- Fourth Quarter 2010 Software Revenue Increased 35% (25% at Constant Currencies) to €1.5 Billion
- Full-Year 2010 Non-IFRS Software and Software Related Service Revenue Increased 20% (13% at Constant Currencies) and Exceeded Company Guidance
- Full-Year 2010 Non-IFRS Operating Margin At Constant Currencies Meets Company Guidance; Full-Year 2010 IFRS Operating Margin Negatively Impacted by Litigation Provision
- SAP Executive Board Will Recommend to the SAP Supervisory Board to Increase the 2010 Dividend by 20% from €0.50 to €0.60 Per Share.

FINANCIAL HIGHLIGHTS – Fourth Quarter 2010

Fourth Quarter 20101)
IFRS Non-IFRS2)
€ million, unless stated otherwise Q4 2010 Q4 2009 % change Q4 2010 Q4 2009 % change % change constant currency3)
Software revenue 1,507 1,120 35% 1,507 1,120 35% 25%
Software and software-related service revenue 3,273 2,566 28% 3,309 2,566 29% 20%
Total revenue 4,058 3,190 27% 4,094 3,190 28% 20%
Total operating expenses -3,515 -2,168 62% -2,484 -2,055 21% 15%

- thereof TomorrowNow litigation -933 -49 >100% na na na na
Operating profit 543 1,022 -47% 1,610 1,134 42% 30%
Operating margin (%) 13.4 32.0 -18.6pp 39.3 35.5 3.8pp 3.0pp
Profit after tax 437 682 -36% 1,103 761 45%
Basic earnings per share (€) 0.37 0.57 -35% 0.93 0.64 45%




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 profit figures are calculated by translating revenue and operating profit 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.

Revenue – Fourth Quarter 2010
IFRS software revenue was €1.51 billion (2009: €1.12 billion), an increase of 35% (25% at constant currencies).
IFRS software and software-related service revenue was €3.27 billion (2009: €2.57 billion), an increase of 28%. Non-IFRS software and software-related service revenue was €3.31 billion (2009: €2.57 billion), an increase of 29% (20% at constant currencies).
Excluding the contribution from Sybase, SAP’s business contributed 21 percentage points to the growth of IFRS and Non-IFRS software and software related service revenue (13 percentage points at constant currencies).
IFRS total revenue was €4.06 billion (2009: €3.19 billion), an increase of 27%. Non-IFRS total revenue was €4.09 billion (2009: €3.19 billion), an increase of 28% (20% at constant currencies).
Fourth quarter 2010 Non-IFRS software and software-related service revenue as well as total revenue exclude a deferred support revenue write-down from acquisitions of €36 million.
Income – Fourth Quarter 2010
IFRS operating profit was €543 million (2009: €1.02 billion), a decrease of 47%. Non-IFRS operating profit was €1.61 billion (2009: €1.13 billion), an increase of 42% (30% at constant currencies). In the fourth quarter of 2009, the IFRS and Non-IFRS operating profit was impacted by restructuring charges of €5 million and €6 million, respectively, resulting from a reduction of positions. In contrast, restructuring charges were insignificant in the fourth quarter of 2010. In the fourth quarter of 2010, IFRS operating profit was negatively impacted by €933 million (2009: €49 million), resulting from an increase in the provision for the TomorrowNow litigation.
IFRS operating margin was 13.4% (2009: 32.0%), a decrease of 18.6 percentage points. Non-IFRS operating margin was 39.3% (2009: 35.5%), or 38.5% at constant currencies, an increase of 3.8 percentage points (3.0 percentage points at constant currencies). In contrast to the respective quarter in 2009, the fourth quarter of 2010 was not materially impacted by restructuring expenses which had, in the fourth quarter of 2009, negatively impacted the IFRS and Non-IFRS operating margin by 0.2 percentage points. In the fourth quarter of 2010, the IFRS operating margin was negatively impacted by 23.0 percentage points (2009: 1.5 percentage points), resulting from an increase in the provision for the TomorrowNow litigation.
IFRS profit after tax was €437 million (2009: €682 million), a decrease of 36%. Non-IFRS profit after tax was €1.10 billion (2009: €761 million), an increase of 45%. IFRS basic earnings per share was €0.37 (2009: €0.57), a decrease of 35%. Non-IFRS basic earnings per share was €0.93 (2009: €0.64), an increase of 45%. The impact, net of tax, of the restructuring expenses incurred in the fourth quarter 2009 on the fourth quarter 2009 IFRS and Non-IFRS basic earnings per share was insignificant. In the fourth quarter of 2010, IFRS basic earnings per share was negatively impacted by €0.49 (2009: €0.03), resulting from an increase in the provision for the TomorrowNow litigation. The IFRS effective tax rate in the fourth quarter of 2010 was 3.1% (2009: 31.1%). Approximately 24 percentage points of the decrease in the IFRS effective tax rate for the fourth quarter 2010 was due to a tax effect resulting from an increase in the provision recorded for the TomorrowNow litigation.

