SAP SE

Earnings Release • Oct 27, 2008

News Details

Ad-hoc | 27 October 2008 23:30

SAP AG: Preliminary results for the third quarter of 2008

SAP AG / Preliminary Results

Release of an Ad hoc announcement according to § 15 WpHG, transmitted by
DGAP - a company of EquityStory AG.
The issuer is solely responsible for the content of this announcement.

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SAP AG announced today preliminary financial results for the third quarter
of 2008. U.S. GAAP software and software-related service revenues were
€1.99 billion (2007: €1.74 billion), representing an increase of 15%
compared to the third 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 €41
million, for the third quarter of 2008 were €2.04 billion (2007: €1.74
billion). This represents an increase of 17% (22% at constant currencies)
compared to the third quarter of 2007.

Third quarter 2008 U.S. GAAP software revenues were €763 million (2007:
€714 million), representing an increase of 7% (11% at constant currencies)
compared to the third quarter of 2007.

The U.S. GAAP operating margin for the third quarter of 2008 was 22.2%
(2007: 25.1%). The third quarter Non-GAAP operating margin was 26.1%
(2007: 25.8%), or 26.3% at constant currencies. Both the U.S. GAAP and the
Non-GAAP operating margins were impacted by one-time expenses associated
with the integration of Business Objects (which are not acquisition-related
charges) of approximately €14 million.

In its previous outlook provided on July 29, 2008, the Company had expected
full-year 2008 Non-GAAP software and software-related service revenues to
increase at the upper end of the range of 24% – 27% at constant currencies
and full-year 2008 Non-GAAP operating margin to be at the upper end of the
range of 28.5% – 29.0% at constant currencies.

In light of the uncertainties surrounding the current economic and business
environment, the Company decided to no longer provide a specific outlook
for Non-GAAP software and software-related service revenues for the
full-year 2008. However, with recent cost savings initiatives in place, the
Company expects the full-year 2008 Non-GAAP operating margin, which
excludes a non-recurring deferred support revenue write-down of €180
million from the acquisition of Business Objects and acquisition-related
charges, to be around 28% at constant currencies if the Company can
increase Non-GAAP software and software-related service revenues, excluding
a non-recurring deferred support revenue write-down from the acquisition of
Business Objects, in a range between 20% – 22% at constant currencies for
the full year 2008.

The Company continues to project an effective tax rate of 31.0% - 31.5%
(based on U.S. GAAP income from continuing operations) for 2008.

Additional infomation:

Operating cash flow from continuing operations for the first nine months of
2008 was €1.97 billion (2007: €1.34 billion). Free cash flow for the first
nine months of 2008 was €1.73 billion (2007: €1.05 billion), which was 21%
of total revenues (2007: 15%). At September 30, 2008, the Company had
total group liquidity of €1.6 billion (December 31, 2007: €2.8 billion),
which includes cash and cash equivalents, restricted cash and short term
investments.

Webcast/Supplementary Financial Information
SAP senior management will host a conference call on Tuesday, October 28th
at 3:00 pm (CET) / 2:00 pm (GMT) / 10:00 am (EDT) / 7:00 am (PDT). The
conference call will be Webcast live on the Company’s Web site at
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 76,000
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.

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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 © 2008 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

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Information and Explaination of the Issuer to this News:

Use of Non-GAAP Measures

This document discloses certain financial measures, such as non-GAAP
revenues, non-GAAP operating income, non-GAAP operating margin, free cash
flow, a 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

Non-GAAP Revenues, Non-GAAP Operating Income and Non-GAAP Operating Margin

We believe that it is of interest to investors to receive certain
supplemental historical and prospective financial information used by our
management in running our business – in addition to financial data prepared
in accordance with U.S. GAAP. Beginning in 2008 we use both non-GAAP
revenues and non-GAAP operating income / non-GAAP operating margin as
defined below consistently in our planning, forecasting, reporting,
compensation and external communication.
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 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 renewals of these contracts are expected
to result in revenues that are not impacted by the business
combination-related fair value accounting.

We believe that our non-GAAP revenue numbers have limitations, particularly
as the eliminated amounts may be material to us. We therefore do not
evaluate our growth and performance without considering both non-GAAP
revenues and U.S. GAAP revenues. We caution the readers of this document to
follow a similar approach by considering our 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.

Non-GAAP operating income / Non-GAAP operating margin: Operating income and
operating margin in this document identified as 'non-GAAP operating income'
or 'non-GAAP operating margin' have been adjusted from the respective
operating income and operating margin numbers as recorded under U.S. GAAP
by including the full amount of Business Objects support revenues to be
included in non-GAAP revenue, and by excluding acquisition-related charges.
Acquisition related charges in this context comprise:

• Amortization expense of intangibles acquired in business combination and
standalone acquisitions of intellectual property
• Expense from purchased in-process research and development
• Restructuring expenses as far as incurred in connection with a business
combinations and accounted for under SFAS 146 in SAP’s U.S. GAAP
consolidated financial statements
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.

We believe that our non-GAAP financial measures described above have
limitations, particularly as the eliminated amounts may be material to us.
We therefore do not evaluate our growth and performance without considering
both non-GAAP operating income / non-GAAP operating margin numbers and U.S.
GAAP operating income and margin numbers. We caution the readers of this
document to follow a similar approach by considering our non-GAAP operating
income / non-GAAP operating margin numbers 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.
27.10.2008 Financial News transmitted by DGAP

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Language: English
Issuer: SAP AG
Dietmar-Hopp-Allee 16
69190 Walldorf
Deutschland
Phone: +49 (0)6227 - 74 74 74
Fax: +49 (0)6227 - 75 75 75
E-mail: investor@sap.com
Internet: www.sap.com
ISIN: DE0007164600
WKN: 716460
Indices: DAX
Listed: Regulierter Markt in Berlin, Frankfurt (Prime Standard),
Stuttgart; Freiverkehr in Hannover, Düsseldorf, Hamburg,
München; Terminbörse EUREX; Foreign Exchange(s) NYSE

End of News DGAP News-Service

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