SAP SE — Investor Presentation 2008

Nov 18, 2008

SAP The Market Leader in Business Applications

Werner Brandt CFO and Member of the Executive Board, SAP AG

UBS Global Technology & Services Conference New York, Tuesday, November 18, 2008

Safe Harbor Statement

Any statements contained in this document that are not historical facts are forwardlooking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995. Words such as "believe," "estimate," "intend," "may," "will," "expect," and "project" and similar expressions as they relate to the Company are intended to identify such forward-looking statements. The Company 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 the Company's future financial results are discussed more fully in the Company's filings with the U.S. Securities and Exchange Commission (the "SEC"), including SAP's most recent Annual Report on Form 20-F filed with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forwardlooking statements, which speak only as of their dates.

SAP – The World's Leading Provider of Business Application Software

The world's leading provider of business application software

• ~76,000 customers in 120 countries
• Broad global reach provides regional balance and a greater addressable market
• Undisputed market leader
• Recognized global brand

Strongest product portfolio based on an open technology platform

• Leading product and technology innovation with ~15,000 developers
• First to market with next generation enterprise SOA architecture
• Deepest industry functionality with 24 industry solutions

SAP – The World's Leading Provider of Business Application Software

Strong financial performance and market leadership

• Long-term revenue growth, margin expansion and strong cash flow generation
• Steadily increasing market share increase of 6.5pp year on year
• +3.3pp from organic growth
• +3.2pp from acquisition of Business Objects

* Based on US-GAAP; in EUR million, unless stated otherwise

** Relevant Core Enterprise Application Software & Software Related Services Market

The Market Leader Nine Months Performance

Financial Highlights Nine Months 2008 – Non-GAAP

A Challenging Global Macroeconomic Environment

• Acceleration of the financial crisis in the 2nd half of September resulted in rapid deterioration of the macroeconomic environment
• SME business affected most
• Significant number of deals did not close at the end of Q3
• SAP delivered its 19th consecutive quarter of double digit growth in SSRS revenues*
• Strong contribution from Business Objects solutions
• Sales pipeline remains strong, but closure rates are very hard to predict in this environment
• SAP updated its 2008 outlook to reflect its focus on protecting margin and earnings in an uncertain economic environment

Sources: Bloomberg, Institute for Supply Management™

Non-GAAP software and software related service revenues Q3 2008: +19%*

• Germany: Non-GAAP software and software related service revenues for Q3: +20%
• Pockets of strength Germany, southern Europe, Nordics
• Win rates remain high
• Strength in sales of Business Objects products

Select Customer Wins

Î Bundesagentur für Arbeit, IMPRESS Group BV, Moskovskaya obedinennaya, CENEXI, DTEK, Imperial Bank Limited

Regional Update: Asia Pacific Japan

Non-GAAP software and software related service revenues Q3 2008: +24%*

• China and India continued to perform well
• Customers still spending
• Quarter driven by large enterprise deals
• Drop in growth rates for SME due to financial crisis
• Japan: Non-GAAP software and software related service revenue +11%*
• Rest of Asia Pacific Japan +31%* Select Customer Wins

Î Samsung SDS Co., Ltd., Panasonic Corporation, Gansu Electric Power Corp, China Telecom System Integration Co., Ltd, Gansu Electric Power Corp.

Non-GAAP software and software related service revenues Q3 2008: +26%*

• U.S.: Non-GAAP software and software related service revenues for Q3: +23%*
• ¾ Good demand from new customers
• ¾ High win rates
• ¾ Strong acceptance of Business Objects products
• Continued strength in Latin America and Canada
• ¾ Brazil performed well

Select Customer Wins

Î Loblaw Companies Limited, Monsanto Company, Servicios Liverpool, Callaway Golf Company, Limited, Municipio de Medellin,Southern California Edison

Strong Recurring Revenue Streams and Careful Expense Management

Operating expenses by category in %

SAP has a stable revenue base

• Share of recurring support and subscription revenues around 40% in 2007 (9M2008: ~44%)
• Steadily increasing share of recurring revenues provides stability
• Diversified revenue streams across geographies and industries
• SAP expects to take market share in a tough environment

