Product Revenues Increased 13%
Earnings Per Share Increased 16%
WALLDORF - October 19, 2006 - SAP AG (NYSE: SAP) today announced its preliminary financial results for the third quarter and nine months ended September 30, 2006.

HIGHLIGHTS – Third Quarter 2006
Revenues
Software revenues for the third quarter of 2006 were €691 million (2005: €590 million), representing an increase of 17% (20% at constant currencies1) compared to the third quarter of 2005.
Product revenues for the 2006 third quarter were €1.6 billion (2005: €1.4 billion), which is an increase of 13% (16% at constant currencies1) compared to the same period in 2005.
Total revenues were €2.2 billion for the third quarter of 2006 (2005: €2.0 billion), which represented an increase of 11% (14% at constant currencies1) compared to the third quarter of 2005.

Core Enterprise Applications Vendor Share2
Based on software revenues on a rolling four quarter basis, SAP’s worldwide share of Core Enterprise Applications vendors, which account for approximately $16.4 billion in software revenues as defined by the Company based on industry analyst research, continued to grow by 0.9 percentage points to 22.6% at the end of the third quarter of 2006. This represents more than twice the share of the next largest vendor.

Regional Performance
The Company reported double digit growth rates in software revenues in each of its three regions for the third quarter of 2006. Software revenues in the Americas region grew 19% (23% at constant currencies1) to €292 million for the third quarter of 2006 with the U.S. reporting an increase of 15% (20% at constant currencies1) to €228 million. In the EMEA (Europe, Middle East and Africa) region, software revenues increased 14% (15% at constant currencies1) to €301 million with Germany reporting a 3% increase to €117 million for the third quarter of 2006. Software revenues in the Asia-Pacific region for the third quarter of 2006 increased 22% (28% at constant currencies1) to €98 million, with Japan reporting a 51% increase (65% at constant currencies1) to €39 million.

Income
Operating income for the third quarter of 2006 was €583 million (2005: €517 million), which was an increase of 13% compared to the third quarter of 2005. Pro forma operating income1 was €606 million (2005: €520 million) for the 2006 third quarter, representing an increase of 17% compared to the same period last year.
The operating margin for the third quarter of 2006 was 26.0%, which was an increase of 0.3 percentage points compared to the third quarter of 2005. The pro forma operating margin1 for the 2006 third quarter was 27.0%, which was an increase of 1.2 percentage points compared to the 2005 third quarter.
Net income for the 2006 third quarter was €388 million (2005: €334 million), or €1.27 per share (2005: €1.08 per share), representing an increase of 16% compared to the third quarter of 2005. Third quarter 2006 pro forma net income1 was €405 million (2005: €337 million), or pro forma €1.32 earnings per share1 (2005: €1.09 per share), representing an increase of 20% compared to the third quarter of 2005.
“We reported a strong third quarter with an impressive win rate and double digit software revenue growth in all regions,” said Henning Kagermann, CEO of SAP. “At constant currencies, we have now reported 11 consecutive quarters of double digit software revenue growth. This long track record of outstanding performance can be largely attributed to our successful strategy of growing SAP organically. This disproves our major competitor’s claim. SAP’s strategy has worked very well for our customers and our company, resulting in an exceptional customer satisfaction rate and a considerable gain in SAP’s worldwide share among Core Enterprise Applications vendors, which increased from 16.5% to 22.6% over the past three years.”

Mr. Kagermann continued, “We provided a roadmap describing a planned 2007 completion of our enterprise service-oriented architecture. I am pleased to say that we remain on target and on schedule with all deliverables to complete this roadmap. Moreover, with the delivery of mySAP ERP 2005, we have provided our customers and partners the first services enabled suite in the industry, well ahead of the competition. Due to the flexible nature of an enterprise services-oriented architecture, mySAP ERP 2005 gives us the unique position to offer our customers accelerated continuous innovation without upgrades by providing optional Enhancement Packages for many years.”

