SAP SE (SAP) 2007 Q4 法說會逐字稿

Welcome, everybody in Frankfurt to SAP's fourth-quarter results conference. My name is Stefan Gruber. I'm head of Investor Relations at SAP. Let me quickly walk you through the agenda for today. First of all, you'll get a quick recap of the 2007 numbers by Henning Kagermann, the CEO of SAP, including a detailed analysis of our growth opportunities and a midterm outlook up until 2010. Then Werner Brandt, the CFO of SAP, will walk you through the results of 2007 in detail and he will also introduce you to the outlook, as well as the changed format to the outlook and then we have Leo Apotheker, Deputy CEO of SAP and President, Customer Solutions and Operations, who will provide more color on the regions and who will discuss our growth opportunities both in the established and the new businesses.

As usual, a couple of technical comments. This conference is being webcast on our Investor Relations website. For those who follow this event on the web, I guess probably that is the majority of today's attendees, please send questions by e-mail to investor@SAP.com and we'll try to take some questions by e-mail later on. For those of you here in the room in Frankfurt, we have roaming microphones. Please use one of the roaming microphones later on during the Q&A session so everybody on the Internet can hear the entire dialogue. And all the slides we will be showing today are available for download on the SAP Investor Relations website.

And finally, that is the standard statement I have to read; it is the Safe Harbor statement. Please note that, except for certain information, matters discussed in today's conference may contain forward-looking statements, which are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. The factors that could affect the Company's future financial results are discussed more fully in the Company's most recent filings with the Securities and Exchange Commission. With that, I would like to turn it over to Henning Kagermann. Thank you.

Thank you and let me just add that it could be that I use product revenue instead of software and software-related revenue because it is quicker sometimes. Okay. So we had a good year, 2007, and I want to come to the highlights. Let's start with the guidance. You know that we had the highest growth after the boom year 2000 for product revenue. It was on a constant currency basis 17%. That shows the volume. And therefore, let's say beyond the range we have given in the guidance.

On the margin, it is similar. We came up at the high end of this range with 26.7% and you will know that we have invested into a business by design as indicated on the 20 basis points, currency, 30. So you can easily see how strong the underlying business was also from the margin side.

Now let's look to the market as every year. Market is measured in US dollars, so I have just translated normally without sophistication our numbers in US dollars and you'll see downwards that this corresponds to more than $10 billion, total more than $14 billion and therefore, if we compare ourselves to the market with 15% growth in US dollars, it is 24%, so clearly outperformance the same on the total revenue side. So like in the last years.

And seeing from that, it is obvious that the marketshare gains are significant, four percentage points, all organic growth. Yes, we made some small acquisitions, but it was roughly one percentage point to our product revenue and therefore, this is not substantial here. We gained, by the way, our marketshare in all regions and Leo will come to this.

Now, we have done a few other things I would like to highlight. You know that our target is always to be market leader in those segments we identify as strategic for SAP. We want to do it more through innovation than through consolidation and I would like to guide you through the four key areas we have identified many years ago known to you.

We said in order to double our addressable market, we want to focus in particular on the business process platform, mid-market, business user solution, but not forget the core business. So let me start with the business process platform because it is underlying under the other business as well. This is key for us. We talked about it many years. It is now completed, but, more important, we have a huge reduction in the market. You know that the business process platform that is unique in the market how SAP defines it as three key pillars. One is the integration platform, NetWeaver. Momentum is huge. We have now 29,000 productive systems. We had 1000 every month.

From a software revenue point of view, those revenues we allocate to NetWeaver have reached the roughly EUR1 billion. Two-thirds is application-related. It is when we sell the suite of NetWeaver in the bundle, but a third is already standalone NetWeaver sales, EUR330 million, doubling against last year, so you see the momentum.

The second key pillar is the services. The more services we have, the better the more chance that we have the people who are consuming these services through composite applications from other applications. You know that was something where we referred to the potential revenues in the future. We have now over 2000 of these services available. The roadmap is completed as announced. We have 150 [referencee] clients that speak about it, so that is in good shape.

And very important, the third pillar, composition. It is now available as well. That was a key achievement of last year that the final packaged product piece is shipped, so process platform is complete. All our products are transformed with the exception of Business One, but this was never our intention.

