Revenues
First quarter 2008 U.S. GAAP software and software related service revenues were €1.74 billion (2007: €1.52 billion), representing an increase of 15% compared to the first quarter of 2007. Non-GAAP software and software related service revenues, which excludes a non-recurring deferred support revenue write-down from the acquisition of Business Objects of €47 million, for the first quarter of 2008 were €1.78 billion (2007: €1.52 billion). This represents an increase of 18% (24% at constant currencies) compared to the first quarter of 2007.
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. This represents the 17th consecutive quarter of double-digit growth in software and software related service revenues at constant currencies.
U.S. GAAP total revenues for the 2008 first quarter were €2.46 billion (2007: €2.16 billion), which was a year-over-year increase of 14%. Non-GAAP total revenues, which excludes a non-recurring deferred support revenue write-down from the acquisition of Business Objects of €47 million for the first quarter of 2008, were €2.51 billion (2007: €2.16 billion), which is an increase of 16% (22% at constant currencies) compared to the first quarter of 2007.
First quarter 2008 U.S. GAAP software revenues were €622 million (2007: €562 million), representing an increase of 11% (18% at constant currencies) compared to the first quarter of 2007.
Income
U.S. GAAP operating income was €359 million (2007: €436 million), which was a decrease of 18% compared to the first quarter of 2007. First 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 €130 million, was €489 million (2007: €447 million), which was an increase of 9% (20% at constant currencies) compared to the first quarter of 2007.
The U.S. GAAP operating margin for the first quarter of 2008 was 14.6% (2007: 20.2%). The first quarter Non-GAAP operating margin was 19.5% (2007: 20.7%), or 20.2% at constant currencies. Both the U.S. GAAP and the Non-GAAP operating margins were impacted by accelerated investments of approximately €40 million (2007: €23 million) to build a business around the new SAP Business ByDesign solution to address new untapped segments in the midmarket as announced by the Company at the beginning of 2007. The U.S. GAAP operating margin was additionally impacted by a significant increase in acquisition-related charges as a result of the acquisition of Business Objects.
U.S. GAAP income from continuing operations for the first quarter of 2008 was €247 million (2007: €312 million), representing a decrease of 21% compared to the first 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 €98 million, was €345 million (2007: €319 million), representing an increase of 8% compared to the first quarter of 2007.
U.S. GAAP earnings per share from continuing operations for the first quarter of 2008 was €0.21 (2007: €0.26), which was a decrease of 19% compared to the same period in 2007. Non-GAAP earnings per share from continuing operations for the first quarter of 2008 was €0.29 (2007: €0.26), which was an increase of 12% compared to the same period in 2007.

Core Enterprise Applications Vendor Share
SAP reported its ninth consecutive quarter of share gains. Based on U.S. GAAP first 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 $37.4 billion in software and software related service revenues as defined by the Company based on industry analyst research, was 32.6% for the four-quarter period ended March 31, 2008 compared to 31.9% for the four-quarter period ended December 31, 2007, and 28.2% for the four-quarter period ended March 31, 2007, representing a year-over-year share gain of 7.6 percentage points, of which approximately 4 percentage points came from organic growth. All prior period share numbers have been adjusted to reflect the acquisition of Business Objects.

“We are pleased to report our 17th consecutive quarter of double-digit growth in software and software related service revenues, even without the inclusion of Business Objects’ contributions for the quarter, along with our ninth consecutive quarter of share gains against Core Enterprise Application vendors,” said Henning Kagermann, co-CEO of SAP. “Our continued strong performance can be partly attributed to having a leading presence in all regions of the world, making SAP a truly global software company.”

Mr. Kagermann continued, “Our growth strategy, which comprises three pillars – the established business, the midmarket and the business user solutions - is working quite well. For the established business, SAP ERP 6.0 adoption is exceeding our expectations, providing continued opportunities for growth of business process platform; the midmarket business continued to perform well with over 1,570 customers from small businesses and midsize companies added in the first quarter; and business user solutions remained the fastest-growing business at the Company. Moreover, we have strengthened our position and significantly broadened our opportunity in the fast-growing market for business user solutions with the successful acquisition of Business Objects.”

