SAP AG (NYSE: SAP) today announced its preliminary financial results for the third quarter and nine months ended September 30, 2008.

HIGHLIGHTS - Third Quarter 2008
SAP - Third Quarter 2008* U.S. GAAP Non-GAAP** % change % % constant euro million Q3/2008 Q3/2007 change Q3/2008 Q3/2007 change currency*** Software revenues 763 714 7 763 714 7 11 Software and software- related service revenues 1,994 1,735 15 2,035 1,735 17 22 Total revenues 2,761 2,419 14 2,802 2,419 16 20 Operating income 614 606 1 731 624 17 23 Operating margin (%) 22.2 25.1 -2.9pp 26.1 25.8 0.3pp 0.5pp Income from continuing operations 409 414 -1 496 425 17 - Net income 388 408 -5 475 419 13 - Basic EPS from cont. operations (euro) 0.35 0.35 0 0.41 0.36 14 - * 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 Appendix 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 Appendix at the end of the financial section of press release for details.

Revenues

• Third quarter 2008 U.S. GAAP software and software-related service revenues were euro 1.99 billion (2007: euro 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 euro 41 million, for the third quarter of 2008 were euro 2.04 billion (2007: euro 1.74 billion). This represents an increase of 17% (22% at constant currencies) compared to the third quarter of 2007. If SAP's reporting currency was the U.S. Dollar, Non-GAAP software and software-related service revenues for the third quarter would have increased 26% compared to the same period one year ago.
• Excluding the contribution from Business Objects, SAP's business contributed 7 percentage points to the constant currency growth of the Non-GAAP software and software-related service revenues for the third quarter of 2008.
• U.S. GAAP total revenues for the 2008 third quarter were euro 2.76 billion (2007: euro 2.42 billion), which was a year-over-year increase of 14%. Non-GAAP total revenues, which exclude a non-recurring deferred support revenue write-down from the acquisition of Business Objects of euro 41 million for the third quarter of 2008, were euro 2.80 billion (2007: euro 2.42 billion), which is an increase of 16% (20% at constant currencies) compared to the third quarter of 2007.
• Third quarter 2008 U.S. GAAP software revenues were euro 763 million (2007: euro 714 million), representing an increase of 7% (11% at constant currencies) compared to the third quarter of 2007.

Income

• U.S. GAAP operating income for the third quarter was euro 614 million (2007: euro 606 million), which was an increase of 1% compared to the third quarter of 2007. Third 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 117 million, was euro 731 million (2007: euro 624 million), which was an increase of 17% (23% 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 euro 14 million.
• U.S. GAAP income from continuing operations for the third quarter of 2008 was euro 409 million (2007: euro 414 million), representing a decrease of 1% compared to the third 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 87 million, was euro496 million (2007: euro 425 million), representing an increase of 17% compared to the third quarter of 2007.
• U.S. GAAP basic earnings per share from continuing operations for the third quarter of 2008 was euro 0.35 (2007: euro 0.35), which was flat compared to the same period in 2007. Non-GAAP earnings per share from continuing operations for the third quarter of 2008 was euro 0.41 (2007: euro 0.36), which was an increase of 14% compared to the same period in 2007.

"The third quarter 2008 was SAP's 19th consecutive quarter of double-digit growth in software and software-related service revenues at constant currencies. This was an achievement in a period where the global financial crisis had a significant impact on customer decisions towards quarter end," said Henning Kagermann, co-CEO of SAP. "Customers are continuing to spend on our products, but the economic and business environment is uncertain. Our business model is flexible, and we are focusing on protecting our operating margins and earnings."

Mr. Kagermann continued, "We are assessing business activity continuously, and we are balancing the need for greater efficiencies with steady advancements in our products, customer services and technologies, while addressing customers' most critical business issues. This approach has worked well for customers and SAP throughout the up and down economic cycles of the past, and has contributed to SAP's market leadership. We've been through uncertainty before, and have always emerged as a better, stronger and more efficient company."

Core Enterprise Applications Vendor Share
Based on U.S. GAAP third 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 $38.7 billion in software and software-related service revenues as defined by the Company based on industry analyst research, was 33.4% for the four-quarter period ended September 30, 2008. This represents a 6.5 percentage point increase compared to the four quarter period ended September 30, 2007, of which approximately 3.3 percentage points came from organic growth and 3.2 percentage points from the acquisition of Business Objects.

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

Share Buyback
In the third quarter of 2008 the Company bought back 2.8 million shares at an average price of euro 37.75 (euro 104.2 million). Of the total shares purchased in the third quarter, 983,153 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 in the third quarter of 2008 represented 0.23% of the total shares outstanding. At September 30, 2008, the Company held treasury stock in the amount of 38.7 million shares (approximately 3.15% of total shares outstanding) at an average price of euro 35.43. For the first nine months of 2008, the Company invested euro 486.8 million buying back approximately 14.6 million shares at an average price of euro 33.34.

HIGHLIGHTS - Nine Months 2008
Business Objects is included in the results from January 21, 2008 onwards.

SAP - Nine Months 2008* U.S. GAAP Non-GAAP** % change % % constant euro million 9M/2008 9M/2007 change 9M/2008 9M/2007 change currency*** Software revenues 2,283 1,992 15 2,283 1,992 15 21 Software and software- related service revenues 5,791 4,954 17 5,931 4,954 20 26 Total revenues 8,079 7,002 15 8,219 7,002 17 24 Operating income 1,566 1,623 -4 1,931 1,665 16 25 Operating margin (%) 19.4 23.2 -3.8pp 23.5 23.8 -0.3pp 0.2pp Income from continuing operations 1,067 1,179 -9 1,338 1,205 11 - Net income 1,038 1,167 -11 1,309 1,193 10 - Basic EPS from cont. operations (euro) 0.90 0.98 -8 1.12 1.00 12 - * 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 Appendix 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 Appendix at the end of the financial section of press release for details.