SAP will manage its cost base carefully to protect profitability

• SAP will seek the best possible balance between profitability and innovation
• Updated 2008 outlook reflects focus on protecting margins
• In Q4 2008 SAP expects to reduce its expenses by ~€200 million relative to the original planning

SAP is Prepared To Turn Challenge into Opportunity

Executing on SAP's strategy

SAP Business Suite and Industry Solutions

Business User Solutions

SME

Business Process Platform

(+500 p.m.) Three successfully shipped enhancement packages (EhP) prove SAP's unique technology of non-disruptive software delivery

SAP CRM 2007 successfully

shipped

"

12,800+ ERP6.0 customers,

thereof ~8,200 productive

Industry Solutions

SAP Business Suite

Any SAP customers intending to implement or upgrade any time in the next 12 to 18 months should look no further than [SAP] CRM 2007."

Enterprise SOA Delivered, Mass Adoption of Business Process Platform is Under Way

Business User Solutions

SME

Business Process Platform

Industry Solutions

SAP Business Suite

Product portfolio transformed

• SAP Business Suite on business process platform
• SAP Business All-in-One on business process platform
• Composition
• SAP NetWeaver Composition Environment available
• Enterprise SOA
• Road map completed
• 170+ reference accounts
• 2,000+ enterprise services available
• Momentum in SAP NetWeaver
• 46,700+ productive systems (+1,000 p.m.)
• Total SAP NetWeaver software revenue was more than €1.0bn
• Standalone software revenue grew* 26% to ~ €400m

Platform Adoption Creates Up-Sell Opportunities in SAP's Large Customer Base

1 Migration to SAP ERP

Technology platform SAP NetWeaver

SAP business process platform

Business user solutions

Product Portfolio for Small and Midsize Enterprises Completed

Business User Solutions
SME	Single Business Application	Complete, Adaptable	Configurable and Extensible
Business Process Platform Industry Solutions	21,000+ customers " +5,170 customers " yoy +33% customer "	New On-Demand " business model Focus on six key " markets to concentrate on profitability	12,750+ customers " 2,200+ customers " yoy +21% customer "
SAP Business Suite	growth yoy	New release shipped " with significant improvements 8,000+ registrations "	growth yoy New release based " on business process platform, including new CRM

+2,300 partners (VAR)

SAP is the undisputed leader in SME-market

Business Objects Strengthens the Entire SAP Product Portfolio

Business User Solutions
SME	Business User Solutions	Expand #1 position, continue to sell to non-SAP accounts " Bring closed-loop to SAP business performance optimization " customers
Business Process Platform	SME	Embed in SAP's midmarket product portfolio analytic capabilities " Leverage Business Object's midmarket channel "
Industry Solutions	Business Process Platform	Complement SAP's business process platform with a data " source-agnostic business intelligence platform
	Industry Solutions	Leverage strong Business Objects presence in battleground " (e.g. financial services, retail) industries
SAP Business Suite	SAP Business Suite	Further increase attractiveness of SAP Business Suite with " embedded, operational analytics

Business Objects Performance and Integration Update

BI remains to be a top priority for CEO's

• Even if budgets get cut, BI remains at the top of the wish list
• CEO's can gain quick insight into their businesses through transparent analytics that can assess risk, compliance and new business opportunities
• BI products can be packaged in much smaller deals, providing for quick implementations and faster ROI
• SAP continues to build out Business Object's product line
• The next major release of BusinessObjects XI solutions will include:
• Innovations that address the needs of business users and will target enterprise, midmarket, volume, and the OEM customer base
• Support embedded analytics for SAP Business Suite and performance optimization applications

