Company Reaffirms Full-Year 2010 Outlook.
FINANCIAL HIGHLIGHTS – Third Quarter 2010
Third Quarter 20101)
IFRS Non-IFRS2)
€ million, unless stated otherwise Q2 2010 Q2 2009 % change Q2 2010 Q2 2009 % change % change constant currency3)
Software revenue 656 525 25% 656 525 25% 15%
Software and software-related service revenue 2,316 1,937 20% 2,352 1,937 21% 13%
Total revenue 3,003 2,508 20% 3,039 2,508 21% 13%
Total operating expenses -2,287 -1,889 21% -2,157 -1,821 18% 11%

–thereofrestructuring charges 2 -10 <-100% -1 -11 -91%
Operating profit 716 619 16% 883 687 29% 16%
Operating margin (%) 23.8 24.7 -0.9pp 29.1 27.4 1.7pp 0.8pp
Profit after tax 501 447 12% 605 499 21%
Basic earnings per share (€) 0.42 0.38 11% 0.51 0.42 21%

1) All figures are preliminary and unaudited.
2) Adjustments in the revenue line items are for the support revenue that would have been recognized had the acquired entities remained stand-alone entities but that SAP is not permitted to recognize as revenue under IFRS as a result of business combination accounting rules. Adjustments in the operating expense line items are for acquisition-related charges and discontinued activities.

3) 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-IFRS constant currency numbers with the Non-IFRS number of the previous year's respective period.

Third quarter and year to date 2010 revenue, profit and cash flow figures include the revenue, profits and cash flows from Sybase for the period since the acquisition (July 26, 2010). The comparative prior year numbers do not include any Sybase revenues, profits or cash flows.

Revenues – Third Quarter 2010


IFRS software and software-related service revenues were €2.32 billion (2009: €1.94 billion), an increase of 20%. Non-IFRS software and software-related service revenues were €2.35 billion (2009: €1.94 billion), an increase of 21% (13% at constant currencies).
Excluding the contribution from Sybase, SAP’s business contributed 15 percentage points to the growth of our IFRS and Non-IFRS software and software related service revenues (7 percentage points at constant currencies).
IFRS software revenues were €656 million (2009: €525 million), an increase of 25% (15% at constant currencies).
IFRS total revenues were €3.00 billion (2009: €2.51 billion), an increase of 20%. Non-IFRS total revenues were €3.04 billion (2009: €2.51 billion), an increase of 21% (13% at constant currencies)
Third quarter 2010 Non-IFRS revenue figures exclude a deferred support revenue write-down from acquisitions of €36 million.

Income – Third Quarter 2010


IFRS operating profit was €716 million (2009: €619 million), an increase of 16%. Non-IFRS operating profit was €883 million (2009: €687 million), an increase of 29% (16% at constant currencies). In the third quarter of 2009, the IFRS and Non-IFRS operating profit was impacted by restructuring charges of €10 million and €11 million, respectively, resulting from a reduction of positions. In contrast, restructuring charges were not material in the third quarter of 2010.
IFRS operating margin was 23.8% (2009: 24.7%), a decrease of 0.9 percentage points. Non-IFRS operating margin was 29.1% (2009: 27.4%), or 28.2% at constant currencies, an increase of 1.7 percentage points (0.8 percentage points at constant currencies). In contrast to the respective quarter in 2009, the third quarter of 2010 was not materially impacted by restructuring expenses which had, in the third quarter of 2009, negatively impacted the IFRS and Non-IFRS operating margin by 0.4 percentage points.
IFRS profit after tax was €501 million (2009: €447 million), an increase of 12%. Non-IFRS profit after tax was €605 million (2009: €499 million), an increase of 21%. IFRS basic earnings per share were €0.42 (2009: €0.38), an increase of 11%. Non-IFRS basic earnings per share were €0.51 (2009: €0.42), an increase of 21%. The impact, net of tax, of the restructuring expenses incurred in the third quarter 2009 on the third quarter 2009 IFRS and Non-IFRS basic earnings per share was not material. The IFRS effective tax rate in the third quarter of 2010 was 27.3% (2009: 20.5%).
Third quarter 2010 Non-IFRS operating profit excludes a deferred support revenue write-down from acquisitions of €36 million plus acquisition-related charges and discontinued activities totaling €131 million (2009: €68 million). Third quarter 2010 Non-IFRS profit after tax and Non-IFRS basic earnings per share exclude a deferred support revenue write-down from acquisitions of €24 million plus acquisition-related charges and discontinued activities totaling €80 million net of tax (2009: €52 million). The excluded amounts from discontinued activities result from an increase from $100 million to $160 million in the provision related to our discontinued TomorrowNow activities.