Revenues

• Nine-month 2008 U.S. GAAP software and software-related service revenues were euro 5.79 billion (2007: euro 4.95 billion), representing an increase of 17% compared to the first nine months 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 140 million, for the first nine months of 2008 were euro5.93 billion (2007: euro 4.95 billion). This represents an increase of 20% (26% at constant currencies) compared to the first nine months of 2007. If SAP's reporting currency was the U.S. Dollar, Non-GAAP software and software-related service revenues for the first nine months would have increased 35% compared to the same period one year ago.
• Excluding the contribution from Business Objects, SAP's business contributed 12 percentage points to the constant currency growth of the Non-GAAP software and software-related service revenues for the 2008 nine-month period.
• U.S. GAAP total revenues for the 2008 nine-month period were euro 8.08 billion (2007: euro 7.00 billion), which was a year-over-year increase of 15%. Non-GAAP total revenues, which exclude a non-recurring deferred support revenue write-down from the acquisition of Business Objects of euro 140 million for the first nine months of 2008, were euro 8.22 billion (2007: euro 7.00 billion), which was an increase of 17% (24% at constant currencies) compared to the first nine months of 2007.
• Nine-month 2008 U.S. GAAP software revenues were euro 2.28 billion (2007: euro 1.99 billion), representing an increase of 15% (21% at constant currencies) compared to the same period in 2007.

Income

• U.S. GAAP operating income for the 2008 nine-month period was euro 1.57 billion (2007: euro 1.62 billion), which was a decrease of 4% compared to the same period in 2007. The nine-month 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 365 million, was euro 1.93 billion (2007: euro 1.67 billion), which was an increase of 16% (25% at constant currencies) compared to the first nine months of 2007.
• The U.S. GAAP operating margin for the 2008 nine-month period was 19.4% (2007: 23.2%). The nine-month Non-GAAP operating margin was 23.5% (2007: 23.8%), or 24.0% at constant currencies. Both the U.S. GAAP and the Non-GAAP operating margins were impacted by 1) euro 24 million expensed in the second quarter of 2008 for the settlement of a litigation and, 2) one-time expenses associated with the integration of Business Objects (which are not acquisition-related charges) of approximately euro 33 million.
• U.S. GAAP income from continuing operations for the nine-month period of 2008 was euro 1.07 billion (2007: euro 1.18 billion), representing a decrease of 9% compared to the same period in 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 271 million, was euro1.34 billion (2007: euro 1.21 billion), representing an increase of 11% compared to the 2007 nine-month period. Nine-month 2007 U.S. GAAP and Non-GAAP income from continuing operations were positively impacted by a 2007 second quarter effective tax rate of 25.5% and 25.8%, respectively, partly resulting from non-recurring tax effects.
• U.S. GAAP earnings per share from continuing operations for the first nine months of 2008 was euro 0.90 (2007: euro 0.98), which was a decrease of 8% compared to the same period in 2007. Non-GAAP earnings per share from continuing operations for the 2008 nine-month period was euro1.12 (2007: euro1.00), which was an increase of 12% compared to the same period in 2007.

BUSINESS OUTLOOK
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 euro180 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.

KEY EVENTS - Third Quarter 2008

• In the third quarter of 2008, SAP closed major contracts in several key regions including Bundesagentur fur Arbeit, CENEXI, DTEK, Imperial Bank Limited, and TD Perekrestok in EMEA; Callaway Golf Company, Loblaw Companies Limited, Municipio de Medellin, Servicios Liverpool , and Southern California Edison in Americas; and China Telecom System Integration Co., Ltd, Gansu Electric Power Corp., Tomen Electronics Corp., Universal Scientific Industrial Co., Ltd., and Wuthelam Holdings Pte Ltd in the Asia Pacific Japan region.

• In the third quarter, SAP signed a Global Enterprise Agreement (GEA) with Procter & Gamble. The GEA with P&G extends SAP's position as a leader in providing comprehensive enterprise software for the consumer products industry.

• On September 16, 2008, SAP and The Hong Kong and Shanghai Banking Corporation announced that the HSBC Group (HSBC) will create a leading edge bank-client integration solution using the SAP NetWeaver technology platform to streamline and automate the bank's communications for the delivery of banking services to its corporate banking clients.

• On September 9, 2008, Business Objects announced the availability of BusinessObjects Metadata Management XI 3.0, software that enables organizations to support data governance by providing a central view of metadata assets and their relationships.

• On September 9, 2008, SAP announced a SAP NetWeaver Fund investment in InnoCentive, Inc., a global online open innovation marketplace. The addition of InnoCentive to the SAP ecosystem further fosters co-innovation by providing a global platform in which solution-providers are financially rewarded for offering solutions to complex business challenges.

• This year's SAP TechEd 2008 event season is driven by the theme "Connect, Collaborate, Co-Innovate," bringing together the worldwide technical community to harness the collective knowledge and resources of the SAP ecosystem, helping them enhance their skills, get their jobs done with efficiency and provide added benefit to their companies. Now in its 12th year, SAP TechEd 2008 took place in Las Vegas on September 8-12 with 6,000 attendees, Berlin on October 14-16 with 4,500 attendees, and will take place in Shanghai on November 5-6 and Bangalore on November 12-14.

• Based on the resolutions of the SAP AG Annual General Meetings of Shareholders on May 9, 2006 and May 10, 2007, on September 3, 2008 the Executive Board of SAP AG resolved to decrease the Company's capital stock from euro 1,246,683,912.00 (represented by 1,246,683,912 no-par shares, each with an attributable subscribed capital of euro 1) to euro 1,225,683,912.00 (represented by 1,225,683,912 no-par shares, each with an attributable subscribed capital of euro 1) by cancelling 21,000,000 treasury shares, representing 1.68% of the capital stock before this corporate action.

• On August 12, 2008, Business Objects announced the latest versions of its solutions for enterprise performance management (EPM), which will provide customers with improved control and agility, enabling them to enhance performance across both finance and operations. Additionally, Business Objects announced the availability of BusinessObjects Xcelsius Present. Xcelsius Present is a data-visualization tool that transforms ordinary, static Microsoft Office Excel spreadsheets into captivating visuals and allows business users to share them via Microsoft PowerPoint or Adobe PDF files.

• On July 30, 2008, SAP announced that it has been named the worldwide market share leader based on total software revenue for business solutions in the customer relationship management (CRM), enterprise resource planning (ERP) and supply chain management (SCM) markets, according to 2007 market share reports published by the independent research firm Gartner, Inc.

• On July 16, 2008, SAP announced the availability of SAP Enterprise Support to all customers, as of January 1, 2009, further demonstrating a dedication to providing solutions and support offerings that meet the evolving needs of customers.

• On July 15, 2008, SAP announced the 20,000th customer for SAP Business One, its integrated business management application for small businesses, proving the rapid market adoption rate of the application, for which SAP has been able to double its customer base in less than two years.

• On July 2, 2008, Business Objects announced that research analyst firm IDC ranked Business Objects as the number one vendor for business intelligence (BI) tools with a 14.2 percent market share.