SAP Can Emerge From the Downturn With an Even Stronger Competitive Position

• Low total cost of ownership
• Short time-to-value & value engineering
• Low-risk implementations
• High vendor reliability and financial stability
• Tight out-of-the-box integration, within and between companies
• Highest support quality and most comprehensive support concept
• Excellent customer access and relationship of trust / strategic vendor
• Unmatched industry expertise and multiindustry capability
• Leading SOA architecture and high solution flexibility, unique enhancement package technology
• Open business process platform with consistent technology and semantics
• Broadest ecosystem of partners

SAP expects 2009 to be a challenging year for the world economy

• SAP will seek the best possible balance between profitability and innovation
• Top priority will be protecting the margin
• SAP will continue to deliver innovation to support customers in the current environment and to be prepared for further growth opportunities
• SAP's solution portfolio is more competitive than ever
• SAP's service-oriented architecture solution portfolio has reached an unprecedented level of functional comprehensiveness, integration and quality
• SAP can help its customers streamline operations and find innovative ways of doing business
• SAP will emerge from the downturn stronger than before
• SAP has significant competitive advantages which will become even more evident in times of economic uncertainty

APPENDIX

1. Enterprise Support

1. Q3 & 9M 2008 Financials

SAP Enterprise Support takes IT support to the next level

• Next-generation support offering "Enterprise Support" sets new industry benchmark in customer support
• SAP is committed to deliver value to its existing and new customers and further reduce their total cost of ownership
• SAP collaborates closely with SUGEN (SAP User Group Executive Network) to optimize value delivered to customers through Enterprise Support
• SAP Enterprise Support includes support for solution configuration and operation content
• Enhancement Package technology enables customers to deploy new functionality without disruption to operations and at a minimum cost

* 7-2 strategy applies to new releases of the core applications of SAP Business Suite, starting with SAP CRM 7.0, SAP SRM 7.0, SAP SCM 7.0, SAP PLM 7.0; plus SAP ERP 6.0 (EHP4) and SAP NetWeaver 7.0. Industry-specific add-on applications and SAP enhancement packages based on these core application releases will offer mainstream and extended maintenance in line with these releases.

** Enhancement Packages: Illustrative only; does not reflect exact shipment times and frequency.

The Need For an Expanded Support Concept

• Every customer has mission-critical applications along with integration needs
• SAP landscapes become more sophisticated the more comprehensive & integrated they are
• SAP provides advanced support options to manage innovation and integration, risk and TCO

Managing high speed of innovation and integration, risk and total cost of operations is at the heart of SAP Enterprise Support

1. Enterprise Support

2. Q3 & 9M 2008 Financials

Income Statement Overview Third Quarter 2008 (Non-GAAP)

	Non-GAAP
	Q3 2008 € millions	Q3 2008* € millions	Q3 2007 € millions	%	% constant currency
Software revenue Software and software-related service revenue Total revenue	763 2,035 2,802	791 2,113 2,913	714 1,735 2,419	7 17 16	11 22 20
Total operating expenses Operating income Operating margin (in %)	-2,071 731 26.1	-2,147 766 26.3	-1,795 624 25.8	15 17 0.3pp	20 23 0.5 pp
Financial income/expense, net Income from continuing operations before income taxes Income taxes Income from continuing operations Net income	-19 719 -222 496 475		33 656 -230 425 419	-158 10 -3 17 13
EPS from continuing operations (basic, in €) EPS from net income (basic, in €)	0.41 0.40		0.36 0.35	14 14

* % currency adjusted – actuals 2008 converted with the exchange rates of 2007

Income Statement Overview Nine Months 2008 (Non-GAAP)

	Non-GAAP
	9M 2008 € millions	9M 2008* € millions	9M 2007 € millions	%	% constant currency
Software revenue Software and software-related service revenue Total revenue	2,283 5,931 8,219	2,417 6,241 8,652	1,992 4,954 7,002	15 20 17	21 26 24
Total operating expenses Operating income Operating margin (in %)	-6,288 1,931 23.5	-6,577 2,075 24.0	-5,337 1,665 23.8	18 16 -0.3pp	23 25 0.2pp
Financial income/expense, net Income from continuing operations before income taxes Income taxes Income from continuing operations Net income	-34 1,922 -583 1,338 1,309		103 1,760 -552 1,205 1,193	-133 9 6 11 10
EPS from continuing operations (basic, in €) EPS from net income (basic, in €)	1.12 1.10		1.00 0.99	12 11