Cash Flow
Operating cash flow from continuing operations for the first quarter of 2008 was €1.07 billion (2007: €852 million). Free cash flow for the first quarter of 2008 was €1.0 billion (2007: €773 million), which was 41% of total revenues (2007: 36%). At March 31, 2008, the Company had total group liquidity of €2.4 billion, which includes cash and cash equivalents, restricted cash and short term investments (December 31, 2007: €2.8 billion).

Share Buyback
In the first quarter of 2008, the Company bought back 8.0 million shares at an average price of €32.19 (total amount: €258 million). As of March 31, 2008, the Company held treasury stock in the amount of 54.3 million shares (approximately 4.4% of total shares outstanding) at an average price of €35.50. For 2008, the Company expects to invest an additional approximately €250 million buying back shares.

Small and Midsize Enterprises and SAP Business ByDesign
SAP’s small and midsize enterprise (SME) business continued to perform well in the first quarter of 2008 as the Company added more than 1,570 new SME customers (excluding customers from Business Objects) in the quarter, representing a 28% increase compared to the first quarter of 2007. A principal component of the SME strategy is SAP’s breakthrough innovative new solution, SAP Business ByDesign. Since last September’s announcement of SAP Business ByDesign, the Company has been working closely with early customers and partners to validate and fine-tune the solution. As a result of this process, SAP has elected to modify the rollout strategy for SAP Business ByDesign to ensure a more focused and controlled ramp-up process. The new rollout strategy includes the following:

For 2008, go-to-market efforts for SAP Business ByDesign will focus on six countries, where all the current productive early customers are based and which represent a large amount of the worldwide volume market opportunity. Additional country rollouts will be executed in 2009.
It is expected to take around 12 months to 18 months longer than the original 2010 target to reach the SAP Business ByDesign $1 billion revenue and 10,000 customer potential.
However, the Company will use SAP Business ByDesign innovations and technologies for the existing solutions and this will contribute significantly to the overall revenues of SAP in 2010.
Also, the Company will engage with significantly less than 1,000 customers in 2008.

In light of the modified rollout strategy, SAP will reduce its accelerated investments around SAP Business ByDesign in 2008 by approximately €100 million, which is expected to result in additional operating margin expansion in 2008 as noted in the “Business Outlook” section of this release. Furthermore, beginning in 2009 there will be no further accelerated investments. The expected expenses related to SAP Business ByDesign will be funded out of SAP’s normal operational business.

SAP maintains its full confidence in the product, the market opportunity and the associated business model of SAP Business ByDesign, as the Company continues to move toward volume readiness in 2008.

BUSINESS OUTLOOK
The Company is providing the following outlook for the full-year 2008, which differs from the original outlook provided in January 2008 only with regards to SAP’s expectations for the 2008 Non-GAAP operating margin at constant currencies

The Company expects full-year 2008 Non-GAAP software and software related service revenue, which excludes a non-recurring deferred support revenue write-down from the acquisition of Business Objects of approximately €180 million, to increase in a range of 24% – 27% at constant currencies (2007: €7.428 billion). SAP’s business, excluding the contribution from Business Objects, is expected to contribute 12 – 14 percentage points to this growth.
The Company now expects the full-year 2008 Non-GAAP operating margin at constant currencies, which excludes a non-recurring deferred support revenue write-down from the acquisition of Business Objects and acquisition-related charges, to be in the range of 28.5% – 29.0% (2007 non-GAAP operating margin: 27.3%). The previous outlook originally provided in January 2008 was expected to be in a range of 27.5% – 28.0%. The change is the result of the Company’s decision to reduce accelerated investments around SAP Business ByDesign by approximately €100 million in 2008. Therefore, the 2008 Non-GAAP operating margin outlook now includes accelerated investments around SAP Business ByDesign of around €100 million for the full-year 2008 (previously €175 million to €225 million).
The Company is projecting an effective tax rate of 31.0% to 31.5% (based on U.S. GAAP income from continuing operations) for 2008.