Let's come to the core business and here it is key that clients are adapting to these platform-based here pieces that was a front-runner and you know that now the suite is there, so therefore, that will be the next one. More than 5000 productive clients, adding 500 a month is a pretty fast momentum. Behind is this concept of enhancement packages, so not the traditional upgrades any longer. You know that clients don't like it, costs money, takes time. Enhancement packages, I have not the growth here, but if you go to [Tucson], you know them here. The cost implementing them is nothing more than a support package, which is nearly nothing.

And the enhancement package is not small and cheap for you. An enhancement package is something like 100,000 person days. It is a lot of innovation to our clients. That is key. Good growth in some key industries. Again, Leo will cover that and for me, most important in last year was the successful launch of the new CRM release in December, so it is now available for our clients and we had extremely good feedback from the press and from the business analysts because it has both a lot of functionality in it, but it is extremely simple. And we need both to attract users and to push it more into the installed base.

From mid-market, we have completed the portfolio. It's a EUR45 billion market. We believe with these three products, we can cover the entire market. At the lower end with Business One, we added 4690 new customers in 2007. At the high end, SAP Business All-in-One, which is now more done on a business process platform that was achieved. We have bundled some CRM. We added 1700 new customers, so that is in good shape. And you know that we have let's say taken some of our money in '07 and we will take some of our money in '08 for organic growth into a new business and a new business segment, which we will address by SAP Business ByDesign. We believe it is more the lower end of the mid-market. It is not only new products; it is an entire new business model. We achieved this 150 customer engagement. People ask what is an engagement here. So let me explain. This is everybody who is either in trial or implementation or live.

What about the final segment, Business User Solutions. Here we have adopted a different strategy. We wanted to be as quick as possible the number one in this segment as well because it's fast-growing. We have the unique opportunity to acquire the leader, Business Objects, the leader in business intelligence, the size of $1.25 billion for product revenue and now you can see that the combined entity is the instant market leader with 17%. The market data coming from IDC, roughly $15 billion, growth 9% to 12%, and if you look to the three segments, business intelligence, that is where the portfolio of Business Objects kicks in. That is more or less their portfolio. They are the leader here.

Governance risk and compliance is coming from SAP exclusively. We are the perceived market leader. We have launched this category first to the market. Enterprise performance management is a combination. Both parties have something and we have combined our portfolio here.

Now if we look forward, we would first ask ourselves and you ask what is the potential SAP has and it is a pretty simple view. We have three dimensions. We can grow, we can attract new customers; it is obvious. We have now 46,000 and 20% of our order entry is coming from new clients who are a significant piece, so we can more or less get a larger piece of this cake.

Where the estimate market, I said it already, $45 billion market, so it is worth to go there. BRIC countries, where we are very successful, $3.5 billion opportunity, fast-growing, and we should not forget the services industry where we are transforming into a services society, so they have become more -- they grow more and more, add more users. That is something SAP will focus as well. We guess it is a $14 billion market.

Then we have two dimensions. These are let's say make the cake a little bit bigger and putting something on top or something underneath, more users, more functionality. And you see it in our pricelist. We price per user, we price per engine. Engine is obvious because if you automate more and more, there are no users, but we bring value to the client and we want money as well. So therefore, both.

From the user side, three segments -- business intelligence, definitely. That is the reason why we did this acquisition. We believe today 15% of employees in the Company have access to really business intelligence and it will change in the future. Our estimation is in the next five years up to 50%, so 50% of the employees have access to business intelligence. We should not forget packaged software is successful, but many, many clients have still custom-made software. They program a lot [themselves around]. That is now getting better for us. This is a composition environment with the services, with the tools, so we believe that we will get more and more users in this space as well.

And then finally, we try to reach users where their natural home is. So some of them are living in the office space for Microsoft. Some are living in the office space from Lotus, some IBM, many of them are using SmartPhone and using this more and more also to touch business intelligence and that is an area where, with the cooperation with Microsoft and IBM on the one inside and growing more into the mobile space, we will let's say attract users to drill down to the information given from SAP.

Functionality, the engine price is something like meters, [barrels] produced, revenue, all those things. There is an ongoing consolidation of the application landscape. We believe in the top 2000, this is the market of roughly $10 billion. I have already highlighted this space of the new performance optimization solution, business intelligence and finally, there is an integration market. There is integration to it. I have said that SAP NetWeaver is an integration platform. We have seen the standalone, $330 million. This is a huge market where we are just a little bit in, but we can get more of this market.