* % currency adjusted – actuals 2008 converted with the exchange rates of 2007

Group Sales by Revenue Type Third Quarter 2008 (Non-GAAP)

	Non-GAAP
	Q3 2008 € millions	Q3 2008* € millions	Q3 2007 € millions	%	% constant currency
Software revenue Support revenue Subscriptions and other software-rel. serv. SW & SW-related service revenue	763 1,208 64 2,035	791 1,257 65 2,113	714 975 46 1,735	7 24 39 17	11 29 41 22
Consulting revenue Training revenue Other services revenue Professional services revenue	617 105 26 748	645 109 27 781	544 102 28 674	13 3 -7 11	19 7 -4 16
Other revenue	19	19	10	90	90
Total revenue	2,802	2,913	2,419	16	20

* % currency adjusted – actuals 2008 converted with the exchange rates of 2007

Group Sales by Revenue Type Nine Months 2008 (Non-GAAP)

	Non-GAAP
	9M 2008 € millions	9M 2008* € millions	9M 2007 € millions	%	% constant currency
Software revenue Support revenue Subscriptions and other software-rel. serv. SW & SW-related service revenue	2,283 3,464 184 5,931	2,417 3,636 188 6,241	1,992 2,833 129 4,954	15 22 43 20	21 28 46 26
Consulting revenue Training revenue Other services revenue Professional services revenue	1,832 323 77 2,232	1,931 340 82 2,353	1,618 300 84 2,002	13 8 -8 11	19 13 -2 18
Other revenue	56	58	46	22	26
Total revenue	8,219	8,652	7,002	17	24

* % currency adjusted – actuals 2008 converted with the exchange rates of 2007

Gross Margin Analysis Third Quarter 2008 (U.S. GAAP and Non-GAAP)

	U.S. GAAP		Non-GAAP
	Q3 2008 € millions	Q3 2007 € millions	%	Q3 2008 € millions	Q3 2007 € millions	%
SW & SW-related service revenue SW & SW-related service cost - SW & SW-related serv. margin in %	1,994 -381 80.9	1,735 -327 81.2	15 17 -0.3pp	2,035 -332 83.7	1,735 -311 82.1	17 7 1.6pp
Professional service and other service revenue Professional serv. and other serv. cost - Professional serv. gross margin in %	748 -583 22.1	674 -502 25.5	11 16 -3.4pp	748 -583 22.1	674 -501 25.7	11 16 -3.6pp
SW & SW-related service, professional serv. and other serv. revenue SW & SW-related service, professional serv. and other serv. costs	2,742 -964	2,409 -829	14 16	2,783 -915	2,409 -812	16 13
- Gross margin in %	64.8	65.6	-0.8pp	67.1	66.3	0.8pp

Gross Margin Analysis Nine Months 2008 (U.S. GAAP and Non-GAAP)

	U.S. GAAP			Non-GAAP
	9M 2008 € millions	9M 2007 € millions	%	9M 2008 € millions	9M 2007 € millions	%
SW & SW-related service revenue SW & SW-related service cost - SW & SW-related serv. margin in %	5,791 -1,166 79.9	4,954 -919 81.4	17 27 -1.5pp	5,931 -1,024 82.7	4,954 -882 82.2	20 16 0.5pp
Professional service and other service revenue Professional serv. and other serv. cost - Professional serv. gross margin in %	2,232 -1,731 22.4	2,002 -1,531 23.5	11 13 -1.1pp	2,232 -1,731 22.4	2,002 -1,530 23.6	11 13 -1.2pp
SW & SW-related service, professional serv. and other serv. revenue SW & SW-related service, professional serv. and other serv. costs	8,023 -2,897	6,956 -2,450	15 18	8,163 -2,755	6,956 -2,412	17 14
- Gross margin in %	63.9	64.8	-0.9pp	66.3	65.3	1.0pp