KEY EVENTS – First Quarter 2008

In the first quarter of 2008, SAP closed major contracts in several key regions including Al Futtaim Group, Barclays Bank, Landesamt für Besoldung und Versorgung, Nordrhein-Westfalen, Germany, and Nationwide Building Society in EMEA, Bank of America, LensCrafters, Sigdo Koppers S.A., Tawa Supermarkets in Americas, and Fujian Electric Power Co., Ltd., National Health Insurance Corporation, Korea, Mitsui High-tec, Inc., and Pegatron Corporation in the Asia Pacific Japan region.
On March 17, 2008, SAP announced an extension of their relationship with Novell to enable customers of all sizes to run, manage and secure mission-critical operations on Linux. In a move that will help meet the growing demand for SUSE Linux Enterprise and provide support for the open source community, Novell and SAP are planning to offer enhanced options for customers who choose to run open source.
Further enabling customers to realize the benefits of enterprise service-oriented architecture, SAP and IDS Scheer announced an expansion of their strategic partnership that will enable customers, for the first time, to take a model and process-centric approach to the implementation of service-enabled business applications from SAP.
Building upon its recently announced fast-start program for SAP Business All-in-One solutions, SAP revealed plans for an expansion of its partnership with Intel. SAP and its long-term technology partner Intel intend to introduce a ground-breaking offering that will be offered on an Intel-based system via original equipment manufacturer (OEM) and hardware system providers based on SUSE Linux Enterprise from Novell and the database SAP MaxDB.
On February 25, 2008, SAP announced the third enhancement package for its market-leading enterprise resource planning (ERP) application, SAP ERP. Enhancement packages enable customers to access new software features via a simple download to switch on as needed, responding directly to customer requests for access to new innovation without touching mission-critical core systems.
On February 25, 2008, SAP announced a new fast-start program for its proven SAP Business-All-in-One solutions. The program targets midsize companies in the manufacturing, services and trade industries and provides them with the pre-configured industry-specific processes needed to streamline and gain visibility into their core business operations.
On February 13, 2008, SAP announced that the company had been named “Germany’s Best Employer” for the fourth consecutive year in the 2008 “Great Place to Work” initiative, and that it has been named among the leading employers in Japan by the Great Place to Work Institute (GPTW).
On February 12, 2008, SAP announced the industry’s first Intelligence Platform. A single, enterprise-scale platform, BusinessObjects XI 3.0 breaks the barriers of traditional business intelligence (BI), helping to ensure that all people connected with an organization can have access to the information they need to make a difference.
On February 11, 2008, SAP announced the squeeze-out of Business Objects securities by SAP France which was completed during the quarter.
On January 29, 2008, SAP announced the launch of an industry value network for public security. The Industry Value Network for public security will join 15 existing industry-focused networks hosted by SAP and brings together customers, partners and SAP to develop solutions that solve the unique challenges of the public security industry. The solutions are based on an enterprise service-oriented architecture and open standards to fuel a new dimension of industry interoperability and collaboration.
On January 21, 2008, SAP obtained control over Business Objects.


On January 21, 2008, SAP and IBM announced at the annual Lotusphere conference plans to deliver their first joint software product codenamed “Atlantic” which will integrate IBM Lotus Notes software with SAP Business Suite. The combined efforts to create “Atlantic” will result in a new style of applications that present information and data in a context familiar to users of the Lotus Notes desktop. This will make it easier for users to do their jobs and greatly enhance the return on investment that companies have made in their SAP applications.
On January 16, 2008, SAP and Business Objects unveiled their first joint offerings. Nine combined product packages were chosen to address the most common challenges facing business users from the C-suite to main street, which include: gaining better business insight, improving company performance and ensuring compliance with corporate governance policies.
On January 16, 2008, SAP announced that by uniting two of the technology industry’s biggest brands, SAP and Business Objects now intend to embark on a road map to transform their wide lead in the market of software for business users into leadership in the emerging market for business performance optimization.
At the National Retail Federation (NRF) 97th Annual Convention and Expo in New York, SAP announced on January 15, 2008, increasing momentum for SAP solutions in the retail industry as evidenced by newly released data for customers that have recently implemented SAP for Retail solutions. More than 500 customers went live with SAP solutions in 2007, solidifying SAP’s reputation as the preeminent solution provider among retailers.

Use of Non-GAAP Measures
This press release contains certain financial measures such as Non-GAAP revenues, Non-GAAP operating income, Non-GAAP operating margin, free cash flow and constant currency period-over-period changes in revenue and operating income. 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 $37.4 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 today at 3:00 pm (CEDT) / 2:00 pm (GMT) / 9:00 am (EDT) / 6:00 am (PDT). The conference call will be Webcast live on the Company’s Web site at and will be available for replay purposes as well. Supplementary financial information pertaining to the quarterly results can be found at http://www.sap.com/investor.

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