So that brings us to a slightly different view in particular for the financial market and I think both Leo and Werner will use this later as well. If you look to SAP, not so much from let's say how we strategically put our eggs into the different portfolio baskets, but view from the outside, you will see more or less three slices. It is our big PC-established business, which will continue to be the foundation of our business, highly profitable, organic growth, organic growth, double digit. We will outperform the market with this segment and we expect further operating margin expansion no doubt.

But we have prepared for the future and we add two large, additional segments. One is Business ByDesign. As we said, not just the new products. We open an entirely new market organically, so we pay the bills every month for what we are doing here in 2008, EUR175 million to EUR225 million. We will build the infrastructure for the volume business in '08 and '07 was about having the product volume-ready. That is done. And we believe we end up with 1000 customer engagements at the end of '08 and then we will ramp up the business more and more in terms of top line, but also bottom line, so that the revenue potential of 2010 is about EUR1 billion.

On the other side, we have the Business User Solutions. Now encapsulated in this new entity, SAP Business Objects. 2008, we will do all the integration, the product roadmap, everything and then we believe, after '08, this entity will grow faster than our established business. It is a faster growing market and please have in mind both segments have, by definition today, of a far lower margin. This will move up and therefore, the entire margin should improve significantly.

The final point and I think it is important, all the investments we are doing in these two segments -- Business ByDesign, Business User Solutions -- have a positive impact on our established business and I will explain why with two final slides.

Let's start with Business Objects. If you look, at a first glance, you would say [Nia], what they are doing is they get 25,000-30,000 customers from Business Objects, which are non-SAP customers, what will they do with that? The first answer, we want to extend this market. We will continue to sell in the non-SAP market. Therefore, it is a standalone entity. So this is a [black thing] that comes in addition.

Second, we can now combine both. We have best business intelligence. We have best business process platform, so we can create a new category of applications, which we call closed loop business performance optimization. That you can only do if you have both in place. That will help us -- that will help us to sell into the installed base.

Mid-market, Business Objects has a lot of partners in the mid-market. They have packages for the mid-market. They have information on demand, we adjust [leverage fees] and bundle it into our offerings. Business process platform. They cannot contribute, but we will build a complementary business intelligence platform, which you need to cover the entire space.

So industry solutions, they have a very strong presence in industries where SAP is not that strong, for example financial services, telecommunications, retail. We can leverage that and please don't forget that if you have the best business intelligence capabilities in-house, you can push the suite even forward and come to really operational analytics, embedded analytics in the suite, so there is more than just covering these additional segments.

And by the way, the same is true for Business ByDesign. Last year, we were focusing very much on this new or exclusively on this new market we want to open for us. Now, where we know it is more about go-to-market, it's more about the business model, but less about the product, we can extend our view. It was obvious from the beginning that Business ByDesign is a good vehicle for smaller business partners of larger entities who to take it and to have interconnectivity network readiness out of the box because we come more and more to seamless processes across enterprises and it is important for the small businesses as well. We can extend this. We can now start offering it also for small subsidiaries of large groups, which I think everybody believes we will do at some point in time and the design is very modular. That is very important both from a technology side and from the application side. So we can take certain modules, certain pieces -- not the entire product -- certain pieces and (technical difficulty) them to bring new innovation extensions to the larger enterprises as well. That means the benefit is obvious for clients as these out-of-the-box integration on the business level, lower TCO for us that we can increase share of wallet, but we have definitely lower R&D investments.

So with that, let me conclude. We believe these are our three advantages. I always believe we have more, but let's bring it down to three. We are the market leader for all the key segments for large and mid-market and in particular now for these very important business user applications. We have a very balanced and rich portfolio of opportunities because we are strong in all geographies and all industries, which is particularly important in a more volatile economic environment and we have a natively integrated product portfolio. We have not assembled our product portfolio, but buying it piece by piece from a market, which we believe in the mid to long term is an important strategic and competitive advantage. Thank you.

Let's continue with a more detailed financial analysis and I will jump right away here in the highlights, financial highlights for the full year 2007. You see that software and software-related service revenue increased by 17% on a constant currency basis, but you also see that we provide double-digit growth since 2004 with regard to software and software-related service revenue. This is heavily supported by a strong double-digit increase on the software revenue side, also with 18% here in 2007 and Leo will go into more detail in his presentation from a regional perspective and also from a marketshare gain perspective.