Cost Analysis Third Quarter 2008 (U.S. GAAP and Non-GAAP)

	U.S. GAAP		Non-GAAP
	Q3 2008 € millions	Q3 2007 € millions	%	Q3 2008 € millions	Q3 2007 € millions	%
Research and development - as % of total revenue	-398 14.4	-357 14.8	11 -0.4pp	-395 14.1	-357 14.8	11 -0.7pp
Sales and marketing - as % of total revenue	-634 23.0	-510 21.1	24 1.9pp	-611 21.8	-509 21.0	20 0.8pp
General and administration - as % of total revenue	-156 5.7	-121 5.0	29 0.7pp	-155 5.5	-121 5.0	28 0.5pp
Other operating income/expenses	5	4	25	5	4	25
Total operating expenses	-2,147	-1,813	18	-2,071	-1,795	15

Cost Analysis Nine Months 2008 (U.S. GAAP and Non-GAAP)

	U.S. GAAP		Non-GAAP
	9M 2008 € millions	9M 2007 € millions	%	9M 2008 € millions	9M 2007 € millions	%
Research and development - as % of total revenue	-1,236 15.3	-1,049 15.0	18 0.3pp	-1,218 14.8	-1,048 15.0	16 -0.2pp
Sales and marketing - as % of total revenue	-1,912 23.7	-1,523 21.8	26 1.9pp	-1,848 22.5	-1,520 21.7	22 0.8pp
General and administration - as % of total revenue	-477 5.9	-367 5.2	30 0.7pp	-476 5.8	-367 5.2	30 0.6pp
Other operating income/expenses	9	10	-10	9	10	-10
Total operating expenses	-6,513	-5,379	21	-6,288	-5,337	18

	2008 € millions	volume	currency	2007 € millions
Q1 Total operating expenses	2,018	+395	-92	1,715
Q2 Total operating expenses	2,199	+493	-121	1,827
Q3 Total operating expenses	2,071	+352	-76	1,795
Total operating expenses	6,288	+1,240	-289	5,337

Personnel	Hiring (9,262 FTEs*, net since Q3 2007)
3rd Party	Usage of third party services
Travel	Increased business activity

Balance Sheet Summary Third Quarter 2008 (U.S. GAAP)

Assets* Shareholders' Equity & Liabilities*

* in € millions

	9/30/08	12/31/07	%
Days sales outstanding (DSO)	69 days	66 days	+3 days
Equity ratio	48%	63%	-15pp

	9M 2008 € millions	9M 2007 € millions	%
Operating cash flow – Capital expenditure	1,970 -244	1,344 -294	47 -17
Free cash flow	1,726	1,050	64
Free cash flow as a % of total revenue	21	15	6pp

Headcount* as of September 30, 2008 Continuing Operations Only – Nine Months 2008

				9M		9M
	9/2008	12/2007	9/2007	Total	Thereof acqns.	% Total	% Excl. acqns.
Headcount by Region EMEA Americas Asia Pacific Japan	26,764 13,793 11,306	23,654 10,629 9,578	23,229 10,396 8,976	3,110 3,164 1,728	2,262 3,329 900	13 30 18	4 -2 9
Headcount by Functional Area SW and SW-rel. services Prof. svs. and other svs. Research and development Sales and marketing General and administration Infrastructure	6,457 14,193 15,458 10,909 3,303 1,543	5,831 12,785 12,951 8,282 2,797 1,215	5,716 12,470 12,532 8,035 2,674 1,174	626 1,408 2,507 2,627 506 328	604 1,035 1,851 2,184 540 276	11 11 19 32 18 27	0 3 5 5 -1 4
Group	51,863	43,861	42,601	8,002	6,491	18	3
Net growth Net growth (excluding acquisitions)	8,002 1,511

* in full-time equivalents

Headcount* as of September 30, 2008 – Cont'd Continuing Operations Only – Nine Months 2008

in full-time equivalents | % 9M

thereof acquisitions 1,035

* in full-time equivalents