• Effective July 1, 2008, the Supervisory Board of SAP AG appointed Erwin Gunst , Bill McDermott and Jim Hagemann Snabe as three new members of the SAP Executive Board. McDermott is responsible for all sales regions worldwide: Snabe has full development responsibility for SAP Business Suite and the SAP NetWeaver technology platform and Gunst is charged with further improving the company's operations and process efficiency in the newly created position of chief operating officer (COO).

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 Appendix at the end of 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 $38.7 billion in software and software-related service revenues as defined by the Company based on industry analyst research. For 2008, industry analysts project approximately 7% year-on-year growth for Core Enterprise Applications vendors. For its quarterly share calculation, SAP assumes that this approximate 7% growth will not be linear throughout the year. Instead, quarterly adjustments are made based on the financial performance of a sub set of (approximately 25) Core Enterprise Application vendors.

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 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 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.

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) 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, EDT 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, EDT

Appendix - Financial Information to Follow

CONSOLIDATED INCOME STATEMENT - THIRD QUARTER (U.S. GAAP) Preliminary and unaudited Three months ended euro millions, unless otherwise stated September 30 ------------------ 2008 2007 % change ---- ---- -------- Software revenue 763 714 7 Support revenue 1,167 975 20 Subscription and other software-related service revenue 64 46 39 Software and software-related service revenue 1,994 1,735 15 Consulting revenue 617 544 13 Training revenue 105 102 3 Other service revenue 26 28 -7 Professional services and other service revenue 748 674 11 Other revenue 19 10 90 --------------- -- -- -- Total revenue 2,761 2,419 14 ------------- ----- ----- -- Cost of software and software-related services -381 -327 17 Cost of professional services and other services -583 -502 16 Research and development -398 -357 11 Sales and marketing -634 -510 24 General and administration -156 -121 29 Other operating income/expense, net 5 4 25 ------------------------------------- --- --- --- Total operating expenses -2,147 -1,813 18 ------------------------ ------ ------ -- Operating income 614 606 1 ---------------- --- --- - Other non-operating income/expense, net 7 -1 -800 Financial income/expense, net -19 33 -158 ------------------------------- --- -- ---- Income from continuing operations before income taxes 602 638 -6 ------------ --- --- -- Income taxes -192 -223 -14 Minority interests -1 -1 0 -------------------- -- -- -- Income from continuing operations 409 414 -1 ---------------------- --- --- -- Loss from discontinued operations, net of tax -21 -6 250 ------------------------------------ --- -- --- Net income 388 408 -5 ---------- --- --- -- Earnings per Share (EPS) EPS from continuing operations - basic in euro 0.35 0.35 0 EPS from continuing operations - diluted in euro 0.34 0.34 0 EPS from net income - basic in euro 0.33 0.34 -3 EPS from net income - diluted in euro 0.33 0.33 0 Weighted average number of shares* 1,188 1,206 Key Ratios Operating margin 22.2% 25.1% -2.9pp Effective tax rate from continuing operations 31.9% 35.0% * in millions, treasury stock excluded -------------------------------------- CONSOLIDATED INCOME STATEMENT - YEAR TO DATE (U.S. GAAP) Preliminary and unaudited ------------------------ Nine months ended euro millions, unless otherwise stated September 30 ----------------- 2008 2007 % change ---- ---- -------- Software revenue 2,283 1,992 15 Support revenue 3,324 2,833 17 Subscription and other software-related service revenue 184 129 43 Software and software-related service revenue 5,791 4,954 17 Consulting revenue 1,832 1,618 13 Training revenue 323 300 8 Other service revenue 77 84 -8 Professional services and other service revenue 2,232 2,002 11 Other revenue 56 46 22 --------------- -- -- -- Total revenue 8,079 7,002 15 ------------- ----- ----- -- Cost of software and software-related services -1,166 -919 27 Cost of professional services and other services -1,731 -1,531 13 Research and development -1,236 -1,049 18 Sales and marketing -1,912 -1,523 26 General and administration -477 -367 30 Other operating income/expense, net 9 10 -10 ------------------------------------- -- -- --- Total operating expenses -6,513 -5,379 21 ------------------------ ------ ------ -- Operating income 1,566 1,623 -4 ---------------- ----- ----- -- Other non-operating income/expense, net 25 -8 -413 Financial income/expense, net -34 103 -133 ------------------------------- --- --- ---- Income from continuing operations before income taxes 1,557 1,718 -9 ------------ ----- ----- -- Income taxes -489 -536 -9 Minority interests -1 -3 -67 -------------------- -- -- --- Income from continuing operations 1,067 1,179 -9 ---------------------- ----- ----- -- Loss from discontinued operations, net of tax -29 -12 142 ------------------------------------ --- --- --- Net income 1,038 1,167 -11 ---------- ----- ----- --- Earnings per Share (EPS) EPS from continuing operations - basic in euro 0.90 0.98 -8 EPS from continuing operations - diluted in euro 0.89 0.97 -8 EPS from net income - basic in euro 0.87 0.97 -10 EPS from net income - diluted in euro 0.87 0.96 -9 Weighted average number of shares* 1,192 1,209 Key Ratios Operating margin 19.4% 23.2% -3.8pp Effective tax rate from continuing operations 31.4% 31.2% * in millions, treasury stock excluded CONDENSED CONSOLIDATED BALANCE SHEETS (U.S. GAAP) Preliminary and unaudited September December euro millions 30, 2008 31, 2007 ------------ --------- --------- Assets Cash and cash equivalents 1,486 1,608 Restricted cash 3 550 Short-term investments 111 598 Accounts receivable, net 2,644 2,895 Other assets 441 541 Deferred income taxes 193 125 Prepaid expenses/deferred charges 119 76 Assets classified as held for disposal 6 15 Current assets 5,003 6,408 Goodwill 5,077 1,423 Intangible assets, net 1,202 403 Property, plant, and equipment, net 1,388 1,316 