HIGHLIGHTS – Nine Months 2006
Revenues
Software revenues increased 15% (15% at constant currencies1) to €1.8 billion (2005: €1.6 billion) for the first nine months of 2006 compared to the same period last year.
Product revenues increased to €4.4 billion (2005: €3.9 billion) for the first nine months of 2006, representing an increase of 13% (13% at constant currencies1) compared to the first nine months of 2005.
Total revenues were €6.5 billion (2005: €5.8 billion) for the 2006 first nine months, which was an increase of 13% (12% at constant currencies1) compared to the same period last year.

Income
Operating income for the first nine months of 2006 was €1.5 billion (2005: €1.4 billion), which was an increase of 13% compared to the same period last year. Pro forma operating income1 for the 2006 nine month period was €1.6 billion (2005: €1.4 billion), representing an increase of 16% compared to the 2005 nine month period.
The operating margin for the first nine months of 2006 was 23.5%, which was flat compared to the 2005 nine month period. The pro forma operating margin1 was 25.0% for the first nine months of 2006, which was an increase of 0.7 percentage points compared to the same period in 2005.
Net income for the first nine months of 2006 was €1.1 billion (2005: €877 million), or €3.53 per share (2005: €2.83 per share), representing an increase of 24% compared to the same period in 2005. Pro forma net income1 for the 2006 nine month period was €1.2 billion (2005: €910 million), or pro forma €3.75 per share1 (2005: €2.94 per share), representing an increase of 27% compared to the same period in 2005. Nine months 2006 net income, earnings per share, pro forma net income1 and pro forma earnings per share1 were positively impacted by approximately €30 million, or €0.10 per share, from a reduced second quarter effective tax rate of 25% mainly due to a settlement with the fiscal authorities on one specific item.

Cash Flow
Operating cash flow for the first nine months of 2006 was €1.3 billion (2005: €1.1 billion). Free cash flow1 for the 2006 nine month period was €1.0 billion (2005: €901 million), which was 16% of total revenues for the first nine months of 2006 (2005: 16%). At September 30, 2006, the Company had €2.8 billion in liquid assets, including short term marketable securities (September 30, 2005: €3.1 billion). The year-over-year decrease in liquid assets is primarily the result of an increase in share buybacks in 2006, expenditures on acquisitions and increased dividend payments.

Share Buy-Back Program
In the first nine months of 2006, the Company bought back 5.81 million shares at an average price of €165.25 (total amount: €960 million). This compares to 2.75 million shares bought back in the first nine months of 2005. At September 30, 2006, treasury stock stood at 11.35 million shares at an average price of €139.89. SAP’s current share buy-back program allows the Company to purchase up to 30 million shares. Given the Company’s strong free cash flow1 generation, SAP plans to further evaluate opportunities to buy back shares in the future.

BUSINESS OUTLOOK
The Company also announced an update to its outlook for the full-year 2006.
The Company increased its expected full-year 2006 pro forma earnings per share1, which excludes stock-based compensation, acquisition-related charges and impairment-related charges. The Company now expects pro forma earnings per share to be slightly above the previously communicated range of €5.80 to €6.00 per share.
The Company reaffirmed that it expects full-year 2006 product revenues to increase in a range of 13% - 15% compared to 2005. This growth rate is based on the Company's expectation for full-year 2006 software revenue growth in a range of 15% - 17% compared to 2005. From today’s perspective, it appears less likely that product or software revenue growth will reach the upper end of the aforementioned ranges.
The Company reaffirmed that it expects the full-year 2006 pro forma operating margin1, which excludes stock-based compensation and acquisition-related charges, to increase in a range of 0.5 – 1.0 percentage points compared to 2005. From today’s perspective it appears less likely that the pro forma operating margin increase will be at the upper end of the aforementioned range.
The outlook continues to be based on a U.S. Dollar to Euro exchange rate of $1.23 per €1.00.