. Our press release for Q4/2009 will be the last document in which we will provide U.S. GAAP financial information. In our annual report as well as our annual report on Form 20-F for fiscal year 2009 and all quarterly and annual reports thereafter, we plan to include only IFRS financial statements, and we plan to base our business outlook for 2010 and years thereafter on non-IFRS numbers derived from IFRS numbers. Concurrently with this change in our external financial communication, we will modify our internal management reporting, planning and forecasting, and variable compensation plans to align to the non-IFRS numbers we provide in our external communication.

To give investors an insight into what our migration from U.S. GAAP/non-GAAP to IFRS/non-IFRS will mean for SAP's key performance measures, the section titled Reconciliations: U.S.GAAP / IFRS / Non-GAAP / Non-IFRS shows a reconciliation from our U.S. GAAP and non-GAAP numbers to their most comparable IFRS and non-IFRS numbers. Note: Our non-GAAP and non-IFRS numbers are not prepared under a comprehensive set of accounting rules or principles. For more information on our non-GAAP measures, which also applies to our non-IFRS numbers subject to the additional explanations below, see the section titled Explanation of Non-GAAP Measures.

Our non-GAAP measures and our non-IFRS measures have been adjusted from the respective U.S. GAAP and IFRS numbers by:

• Including the full amount of Business Objects support revenue that Business Objects would have recognized had it remained a stand-alone entity but which we are not permitted to recognize as revenue under U.S. GAAP and IFRS as a result of fair value accounting for Business Objects support contracts in effect at the time of the Business Objects acquisition, and
• Excluding acquisition-related charges

However, the adjustment amounts for acquisition-related charges differ between our non-GAAP measures and our non-IFRS measures, due to differences between U.S. GAAP and IFRS. Specifically:

• Certain acquisition-related restructuring costs are accounted for as liabilities assumed in a business combination under U.S. GAAP while being charged to expense under IFRS. Consequently, these costs are eliminated only in our non-IFRS numbers.
• Purchased in-process research and development is charged to expense immediately under U.S. GAAP while being capitalized and amortized over the expected life under IFRS. Consequently, the immediate charge to expense is only eliminated in our non-GAAP measures while the amortization is only eliminated in our non-IFRS measures.

Additionally, our non-IFRS measures have been adjusted from the respective IFRS numbers for the income from our discontinued TomorrowNow operations. Under U.S. GAAP, we present the results of operations of the TomorrowNow entities as discontinued operations. Under IFRS, results of discontinued operations may only be presented as discontinued operations if a separate major line of business or geographical area of operations is discontinued. Our TomorrowNow operations were not a separate major line of business and thus did not qualify for separate presentation under IFRS. We believe that this additional adjustment is useful to investors for the following reasons:

• Despite the migration from U.S. GAAP to IFRS, SAP will continue to view the TomorrowNow operations as discontinued operations and thus will continue to exclude potential future TomorrowNow results from its internal management reporting, planning, forecasting, and compensation plans. Therefore, adjusting our non-IFRS measures for the results of the discontinued TomorrowNow operations provides insight into the financial measures that SAP will use internally once SAP has fully migrated to IFRS.
• By adjusting the non-IFRS numbers for the results form our discontinued TomorrowNow operations, the non-IFRS number is more comparable to the non-GAAP measures that SAP uses currently, which makes SAP's performance measures before and after the full IFRS migration easier to compare.

SOURCE SAP AG

Source: PR Newswire

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