Investments 105 89 Accounts receivable, net 3 3 Other assets 637 555 Deferred income taxes 171 146 Prepaid expenses/deferred charges 25 23 Noncurrent assets 8,608 3,958 Total assets 13,611 10,366 ------------ ------ ------ September December euro millions 30, 2008 31, 2007 ------------ --------- --------- Liabilities, Minority interests and Shareholders' equity Accounts payable 572 715 Income tax obligations 486 341 Other liabilities 1,382 1,456 Provisions 264 154 Deferred income taxes 33 47 Deferred income 1,041 477 Liabilities associated with assets classified as held for disposal 15 9 Current liabilities 3,793 3,199 Accounts payable 6 10 Income tax obligations 97 90 Other liabilities 2,453 79 Provisions 496 369 Deferred income taxes 173 73 Deferred income 36 42 Noncurrent liabilities 3,261 663 Total liabilities 7,054 3,862 Minority interests 2 1 Common stock, no par value 1,226 1,246 Treasury stock -1,370 -1,734 Additional paid-in capital 351 347 Retained earnings 6,882 7,159 Accumulated other comprehensive loss -534 -515 Shareholders' equity 6,555 6,503 Total liabilities, Minority interests and Shareholders' equity 13,611 10,366 ------------------------------------------ ------ ------ Days Sales Outstanding 69 66 ---------------------- -- -- CONSOLIDATED STATEMENTS OF CASH FLOWS - YEAR TO DATE (U.S. GAAP) Preliminary and unaudited euro millions Nine months ended September 30 ------------------------------ 2008 2007 ---- ---- Net income 1,038 1,168 Net loss from discontinued operations 29 12 Minority interests 1 2 Income from continuing operations before minority interests 1,068 1,182 Adjustments to reconcile income from continuing operations before minority interests to net cash provided by operating activities: Depreciation and amortization 412 187 Losses from equity investees 1 1 Losses on disposal of intangible assets and property, plant, and equipment 2 0 Gains on disposal of investments -9 -2 Writeups/downs of financial assets 4 2 Allowances for doubtful accounts 34 -5 Impacts of hedging for cash-settled share-based payment plans -10 13 Stock-based compensation including income tax benefits 22 31 Excess tax benefit from share-based compensation -14 -8 Deferred income taxes -72 2 Change in accounts receivable 528 251 Change in other assets 77 -234 Change in accrued and other liabilities -558 -448 Change in deferred income 485 372 --------------------------- --- --- Net cash provided by operating activities from continuing operations 1,970 1,344 -------------------------------------- ----- ----- Acquisition of minority interests in subsidiaries 0 -48 Business combinations, net of cash and cash equivalents acquired -3,767 -657 Repayment of acquirees' debt in business combinations -450 0 Purchase of intangible assets and property, plant, and equipment -244 -294 Proceeds from disposal of intangible assets and property, plant, and equipment 27 22 Cash transferred to restricted cash -451 0 Reduction of restricted cash 1,000 0 Purchase of investments -40 -720 Sales of investments 521 646 Purchase of other financial assets -11 -15 Sales of other financial assets 12 11 --------------------------------- -- -- Net cash used in investing activities from continuing operations -3,403 -1,055 ------------------------------------------ ------ ------ Dividends paid -594 -556 Purchase of treasury stock -487 -756 Proceeds from reissuance of treasury stock 79 131 Proceeds from issuance of common stock (share-based compensation) 13 39 Excess tax benefit from share-based compensation 14 8 Proceeds from short-term and long-term debt 3,859 32 Repayments of short-term and long-term debt -1,521 -32 Proceeds from the exercise of equity-based derivative instruments (STAR hedge) 33 74 Purchase of equity-based derivative instruments (hedge for cash-settled share-based payment plans) -55 0 ------------------------------------------------- --- -- Net cash provided by / used in financing activities from continuing operations 1,341 -1,060 ---------------------------------------- ----- ------ Effect of foreign exchange rates on cash and cash equivalents -9 -7 ---------------------------------------- -- -- Net cash used in operating activities from discontinued operations -21 -12 Net cash used in investing activities from discontinued operations 0 0 Net cash used in financing activities from discontinued operations 0 0 -------------------------------------------- -- -- Net cash used in discontinued operations -21 -12 ---------------------------------------- --- --- Net change in cash and cash equivalents -122 -790 --------------------------------------- ---- ---- Cash and cash equivalents at the beginning of the period 1,608 2,399 -------------------------------- ----- ----- Cash and cash equivalents at the end of the period 1,486 1,609 --------------------------------------- ----- ----- Reconciliations from Non-GAAP Numbers to U.S. GAAP Numbers - Third 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 Appendix for more information on our non-GAAP numbers. euro millions, unless otherwise stated Three months ended September 30 ------------------------------- 2008 ---- Non-GAAP Currency constant U.S. GAAP Adj.* Non-GAAP* impact** currency** Software revenue 763 0 763 28 791 Support revenue 1,167 41 1,208 49 1,257 Subscription and Other software-related service revenue 64 0 64 1 65 Software and software-related Service revenue 1,994 41 2,035 78 2,113 Consulting revenue 617 0 617 28 645 Training revenue 105 0 105 4 109 Other service revenue 26 0 26 1 27 Professional services and other service revenue 748 0 748 33 781 Other revenue 19 0 19 0 19 --------------- -- - -- - -- Total revenue 2,761 41 2,802 111 2,913 ------------- ----- -- ----- --- ----- Cost of software and software-related services -381 49 -332 Cost of professional services and other services -583 0 -583 Research and development -398 3 -395 Sales and marketing -634 23 -611 General and administration -156 1 -155 Other operating income/expense, net 5 0 5 ---------------------- -- -- -- Total operating expenses -2,147 76 -2,071 -76 -2,147 ---------- ------ -- ------ --- ------ Operating income 614 117 731 35 766 --------- --- --- --- -- --- Other non-operating income/expense, net 7 0 7 Financial income/expense, net -19 0 -19 ------------------ --- - --- Income from continuing Operations before income taxes 602 117 719 ------------ --- --- --- Income taxes -192 -30 -222 Minority interests -1 0 -1 -------------------- -- - -- Income from continuing operations 409 87 496 ----------- --- -- --- Loss from discontinued operations, net of tax -21 0 -21 ------------------------ --- -- --- Net income 388 87 475 ---------- --- -- --- Earnings per Share (EPS) EPS from continuing operations - basic in euro 0.35 0.41 EPS from continuing operations - diluted in euro 0.34 0.41 EPS from net income - basic in euro 0.33 0.40 EPS from net income - diluted in euro 0.33 0.40 Weighted average number of shares*** 1,188 1,188 Key Ratios Operating margin 22.2% 26.1% 26.3% Effective tax rate From continuing operations 31.9% 30.9% euro millions, unless otherwise stated Three months ended September 30 ------------------------------- 2007 ---- U.S. GAAP Adj.