“We are pleased to report double-digit growth in software and software related service revenue and the contribution of Sybase,” said Werner Brandt, CFO of SAP AG. “All of the regions reported growth in the third quarter, with particular strength in the U.S. and the emerging markets of Asia, Europe and Latin America. We saw a good mix of revenues among small, midsized and large enterprises, and we had an increase in deal volume. On the product side, Business Analytics remains a top priority among our customers and continues to be a principal growth driver.”

“We were already delivering our solutions on premise and on demand. With the acquisition of Sybase, we now have the most complete and heterogeneous mobile platform in the industry and with it the added ability to deliver our solutions on device as well,” said Bill McDermott, Co-CEO of SAP. “As customers continue to reengage, seeking opportunities to grow their businesses and differentiate themselves from their competitors, we are able to help them be best run businesses with our unique strategy to deliver a full suite of enterprise software and next generation business intelligence on any device at any time.”

“The experience we have gained with our more than 100,000 customers over many years tells us that they want choice, openness and innovation from their technology partners,” said Jim Hagemann Snabe, Co-CEO of SAP. “The opposite seems to be happening as more technology companies want to lock in their customers to a single vendor on one proprietary technology stack. This has made our business even more important to our customers because at SAP we provide choice, innovation, co-innovation, a completely open platform and the resources of a vast ecosystem of partners, with whom we continue to forge even stronger relationships. Our in-memory High-Performance Analytic Appliance called SAP HANA is a prime example of cutting edge technology delivered through co-innovation with partners.”

FINANCIAL HIGHLIGHTS – Nine Months 2010

Third Quarter 20101)
IFRS Non-IFRS2)
€ million, unless stated otherwise Q2 2010 Q2 2009 % change Q2 2010 Q2 2009 % change % change constant currency3)
Software revenue 1,757 1,487 18% 1,757 1,487 18% 9%
Software and software-related service revenue 6,521 5,632 16% 6,557 5,643 16% 10%
Total revenue 8,406 7,482 12% 8,442 7,493 13% 7%
Total operating expenses -6,359 -5,915 8% -6,108 -5,700 7% 3%

–thereofrestructuring charges 1 -193 <-100% -2 -188 -99%
Operating profit 2,047 1,567 31% 2,334 1,792 30% 19%
Operating margin (%) 24.4 20.9 3.5pp 27.6 23.9 3.7pp 2.7pp
Profit after tax 1,379 1,069 29% 1,591 1,239 28%
Basic earnings per share (€) 1.16 0.90 29% 1.34 1.04 29%




1) All figures are preliminary and unaudited.
2) Adjustments in the revenue line items are for the support revenue that would have been recognized had the acquired entities remained stand-alone entities but that SAP is not permitted to recognize as revenue under IFRS as a result of business combination accounting rules. Adjustments in the operating expense line items are for acquisition-related charges and discontinued activities.

3) 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-IFRS constant currency numbers with the Non-IFRS number of the previous year's respective period.

Revenues – Nine Months 2010


IFRS software and software-related service revenues were €6.52 billion (2009: €5.63 billion), an increase of 16%. Non-IFRS software and software-related service revenues were €6.56 billion (2009: €5.64 billion), an increase of 16% (10% at constant currencies).
Excluding the contribution from Sybase, SAP’s business contributed 14 percentage points to the growth of our IFRS and Non-IFRS software and software related service revenues (8 percentage points at constant currencies).
IFRS software revenues were €1.76 billion (2009: €1.49 billion), an increase of 18% (9% at constant currencies).
IFRS total revenues were €8.41 billion (2009: €7.48 billion), an increase of 12%. Non-IFRS total revenues were €8.44 billion (2009: €7.49 billion), an increase of 13% (7% at constant currencies).
Nine months 2010 Non-IFRS revenue figures exclude a deferred support revenue write-down from acquisitions of €36 million (2009: €11 million).