Fourth quarter 2010 Non-IFRS operating profit excludes a deferred support revenue write-down from acquisitions of €36 million plus acquisition-related charges of €96 million (2009: €64 million) and discontinued activities totaling €935 million (2009: €49 million). Fourth quarter 2010 Non-IFRS profit after tax and Non-IFRS basic earnings per share exclude a deferred support revenue write-down from acquisitions of €23 million plus acquisition-related charges of €67 million (2009: €49 million) and discontinued activities totaling €575 million (2009: €30 million) net of tax. The amounts excluded from operating profit for discontinued activities related to the TomorrowNow litigation was €933 million (2009: €49 million), and €586 million (2009: €31 million), net of tax

“We finished 2010 with the highest fourth quarter for software revenue in our history. Our strong performance and our business outlook for 2011 demonstrate that SAP is confident about achieving double-digit growth and continued margin expansion,” said Werner Brandt, CFO of SAP. “Moreover, in light of our excellent results and our confidence in our business going forward, we will recommend to the Supervisory Board that we increase our dividend by 20% from €0.50 to €0.60 per share payable in 2011.”

“Our results prove that SAP is back to being a growth company,” said Bill McDermott, Co-CEO of SAP. “We showed rock solid revenue across the globe, particularly in the fast growing emerging markets where customers still have the most choice and are rapidly expanding their businesses. We also performed extremely well in all key customer segments. We have excellent momentum and we are confident in 2011 and beyond.”

“SAP fundamentally believes in innovation and choice as a sustainable business model for us and our customers,” said Jim Hagemann Snabe, Co-CEO of SAP. “We have a full pipeline of innovations and are expanding into new markets for mobility, on demand and in-memory computing. We are convinced that these new innovations will help us drive double digit growth and reach 1 billion users by 2015.”  

TomorrowNow Litigation
SAP has great respect for the US legal system and Court decisions. However, SAP believes that the amount awarded by the jury in Oracle v. SAP/TomorrowNow is disproportionate and wrong. After the Court has entered final judgment SAP intends to file post-trial motions in the coming weeks asking the Court to reduce the amount of damages awarded, or to order a new trial. Depending on the outcome of the post-trial motion process, SAP may consider an appeal. Because the motions have not yet been filed and the outcome of the motions remains uncertain the amount by which the jury award would be reduced cannot be reliably measured at this time. Therefore, SAP has based the provision on the jury award. SAP will consider all new information and developments emerging over the coming weeks to determine the appropriate provision amount for SAP’s final full year 2010 financials. Therefore, SAP cannot exclude the possibility that the final provision differs from the preliminary amounts presented in this earnings release.

Cash Flow – Full-Year 2010
Operating cash flow for the full-year 2010 was €2.95 billion (2009: €3.02 billion). Free cash flow was €2.62 billion (2009: €2.79 billion), a decrease of 6%. Free cash flow was 21% of total revenue (2009: 26%). At December 31, 2010, SAP had a total group liquidity of €3.53 billion (December 31, 2009: €2.28 billion), which includes cash and cash equivalents and short term investments. Net liquidity at December 31, 2010 was -€850 million, which included €4.38 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.

SAP Executive Board Recommends Dividend Increase
The SAP Executive Board will recommend to the SAP Supervisory Board to propose at the AGM to increase the dividend by 20% from €0.50 to €0.60 per share for the fiscal year 2010, payable in 2011.

Business Outlook
For 2011, the Company is adjusting its definition of Non-IFRS operating profit and Non-IFRS operating margin to align with the performance measures used internally in managing SAP’s segments and reflected in SAP’s segment reporting, and to enhance comparability with other software companies. For 2011, Non-IFRS operating profit and Non-IFRS operating margin will exclude stock based compensation expenses and restructuring charges, in addition to the items that were already excluded in the past (deferred support revenue write-downs from acquisitions, acquisition related charges and discontinued activities).

SAP is providing the following outlook for the full-year 2011.

The Company expects full-year 2011 Non-IFRS software and software-related service revenue to increase in a range of 10% – 14% at constant currencies (2010: €9.87 billion).
The Company expects full-year 2011 Non-IFRS operating profit to be in a range of €4.45 billion – €4.65 billion at constant currencies (2010: €4.00 billion), resulting in a 2011 Non-IFRS operating margin increasing in a range of 0.5 - 1.0 percentage points at constant currencies (2010: 31.9%).
For the full-year 2011, the Company projects an IFRS effective tax rate of 27.0% – 28.0% (2010: 22.3%) and a Non-IFRS effective tax rate of 27.5% - 28.5% (2010: 27.2%).


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

EMEA:
SAP - Gruppa VISTA (Vertical Integrated Solutions, Technology and Architecture), LLC, United Nations Industrial Development Organization, Nottinghamshire County Council, Sociedad de Prevención de FREMAP, Saudi Electricity Company (SEC), Novartis International AG.
Sybase - European Southern Observatory, Odyssey Financial Technologies, Telefonica Group.

Americas:
SAP - Glazer's Wholesale Distributors, American Family Life Assurance Co., Tyco International, Halliburton, Banco Compartamos, S.A., Sonda Supermercados Exportacao.
Sybase - CARMAX, comScore, University of São Paulo.

Asia Pacific/Japan:
SAP - China Datang Corporation, Akebono Brake Industry Co., Ltd., China National Chemical Corporation, Vedan International (Holdings) Limited, Thai Airways International Public Company Limited, KOBELCO CONSTRUCTION MACHINERY CO., LTD., BlueScope Steel Limited.
Sybase - Korea Exchange Bank, Total Access Communication (dtac).

SAP Business ByDesign
De Villiers Walton Solutions, Edson Consulting, Airsolia, KPF, Global Office, IS4IT, TVN, Standard Calibrations, Silicon Valley Sports and Entertainment, Longre Education, Octopus e-Internation, Affordable Business Solutions, Zinnov.




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