* Non-GAAP* Software revenue 714 0 714 Support revenue 975 0 975 Subscription and other software-related service revenue 46 0 46 Software and software-related service revenue 1,735 0 1,735 Consulting revenue 544 0 544 Training revenue 102 0 102 Other service revenue 28 0 28 Professional services and other service revenue 674 0 674 Other revenue 10 0 10 --------------- -- - -- Total revenue 2,419 0 2,419 ------------- ----- - ----- Cost of software and software-related services -327 16 -311 Cost of professional services and other services -502 1 -501 Research and development -357 0 -357 Sales and marketing -510 1 -509 General and administration -121 0 -121 Other operating income/expense, net 4 0 4 ------------------------------------- -- -- -- Total operating expenses -1,813 18 -1,795 ------------------------ ------ -- ------ Operating income 606 18 624 ---------------- --- -- --- Other non-operating income/expense, net -1 0 -1 Financial income/expense, net 33 0 33 ------------------------------- -- -- -- Income from continuing operations before income taxes 638 18 656 ------------ --- -- --- Income taxes -223 -7 -230 Minority interests -1 0 -1 -------------------- -- - -- Income from continuing operations 414 11 425 ---------------------- --- -- --- Loss from discontinued operations, net of tax -6 0 -6 ------------------------------------ -- - -- Net income 408 11 419 ---------- --- -- --- Earnings per Share (EPS) EPS from continuing operations - basic in euro 0.35 0.36 EPS from continuing operations - diluted in euro 0.34 0.35 EPS from net income - basic in euro 0.34 0.35 EPS from net income - diluted in euro 0.33 0.34 Weighted average number of shares*** 1,206 1,206 Key Ratios Operating margin 25.1% 25.8% Effective tax rate from continuing operations 35.0% 35.1% euro millions, unless otherwise stated Three months ended September 30 ------------------------------- % change -------- Non-GAAP constant U.S. GAAP Non-GAAP* currency** Software revenue 7 7 11 Support revenue 20 24 29 Subscription and other software-related service revenue 39 39 41 Software and software-related service revenue 15 17 22 Consulting revenue 13 13 19 Training revenue 3 3 7 Other service revenue -7 -7 -4 Professional services and other service revenue 11 11 16 Other revenue 90 90 90 --------------- -- -- -- Total revenue 14 16 20 ------------- -- -- -- Cost of software and software-related services 17 7 Cost of professional services and other services 16 16 Research and development 11 11 Sales and marketing 24 20 General and administration 29 28 Other operating income/expense, net 25 25 ---------------------- -- -- Total operating expenses 18 15 20 --------------- -- -- -- Operating income 1 17 23 ---------------- -- -- -- Other non-operating income/expense, net -800 -800 Financial income/expense, net -158 -158 ------------------------------- ---- ---- Income from continuing operations before income taxes -6 10 ------------ -- -- Income taxes -14 -3 Minority interests 0 0 -------------------- -- -- Income from continuing operations -1 17 ----------- -- -- Loss from discontinued operations, net of tax 250 250 ------------------------- --- --- Net income -5 13 ---------- -- -- Earnings per Share (EPS) EPS from continuing operations - basic in euro 0 14 EPS from continuing operations - diluted in euro 0 17 EPS from net income - basic in euro -3 14 EPS from net income - diluted in euro 0 18 Weighted average number of shares*** Key Ratios Operating margin -2.9pp 0.3pp 0.5pp Effective tax rate from continuing operations * 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 Appendix 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 Appendix for details *** in millions, treasury stock excluded Reconciliations from Non-GAAP Numbers to U.S. GAAP Numbers - Year to Date 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 Appendix for more information on our non-GAAP numbers. euro millions, unless otherwise stated Nine months ended September 30 ------------------------------ 2008 ---- Non-GAAP Currency constant U.S. GAAP Adj.* Non-GAAP* impact** currency** Software revenue 2,283 0 2,283 134 2,417 Support revenue 3,324 140 3,464 172 3,636 Subscription and Other software-related service revenue 184 0 184 4 188 Software and software-related service revenue 5,791 140 5,931 310 6,241 Consulting revenue 1,832 0 1,832 99 1,931 Training revenue 323 0 323 17 340 Other service revenue 77 0 77 5 82 Professional services and other service revenue 2,232 0 2,232 121 2,353 Other revenue 56 0 56 2 58 --------------- -- -- -- -- -- Total revenue 8,079 140 8,219 433 8,652 ------------- ----- --- ----- --- ----- Cost of software and software-related services -1,166 142 -1,024 Cost of professional services and other services -1,731 0 -1,731 Research and development -1,236 18 -1,218 Sales and marketing -1,912 64 -1,848 General and administration -477 1 -476 Other operating income/expense, net 9 0 9 ---------------------- -- -- -- Total operating expenses -6,513 225 -6,288 -289 -6,577 ---------- ------ --- ------ ---- ------ Operating income 1,566 365 1,931 144 2,075 ---------------- ----- --- ----- --- ----- Other non-operating income/expense, net 25 0 25 Financial income/expense, net -34 0 -34 ---------------------- --- -- --- Income from continuing Operations before income taxes 1,557 365 1,922 ------------ ----- --- ----- Income taxes -489 -94 -583 Minority interests -1 0 -1 -------------------- -- -- -- Income from continuing operations 1,067 271 1,338 ----------- ----- --- ----- Loss from discontinued operations, net of tax -29 0 -29 --------------------- --- - --- Net income 1,038 271 1,309 ---------- ----- --- ----- Earnings per Share (EPS) EPS from continuing operations - basic in euro 0.90 1.12 EPS from continuing operations - diluted in euro 0.89 1.12 EPS from net income - basic in euro 0.87 1.10 EPS from net income - diluted in euro 0.87 1.10 Weighted average number of shares*** 1,192 1,192 Key Ratios Operating margin 19.4% 23.5% 24.0% Effective tax rate from Continuing operations 31.4% 30.3% euro millions, unless otherwise stated Nine months ended September 30 ------------------------------ 2007 ---- U.S. GAAP Adj.