If you look to the operating cash flow, you see that we achieved more than close to EUR2 billion cash flow and free cash flow being EUR1.4 billion, so the difference here is investments in capital expenditure and we announced, beginning of the year, that we would achieve EUR2 billion. That's what we achieved in 2007.

If you look to the operating margin, you see that we ended the year with 26.7%, but if you look into more detail here, we would have to add back 30 basis points for the currency and additionally 120 basis points from the investments -- accelerated investments in Business ByDesign. So the margin of the underlying established business is above 28% at 28.2%.

If you look to the group total revenue in detail, you see I mentioned before, 17% on the software and software-related side at constant currency driven by software revenue growing by 18%, but also support revenue on a constant currency basis increased double digits by 15% and subscription revenue even increased by 46% in line with our expectations regarding the subscription revenue.

If you look to the service side, you see we have a growth in constant currency by 4%. This is in line with our expectations. We have limited growth on the consulting side. That is what we want to achieve. It drives the consulting business more from a profitability perspective and we have a strong increase, also double digit, on the training side, which is a highly profitable business for us, so here it makes sense to grow double digit year over year. So total revenue increased from a constant currency perspective 13% and we achieved for the first time the EUR10 billion benchmark.

If you look to the currency impact, we talked about this from a rate perspective, here you see the absolute numbers. If you look to software revenue, I think the currency impact was, on the top line, EUR124 million. If you go to software and software-related service revenue, it is EUR260 million and if you look to total revenue, it is even more than EUR360 million, which was the impact from the currency. If you look to the operating income, it is EUR129 million and the impact from the margin perspective, as I mentioned before, was 30 basis points.

If you look to the income statement, there is one point I would like to highlight that is the inclusion of income from discontinued operations net of tax. This EUR14 million. That is our TomorrowNow business where we indicated, towards the end of last year, that we want to discontinue this and we are looking to sell this business throughout 2008 and this isn't a consequence from US GAAP that we separated from the continuing operations and put it into a separate line item into our P&L.

Some additional supplementary information about financing come first. You see we have an increase in interest income here, which has two reasons. Number one, we were able to achieve high interest rates by roughly higher by 80 basis points, now being at an average of 4.3%, number one and number two, our average liquidity is a bit lower than last year, roughly EUR300 million lower, so the average we had throughout 2006 was roughly EUR3.1 billion.

Other financial income and gains and losses from investment were impacted in 2006 by an appreciation of our derivatives related to the STAR hedging. This was an amount of roughly EUR7 million and the second reason for this swing here from positive 2 to minus 10 is that we had higher write-downs of minority investment in 2007 compared to 2006 and this was an amount, this higher amount of EUR5 million, there is no need to worry, the total write-down did not exceed EUR10 million. I think the exact amount was EUR9.7 million.

If you look to the tax rate, we achieved a 32.2%. It seems as if we would have here an increase from a pure US GAAP perspective, that's true, but we have to keep in mind that our effective tax rate of 2006 was impacted positively by nonrecurring tax benefit of roughly EUR85 million and this represented roughly 3.2 percentage points. This came from settlements of various tax audits throughout the world and if you add this back, the comparable tax rate would be 33.1%. So we have a reduction here actually of 110 basis points on an apples-to-apples comparison.

Finally, some additional information, our acquisition-related charges in 2007, this is EUR61 billion and if you would strip this out, then you would come to an operating margin of 27.3%, so this is actually worth 60 basis points and we need to refer back to this when we talk about the guidance for 2008, which is based on non-GAAP numbers.

If we look to the operating expense, first off from a gross margin perspective, you see that on the product side, software and software-related service side, we have a margin decrease of 110 basis points and 50% of this relates to the investments in Business ByDesign and this would mean that we have a reduction of 60 basis points year-over-year and this reduction is mainly due to the fact that we have an over proportional increase in our purchase licenses, which is driven by three factors. Number one, software, where we sell to our customers' software like Adobe, Mercury, RWD from other software vendors and number two, database and number three, what also is included in these software and software-related service costs is the amortization of acquired IP. When we do acquisitions, this runs into this part of the P&L and of course, leads to a reduction of the product margin.