Income – Nine Months 2010


IFRS operating profit was €2.05 billion (2009: €1.57 billion), an increase of 31%. Non-IFRS operating profit was €2.33 billion (2009: €1.79 billion), an increase of 30% (19% at constant currencies). In the first nine months of 2009, the IFRS and Non-IFRS operating profit was impacted by restructuring charges of €193 million and €188 million, respectively, resulting from a reduction of positions. In contrast, restructuring charges were not material in the 2010 nine month period.
IFRS operating margin was 24.4% (2009: 20.9%), an increase of 3.5 percentage points. Non-IFRS operating margin was 27.6% (2009: 23.9 %), or 26.6% at constant currencies, an increase of 3.7 percentage points (2.7 percentage points at constant currencies). In contrast to the respective first nine months of 2009, the first nine months of 2010 were not materially impacted by restructuring expenses which had, in the first nine months of 2009, negatively impacted the IFRS and Non-IFRS operating margin by 2.6 percentage points and 2.5 percentage points, respectively. However, severance expenses of €45 million (2009: €11 million) and unused lease space expenses of €8 million (2009: €5 million) negatively impacted the IFRS and Non-IFRS operating margin by 0.6 percentage points (2009: 0.2 percentage points).
IFRS profit after tax was €1.38 billion (2009: €1.07 billion), an increase of 29%. Non-IFRS profit after tax was €1.59 billion (2009: €1.24 billion), an increase of 28%. IFRS basic earnings per share were €1.16 (2009: €0.90), an increase of 29 %. Non-IFRS basic earnings per share were €1.34 (2009: €1.04), an increase of 29 %. The impact, net of tax, of the severance and unused lease space expenses incurred in the first nine months of 2010 on the first nine months 2010 IFRS and Non-IFRS basic earnings per share was €0.03 (2009: €0.01). The impact, net of tax, of the restructuring expenses incurred in the first nine months of 2009 on the first nine months 2009 IFRS and Non-IFRS basic earnings per share was €0.11. The IFRS effective tax rate in the first nine months 2010 was 26.9% (2009: 26.0%).
First nine months 2010 Non-IFRS operating profit excludes a deferred support revenue write-down from acquisitions of €36 million (2009: €11 million) plus acquisition-related charges and discontinued activities totaling €251 million (2009: €215 million). First nine months 2010 Non-IFRS profit after tax and Non-IFRS basic earnings per share exclude a deferred support revenue write-down from acquisitions of €24 million (2009: €7 million) plus acquisition-related charges and discontinued activities totaling €188 million net of tax (2009: €163 million). The excluded amounts from discontinued activities result from an increase from $100 million to $160 million in the provision related to our discontinued TomorrowNow activities.

Cash Flow – Nine Months 2010
Operating cash flow for the nine months 2010 exceeded €2 billion (2009: €2.36 billion). The year-over-year decrease in operating cash flow was mainly the result of a significant increase in payments in 2009 that were delayed from the end of 2008 resulting from the onset of the financial crisis. In 2010, however, the timing of the cash inflows from customers returned to normal.

Free cash flow was €1.86 billion (2009: €2.19 billion), a decrease of 15%. Free cash flow was 22% of total revenues (2009: 29%). At September 30, 2010, SAP had a total group liquidity of €2.83 billion (December 31, 2009: €2.28 billion), which includes cash and cash equivalents and short term investments. Net liquidity at September 30, 2010 was -€1.64 billion, which included €4.47 billion of debt, of which €2.20 billion resulted from the proceeds of two successful bond transactions. These debt offerings were very well-received in the market.

Business Outlook
SAP is providing the following outlook for the full-year 2010, which is unchanged from the previous outlook.

The Company expects full-year 2010 Non-IFRS software and software-related service revenue to increase in a range of 9% – 11% at constant currencies (2009: €8.2 billion). SAP’s business, excluding the contribution from Sybase, is expected to contribute 6 – 8 percentage points to this growth.
The Company expects the full-year 2010 Non-IFRS operating margin to be in a range of 30% – 31% (2009: 27.4%) at constant currencies.
The Company projects an effective tax rate of 27.5% – 28.5% (based on IFRS) for 2010 (2009: 28.1%).

Major Customer Wins
In the third quarter of 2010, SAP closed major contracts in key regions.

EMEA: SAP - Electricity Supply Corporation of Malawi (ESCOM) Ltd, TNK-BP, Nedbank Group Limited, Standard Bank of South Africa Limited and Mercuria Energy Group Holding, Iberdrola and City of Johannesburg. Sybase - BNP Paribas, Commerzbank, Cogetech and Ericsson
Americas: SAP - Fifth Third Processing Solutions, Intermec Technologies Corporation, Applied Industrial Technologies, Fossil, Marisol S.A., Indumotora Automotriz S.A., Hasbro, Inc. and American Express. Sybase - Banco Popular Dominicano, Rite Aid, GlobeOp Financial and Symphony Technology
Asia Pacific/Japan: SAP - Jiangsu Electric Power Corp., China Central Television, Chemical Company of Malaysia Berhad, Pacific Pipe Co., Ltd., Punjab State Power Corporation Ltd., Sharp Corporation and Eros International Media. Sybase - New Zealand Customs and NTT Data Group
SAP Business ByDesign - Anthesis, Frankfurter Fondsbank, Hangzhou Permanent Magnet Group, KunShan Taidah Chemical and RJT Compuquest.