* Non-GAAP* Software revenue 1,992 0 1,992 Support revenue 2,833 0 2,833 Subscription and other software-related service revenue 129 0 129 Software and software-related service revenue 4,954 0 4,954 Consulting revenue 1,618 0 1,618 Training revenue 300 0 300 Other service revenue 84 0 84 Professional services and other service revenue 2,002 0 2,002 Other revenue 46 0 46 --------------- -- -- -- Total revenue 7,002 0 7,002 ------------- ----- -- ----- Cost of software and software-related services -919 37 -882 Cost of professional services and other services -1,531 1 -1,530 Research and development -1,049 1 -1,048 Sales and marketing -1,523 3 -1,520 General and administration -367 0 -367 Other operating income/expense, net 10 0 10 ------------------------------------- -- -- -- Total operating expenses -5,379 42 -5,337 ------------------------ ------ -- ------ Operating income 1,623 42 1,665 ---------------- ----- -- ----- Other non-operating income/expense, net -8 0 -8 Financial income/expense, net 103 0 103 ------------------------------- --- -- --- Income from continuing operations before income taxes 1,718 42 1,760 ------------ ----- -- ----- Income taxes -536 -16 -552 Minority interests -3 0 -3 -------------------- -- -- -- Income from continuing operations 1,179 26 1,205 ---------------------- ----- -- ----- Loss from discontinued operations, net of tax -12 0 -12 ------------------------------------ --- -- --- Net income 1,167 26 1,193 ---------- ----- -- ----- Earnings per Share (EPS) EPS from continuing operations - basic in euro 0.98 1.00 EPS from continuing operations - diluted in euro 0.97 0.99 EPS from net income - basic in euro 0.97 0.99 EPS from net income - diluted in euro 0.96 0.98 Weighted average number of shares*** 1,209 1,209 Key Ratios Operating margin 23.2% 23.8% Effective tax rate from continuing operations 31.2% 31.4% euro millions, unless otherwise stated Nine months ended September 30 ------------------------------ % change -------- Non-GAAP constant U.S. GAAP Non-GAAP* currency** Software revenue 15 15 21 Support revenue 17 22 28 Subscription and other software-related service revenue 43 43 46 Software and software-related service revenue 17 20 26 Consulting revenue 13 13 19 Training revenue 8 8 13 Other service revenue -8 -8 -2 Professional services and other service revenue 11 11 18 Other revenue 22 22 26 --------------- -- -- -- Total revenue 15 17 24 ------------- -- -- -- Cost of software and software-related services 27 16 Cost of professional services and other services 13 13 Research and development 18 16 Sales and marketing 26 22 General and administration 30 30 Other operating income/expense, net -10 -10 ---------------------- --- --- Total operating expenses 21 18 23 ------------------------ -- -- -- Operating income -4 16 25 ---------------- -- -- -- Other non-operating income/expense, net -413 -413 Financial income/expense, net -133 -133 - ----------------------------- ---- ---- Income from continuing operations before income taxes -9 9 ------------ -- -- Income taxes -9 6 Minority interests -67 -67 -------------------- --- --- Income from continuing operations -9 11 ---------------------- -- -- Loss from discontinued operations, net of tax 142 142 ------------------------- --- --- Net income -11 10 ---------- --- -- Earnings per Share (EPS) EPS from continuing operations - basic in euro -8 12 EPS from continuing operations - diluted in euro -8 13 EPS from net income - basic in euro -10 11 EPS from net income - diluted in euro -9 12 Weighted average number of shares*** Key Ratios Operating margin -3.8pp -0.3pp 0.2pp Effective tax rate from continuing operations * 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 Appendix 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 Appendix for details *** in millions, treasury stock excluded Reconciliations from Non-GAAP revenue in U.S. dollar to U.S. GAAP revenue in euro 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 Appendix for more information on our non-GAAP numbers in U.S. dollar. Three months ended September 30 ------------------------------- Software and Software-Related Software Revenue Service Revenue ---------------- ----------------- 2008 2007 % change 2008 2007 % change ---- ---- -------- ---- ---- -------- U.S. GAAP revenue in euro millions 763 714 7 1,994 1,735 15 Respective measure in US$ millions 1,115 991 13 2,960 2,394 24 Adjustment* in US$ millions 0 0 0 60 0 - Non-GAAP revenue in US$ millions 1,115 991 13 3,020 2,394 26 ----------------------- ----- --- -- ----- ----- -- * 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. Nine months ended September 30 ------------------------------ Software and Software-Related Software Revenue Service Revenue ---------------- ----------------- 2008 2007 % change 2008 2007 % change ---- ---- -------- ---- ---- -------- U.S. GAAP revenue in euro millions 2,283 1,992 15 5,791 4,954 17 Respective measure in US$ millions 3,470 2,695 29 8,804 6,680 32 Adjustment* in US$ millions 0 0 0 214 0 - Non-GAAP revenue in US$ millions 3,470 2,695 29 9,018 6,680 35 --------------------------- ----- ----- -- ----- ----- -- * 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. REVENUE BY REGION - THIRD 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 Appendix for more information on our non-GAAP revenue. euro millions Three months ended September 30 ------------------------------- 2008 ---- Non-GAAP Currency constant U.S. GAAP Adj.