Now, if you look to the professional service, then you see here a reduction of 20 basis points. If you strip out the investment, accelerated investment for Business ByDesign, then we have an increase of 30 basis points year-over-year. I think this is going into the right direction. Although we have invested heavily in additional headcount, mainly in the consulting area. We added more than 1200 consultants throughout 2007 in order to match the demand from the market and I think this has an impact on the billable utilization in the year when you hire because these new consultants are not productive from day one onwards leading to this picture.

If you look to the gross margin for product and service as a whole, we see an increase here and this is balanced out by the Business ByDesign investment and you can recalculate this. This is true that even if you see a reduction on both sides, you see, as a whole, an increase because the product-related margin has a much higher impact here.

If you look to the costs from an R&D, sales and marketing and G&A perspective, then, first of all, you see that we stayed flat with regard to R&D expenses to total revenue here, being 14.2% (sic -- see press release) . We have to mention that this is impacted by 30 basis points from the accelerated investment in Business ByDesign, so we actually see, on an apples-to-apples comparison excluding these investments, a reduction of R&D expenses to total sales by 30 basis points. This goes into the right direction.

If you look to sales and marketing, I think also Business ByDesign's investment into this new product and business model accounted for 40 basis points here and the remaining part of the increase is related to additional hirings in the sales and marketing arena, roughly 1260 additions on a worldwide basis and nearly 100% related to sales, not on the marketing side and if you look to the split, 50% of this relates to the Americas and the remaining 50% of the additions relate to Asia-Pacific and Europe, both 50/50, in both regions, roughly 300 additions.

G&A stayed flat, although I strongly believe that we have here potential for further improvement. So in 2007, flat compared to 2006 is a clear ambition to decrease this going forward.

If you look to the investment now by Business ByDesign, you see that we have invested EUR125 million in 2007. This is completely in line with our own expectations and in 2008, what we intend to do is to invest an additional EUR175 million to EUR225 million into this new product and business model. If you now add both up together, you come into a range of EUR300 million to EUR350 million if you add both numbers. That is -- or we might see a spillover of spending into the first quarter of 2009.. Remember, beginning of last year, we said we would do this investment over eight quarters. We didn't start right in the beginning of the first quarter of 2008. So if you look to it from an eight-quarter perspective, it can be that we will have, as I said before, a bit of investments also in the first quarter of 2009, but I want to make one thing clear right now here. We will never exceed this EUR400 million we gave as a ceiling for these investments.

Balance sheet, you see normal structure, no big changes. The total assets increased by 9% and I would like to go into detail with regard to two or three items here. The first one is our equity ratio, still very strong with 63%. We achieved a further two days reduction in our DSOs, which also led to an operating cash flow of nearly EUR2 billion here as I mentioned before. That is an increase we anticipated for 2007. As you see, the capital expenditure here with roughly EUR400 million.

If you look to the development of the group liquidity, you see that we had group liquidity by the end of last year, so it is 2006 now, of EUR3.3 billion. We went down to EUR2.8 billion and you see the bridging here. First of all, we start, of course, with the operational cash flow being roughly EUR2 billion, then capital expenditure, EUR400 million, then acquisition, EUR670 million. This accounts for seven acquisitions we conducted and concluded in 2007, excluding, of course, Business Objects. That is a 2008 event and this includes OutlookSoft. This includes Vicom and also includes and also include SAP Arabia where we terminated an exclusive partnership and are now in a position to do the business on our own. We are the first company, software company in Saudi Arabia, which is allowed to sell through an own legal entity software in this market and I think this will help us to get more out of this market and I think Leo will come back to this in his presentation.

Then the dividend was EUR565 million (sic -- see press release) and finally the repurchase of stock, share buyback and I have a summary here for you. In the fourth quarter, we bought back 6.9 million shares worth of roughly EUR250 million as we indicated beginning of the fourth quarter. We spent now in total EUR1 billion and we have 48 million in treasury stock and this accounts for roughly 3.9% of our outstanding shares. We will continue with share buyback activities right now. We said in our press release that we would at least invest EUR500 million through 2008 for share buyback activities.

We have, in 2008 -- 2007, canceled shares, 23 million shares if you remember and that is something we will reconsider when we have bought back more shares. This 48 million shares we have in treasury stock now roughly matches the number of outstanding options and if we exceed this, then we will cancel again shares, but that is something we will discuss and need approval of our Board.

