SAP Reports 17% Growth In Software Revenues

Earnings Per Share Increased 16%

WALLDORF, Germany, Oct. 19 /PRNewswire-FirstCall/ -- 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 euro 691 million
       (2005: euro 590 million), representing an increase of 17% (20% at
       constant currencies(1)) compared to the third quarter of 2005.
     * Product revenues for the 2006 third quarter were euro 1.6 billion
       (2005: euro 1.4 billion), which is an increase of 13% (16% at constant
       currencies(1)) compared to the same period in 2005.
     * Total revenues were euro 2.2 billion for the third quarter of 2006
       (2005: euro 2.0 billion), which represented an increase of 11% (14% at
       constant currencies(1)) compared to the third quarter of 2005.

    Core Enterprise Applications Vendor Share(2)
     * 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 currencies(1)) to euro 292 million for the third quarter of 2006 with the U.S. reporting an increase of 15% (20% at constant currencies(1)) to euro 228 million. In the EMEA (Europe, Middle East and Africa) region, software revenues increased 14% (15% at constant currencies(1)) to euro 301 million with Germany reporting a 3% increase to euro 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 currencies(1)) to euro 98 million, with Japan reporting a 51% increase (65% at constant currencies(1)) to euro 39 million.

    Income
     * Operating income for the third quarter of 2006 was euro 583 million
       (2005: euro 517 million), which was an increase of 13% compared to the
       third quarter of 2005.  Pro forma operating income(1) was euro 606
       million (2005: euro 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 margin(1) 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 euro 388 million (2005: euro
       334 million), or euro 1.27 per share (2005: euro 1.08 per share),
       representing an increase of 16% compared to the third quarter of 2005.
       Third quarter 2006 pro forma net income(1) was euro 405 million (2005:
       euro 337 million), or pro forma euro 1.32 earnings per share(1) (2005:
       euro 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 currencies(1)) to euro
       1.8 billion (2005: euro 1.6 billion) for the first nine months of 2006
       compared to the same period last year.
     * Product revenues increased to euro 4.4 billion (2005: euro 3.9 billion)
       for the first nine months of 2006, representing an increase of 13% (13%
       at constant currencies(1)) compared to the first nine months of 2005.
     * Total revenues were euro 6.5 billion (2005: euro 5.8 billion) for the
       2006 first nine months, which was an increase of 13% (12% at constant
       currencies(1)) compared to the same period last year.

    Income
     * Operating income for the first nine months of 2006 was euro 1.5 billion
       (2005: euro 1.4 billion), which was an increase of 13% compared to the
       same period last year.  Pro forma operating income(1) for the 2006 nine
       month period was euro 1.6 billion (2005: euro 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 margin(1) 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 euro 1.1 billion
       (2005: euro 877 million), or euro 3.53 per share (2005: euro 2.83 per
       share), representing an increase of 24% compared to the same period in
       2005.  Pro forma net income(1) for the 2006 nine month period was euro
       1.2 billion (2005: euro 910 million), or pro forma euro 3.75 per
       share(1) (2005: euro 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 income(1) and pro forma earnings per
       share(1) were positively impacted by approximately euro  30  million,  or
              euro  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  euro  1.3
              billion  (2005:  euro  1.1  billion).    Free  cash  flow(1)  for  the  2006  nine
              month  period  was  euro  1.0  billion  (2005:  euro  901  million),  which  was
              16%  of  total  revenues  for  the  first  nine  months  of  2006  (2005:  16%).
              At  September  30,  2006,  the  Company  had  euro  2.8  billion  in  liquid
              assets,  including  short  term  marketable  securities  (September  30,  2005:
              euro  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  euro  165.25  (total  amount:  euro  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  euro  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  flow(1)
              generation,  SAP  plans  to  further  evaluate  opportunities  to  buy  back
              shares  in  the  future.

        BUSINESS  OUTLOOK 


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