* Non-GAAP* impact** currency** Software revenue by region*** EMEA 344 0 344 6 350 Americas 280 0 280 15 295 Asia Pacific Japan 139 0 139 7 146 -------------------- --- -- --- -- --- Software revenue 763 0 763 28 791 ------------------- --- -- --- -- --- Software and software-related service revenue by region*** Germany 393 0 393 1 394 Rest of EMEA 658 16 674 18 692 Total EMEA 1,051 16 1,067 19 1,086 United States 486 22 508 40 548 Rest of Americas 178 1 179 6 185 Total Americas 664 23 687 46 733 Japan 98 1 99 -2 97 Rest of Asia Pacific Japan 181 1 182 15 197 Total Asia Pacific Japan 279 2 281 13 294 -------------------- --- -- --- -- --- Software and software-related service revenue 1,994 41 2,035 78 2,113 ------------------------- ----- -- ----- -- ----- Total revenue by region*** Germany 569 0 569 1 570 Rest of EMEA 875 16 891 23 914 Total EMEA 1,444 16 1,460 24 1,484 United States 717 22 739 59 798 Rest of Americas 237 1 238 9 247 Total Americas 954 23 977 68 1,045 Japan 120 1 121 -2 119 Rest of Asia Pacific Japan 243 1 244 21 265 Total Asia Pacific Japan 363 2 365 19 384 -------------------- --- -- --- -- --- Total revenue 2,761 41 2,802 111 2,913 --------------- ----- -- ----- --- ----- euro millions Three months ended September 30 ------------------------------ 2007 ---- U.S. GAAP Adj.* Non-GAAP* Software revenue by region*** EMEA 331 0 331 Americas 265 0 265 Asia Pacific Japan 118 0 118 -------------------- --- -- --- Software revenue 714 0 714 ------------------- --- -- --- Software and software-related service revenue by region*** Germany 328 0 328 Rest of EMEA 586 0 586 Total EMEA 914 0 914 United States 444 0 444 Rest of Americas 140 0 140 Total Americas 584 0 584 Japan 87 0 87 Rest of Asia Pacific Japan 150 0 150 Total Asia Pacific Japan 237 0 237 -------------------------- --- -- --- Software and software-related service revenue 1,735 0 1,735 ----------------------------- ----- -- ----- Total revenue by region*** Germany 467 0 467 Rest of EMEA 775 0 775 Total EMEA 1,242 0 1,242 United States 665 0 665 Rest of Americas 193 0 193 Total Americas 858 0 858 Japan 113 0 113 Rest of Asia Pacific Japan 206 0 206 Total Asia Pacific Japan 319 0 319 -------------------------- --- -- --- Total revenue 2,419 0 2,419 --------------- ----- -- ----- euro millions Three months ended September 30 ------------------------------- % change -------- Non-GAAP constant U.S. GAAP Non-GAAP* currency** Software revenue by region*** EMEA 4 4 6 Americas 6 6 11 Asia Pacific Japan 18 18 24 -------------------- -- -- -- Software revenue 7 7 11 ------------------- -- -- -- Software and software-related service revenue by region*** Germany 20 20 20 Rest of EMEA 12 15 18 Total EMEA 15 17 19 United States 9 14 23 Rest of Americas 27 28 32 Total Americas 14 18 26 Japan 13 14 11 Rest of Asia Pacific Japan 21 21 31 Total Asia Pacific Japan 18 19 24 -------------------------- -- -- -- Software and software-related service revenue 15 17 22 ----------------------------- -- -- -- Total revenue by region*** Germany 22 22 22 Rest of EMEA 13 15 18 Total EMEA 16 18 19 United States 8 11 20 Rest of Americas 23 23 28 Total Americas 11 14 22 Japan 6 7 5 Rest of Asia Pacific Japan 18 18 29 Total Asia Pacific Japan 14 14 20 -------------------------- -- -- -- Total revenue 14 16 20 --------------- -- -- -- * 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 Appendix 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 *** based on customer location REVENUE BY REGION - YEAR TO DATE 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 Appendix for more information on our non-GAAP revenue. euro millions Nine months ended September 30 ------------------------------ 2008 ---- Non-GAAP Currency constant U.S. GAAP Adj.* Non-GAAP* impact** currency** Software revenue by region*** EMEA 1,080 0 1,080 30 1,110 Americas 803 0 803 80 883 Asia Pacific Japan 400 0 400 24 424 -------------------- --- -- --- -- --- Software revenue 2,283 0 2,283 134 2,417 ------------------- ----- -- ----- --- ----- Software and software-related service revenue by region*** Germany 1,048 3 1,051 1 1,052 Rest of EMEA 2,032 53 2,085 68 2,153 Total EMEA 3,080 56 3,136 69 3,205 United States 1,371 70 1,441 184 1,625 Rest of Americas 518 5 523 16 539 Total Americas 1,889 75 1,964 200 2,164 Japan 273 3 276 -1 275 Rest of Asia Pacific Japan 549 6 555 42 597 Total Asia Pacific Japan 822 9 831 41 872 -------------------- --- -- --- -- --- Software and software-related service revenue 5,791 140 5,931 310 6,241 ------------------------- ----- --- ----- --- ----- Total revenue by region*** Germany 1,546 3 1,549 1 1,550 Rest of EMEA 2,721 53 2,774 86 2,860 Total EMEA 4,267 56 4,323 87 4,410 United States 2,055 70 2,125 272 2,397 Rest of Americas 688 5 693 21 714 Total Americas 2,743 75 2,818 293 3,111 Japan 347 3 350 -1 349 Rest of Asia Pacific Japan 722 6 728 54 782 Total Asia Pacific Japan 1,069 9 1,078 53 1,131 -------------------- ----- -- ----- -- ----- Total Revenue 8,079 140 8,219 433 8,652 --------------- ----- --- ----- --- ----- euro millions Nine months ended September 30 ------------------------------ 2007 ---- U.S. GAAP Adj.* Non-GAAP* Software revenue by region*** EMEA 918 0 918 Americas 772 0 772 Asia Pacific Japan 302 0 302 -------------------- --- -- --- Software revenue 1,992 0 1,992 ------------------- ----- -- ----- Software and software-related service revenue by region*** Germany 918 0 918 Rest of EMEA 1,663 0 1,663 Total EMEA 2,581 0 2,581 United States 1,278 0 1,278 Rest of Americas 440 0 440 Total Americas 1,718 0 1,718 Japan 231 0 231 Rest of Asia Pacific Japan 424 0 424 Total Asia Pacific Japan 655 0 655 -------------------------- --- -- --- Software and software-related service revenue 4,954 0 4,954 ----------------------------- ----- -- ----- Total revenue by region*** Germany 1,329 0 1,329 Rest of EMEA 2,260 0 2,260 Total EMEA 3,589 0 3,589 United States 1,927 0 1,927 Rest of Americas 597 0 597 Total Americas 2,524 0 2,524 Japan 312 0 312 Rest of Asia Pacific Japan 577 0 577 Total Asia Pacific Japan 889 0 889 -------------------------- --- -- --- Total Revenue 7,002 0 7,002 --------------- ----- -- ----- euro millions Nine months ended September 30 ------------------------------ % change -------- Non-GAAP constant U.S. GAAP Non-GAAP* currency** Software revenue by region*** EMEA 18 18 21 Americas 4 4 14 Asia Pacific Japan 32 32 40 -------------------- -- -- -- Software revenue 15 15 21 ------------------- -- -- -- Software and software-related service revenue by region*** Germany 14 14 15 Rest of EMEA 22 25 29 Total EMEA 19 22 24 United States 7 13 27 Rest of Americas 18 19 23 Total Americas 10 14 26 Japan 18 19 19 Rest of Asia Pacific Japan 29 31 41 Total Asia Pacific Japan 25 27 33 -------------------------- -- -- -- Software and software-related service revenue 17 20 26 ----------------------------- -- -- -- Total revenue by region*** Germany 16 17 17 Rest of EMEA 20 23 27 Total EMEA 19 20 23 United States 7 10 24 Rest of Americas 15 16 20 Total Americas 9 12 23 Japan 11 12 12 Rest of Asia Pacific Japan 25 26 36 Total Asia Pacific Japan 20 21 27 -0------------------------ -- -- -- Total Revenue 15 17 24 --------------- -- -- -- * 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 Appendix 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 *** based on customer location SHARE-BASED COMPENSATION (U.S. GAAP) Preliminary and unaudited euro millions Nine months ended September 30 ------------------------------ 2008 2007 % change ---- ---- -------- Share-based compensation per expense line item Cost of software and software-related services 7 8 -13 Cost of professional services and other services 23 19 21 Research and development 20 26 -23 Sales and marketing 31 18 72 General and administration 19 16 19 Other operating income/expense, net 0 0 0 ------------------------------------- - - - Total Share-Based Compensation 100 87 15 ------------------------------ --- -- -- Note: The share-based compensation expenses do not differ between SAP's U.S. GAAP and non-GAAP measures FREE CASH FLOW Preliminary and unaudited euro millions Nine months ended September 30 ------------------------------ 2008 2007 % change ---- ---- -------- Net cash provided by operating activities from continuing operations 1,970 1,344 47 Purchase of long-lived assets excluding additions from business combinations -244 -294 -17 ----------------------------------------- ---- ---- --- Free Cash Flow 1,726 1,050 64 ----- ----- ----- -- HEADCOUNT Preliminary and unaudited in Full-Time Equivalents - from continuing September December September operations 30, 2008 31, 2007 30, 2007 ------------------------------- --------- --------- --------- Headcount by Region Germany 15,455 14,749 14,531 Rest of EMEA 11,309 8,905 8,698 Total EMEA 26,764 23,654 23,229 United States 9,424 7,832 7,703 Rest of Americas 4,369 2,797 2,693 Total Americas 13,793 10,629 10,396 Japan 1,446 1,344 1,292 Rest of Asia Pacific Japan 9,860 8,234 7,684 Total Asia Pacific Japan 11,306 9,578 8,976 -------------------------- ------ ----- ----- Total 51,863 43,861 42,601 ----- ------ ------ ------ Headcount by Functional Area Software and software related services 6,457 5,831 5,716 Professional services and other services 14,193 12,785 12,470 Research and development 15,458 12,951 12,532 Sales and marketing 10,909 8,282 8,035 General and administration 3,303 2,797 2,674 Infrastructure 1,543 1,215 1,174 ---------------- ----- ----- ----- Total 51,863 43,861 42,601 ----- ------ ------ ------ MULTI QUARTER SUMMARY (U.S. GAAP and Non-GAAP) Preliminary and unaudited euro millions, unless otherwise stated Q3/2008 Q2/2008 Q1/2008 Q4/2007 -------------------- ------- ------- ------- ------- Software revenue (U.S. GAAP) 763 898 622 1,415 Revenue adjustment* 0 0 0 0 Software revenue (Non-GAAP) 763 898 622 1,415 Support revenue (U.S. GAAP) 1,167 1,099 1,058 1,005 Revenue adjustment* 41 52 47 0 Support revenue (Non-GAAP) 1,208 1,151 1,105 1,005 Subscription and other software-related service revenue (U.S. GAAP) 64 64 56 53 Revenue adjustment* 0 0 0 0 Subscription and other software-related service revenue (Non-GAAP) 64 64 56 53 Software and software-related service revenue (U.S. GAAP) 1,994 2,061 1,736 2,473 Revenue adjustment* 41 52 47 0 Software and software-related service revenue (Non-GAAP) 2,035 2,113 1,783 2,473 Total revenue (U.S. GAAP) 2,761 2,858 2,460 3,240 Revenue adjustment* 41 52 47 0 Total revenue (Non-GAAP) 2,802 2,910 2,507 3,240 Operating income (U.S. GAAP) 614 593 359 1,109 Revenue adjustment* 41 52 47 0 Expense adjustment* 76 66 83 19 Operating income (Non-GAAP) 731 711 489 1,128 Operating margin (U.S. GAAP) 22.2% 20.7% 14.6% 34.2% Operating margin (Non-GAAP) 26.1% 24.4% 19.5% 34.8% Effective tax rate from continuing operations (Non-GAAP) 30.9% 30.7% 29.0% 33.8% EPS from continuing operations - basic in euro (U.S. GAAP) 0.35 0.34 0.21 0.63 EPS from continuing operations - diluted in euro (U.S. GAAP) 0.34 0.34 0.21 0.63 EPS from continuing operations - basic in euro (Non-GAAP) 0.41 0.42 0.29 0.64 EPS from continuing operations - diluted in euro (Non-GAAP) 0.41 0.42 0.29 0.64 Headcount** 51,863 51,447 51,274 43,861 ----------- ------ ------ ------ ------ euro millions, unless otherwise stated Q3/2007 Q2/2007 Q1/2007 -------------------- ------- ------- ------- Software revenue (U.S. GAAP) 714 716 562 Revenue adjustment* 0 0 0 Software revenue (Non-GAAP) 714 716 562 Support revenue (U.S. GAAP) 975 944 914 Revenue adjustment* 0 0 0 Support revenue (Non-GAAP) 975 944 914 Subscription and other software-related service revenue (U.S. GAAP) 46 44 39 Revenue adjustment* 0 0 0 Subscription and other software-related service revenue (Non-GAAP) 46 44 39 Software and software-related service revenue (U.S. GAAP) 1,735 1,704 1,515 Revenue adjustment* 0 0 0 Software and software-related service revenue (Non-GAAP) 1,735 1,704 1,515 Total revenue (U.S. GAAP) 2,419 2,421 2,162 Revenue adjustment* 0 0 0 Total revenue (Non-GAAP) 2,419 2,421 2,162 Operating income (U.S. GAAP) 606 581 436 Revenue adjustment* 0 0 0 Expense adjustment* 18 13 11 Operating income (Non-GAAP) 624 594 447 Operating margin (U.S. GAAP) 25.1% 24.0% 20.2% Operating margin (Non-GAAP) 25.8% 24.5% 20.7% Effective tax rate from continuing operations (Non-GAAP) 35.1% 25.8% 33.5% EPS from continuing operations - basic in euro (U.S. GAAP) 0.35 0.37 0.26 EPS from continuing operations - diluted in euro (U.S. GAAP) 0.34 0.37 0.26 EPS from continuing operations - basic in euro (Non-GAAP) 0.36 0.38 0.26 EPS from continuing operations - diluted in euro (Non-GAAP) 0.35 0.38 0.26 Headcount** 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 Appendix for details ** in Full-Time-Equivalents - from continuing operations APPENDIX Explanation 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. 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. 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. 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.

SOURCE SAP AG