Here is the headcount situation. I think we added 4600, a bit more than 4600 people to our base on an FTE basis. There are roughly 500 coming from acquisitions, so actually we are a bit higher than we guided for. If you remember, we started with 3500 at the beginning of the year, then in October, we said we would achieve roughly 4000 employees if you exclude acquisitions and now, we are at 4100 if you exclude these acquisitions and here you see the allocation and from a regional perspective, it is quite balanced with a strong focus on Asia-Pacific which is our growth region number one if you look to the growth percentages and here, of course, also related to low-cost locations -- India and China and you see also here the indication for R&D and support, what we hire in offshore locations.

Finally, let me come to the outlook. We expect, for 2008, non-GAAP software and software-related service revenue to increase by 24% to 27% at constant currency and non-GAAP refers to the exclusion of nonrecurring deferred support revenue write-down from the acquisition of Business Objects. I think this is normal procedure if you look into our industry and if you then strip out the SAP business, excluding the contribution of Business Objects, we expect to contribute 12 to 14 percentage points to the growth of 24% to 27% at constant currency.

If you look to the margin side of the house, we also guide here on a non-GAAP basis, the non-GAAP operating margin at constant currency and this includes, number one, the nonrecurring deferred support revenue write-down from the Business Objects acquisition and excludes acquisition-related charges and we expect this to be in a range of non-GAAP operating margin at constant currency in the range of 27.5% to 28% and the comparable number for 2007 is 27.3%, as I explained before.

This operating margin includes the impact coming from the accelerated investments in our Business ByDesign model and it is arranged for 2008 between EUR175 million and EUR225 million in 2008. The projection also includes an effective tax rate for 2008 in a range of 31% to 31.5% and this is based on US GAAP income from continuing operations for 2008.

And if you compare the guidance format here, the guidance format between 2007 and 2008, let me summarize the differences. First of all, we look for non-GAAP measures on the software and software-related service side as a difference to 2007 if you look to the top line and if you look to the operating margin, you see, number one, it is based on constant currency. Number two, it is also a non-GAAP operating margin, which excludes, number one, the nonrecurring deferred support revenue write-down and number two, the acquisition-related charges. That is all for my side and I want to hand over

Thank you very much, Werner. Good afternoon. Let me start by taking you through our strong and profitable growth in our established business. In 2007, we delivered outstanding results as you can see with our established business and it remains the foundation for our profitable growth going forward as well. Software and software-related services revenues grew 17% at constant currency for Q4 and 2008 and software revenues pure license grew 18% at constant currency for Q4 and also for the full year.

We delivered 16, 1-6, consecutive quarters of double-digit growth, which I think is an outstanding performance in this industry and it is organic and even more important is the fact that 2007 marked the fastest growth we have achieved since the boom year of the year 2000. We have, therefore, achieved the highest share we ever had in terms of marketshare. We now stand at 28.4%. It is the highest that we have achieved. Our lead or our next biggest competitor is bigger than ever. We have a 12 percentage point lead over them. We are the market leader in every region; I like to insist on that. And in almost every industry.

We continue to see a very strong competitive win rate against our competitor. We run at about an 80% win rate and just to illustrate that very specifically, we announced at the end of Q3 a 100-day program that has an objective to have a 100 Hyperion replacements in the SAP customer base. We overshot that target and we achieved 111 replacements.

We see a very good mix of new customer wins compared to the base established business and the installed base. We have 21% of our business coming from new customers based on order value and 31% based on number of contracts, which is a very good measure if you take into account the small order value that you get from SME.

Besides the above, we also laid the foundation in 2007 for additional future profitable growth opportunities. Essentially, of course, the launch of SAP Business ByDesign and all of the work that went into the acquisition of Business Objects.

In order to give you some color on the various regions, let me start with the Americas where our product revenue, to use that term, a bit shorter in the Americas has more than doubled in the last three years and in 2007, we saw yet again double solid digit growth with 17% and 16% respectively, quarter and the full year. We have a very healthy mix in the US and in the Americas between the robust large enterprise business and growing volume business and growing mid-sized business and in the US specifically, we continued our solid double-digit growth path with plus 16% in the highly contested, highly competitive market where we continue to win bids on a very simple thing -- we provide more value to our customers.

In the US, we have now delivered 21 consecutive quarters of double-digit growth. I think that is unheard of performance in this industry, but I am also very happy to share with you that we had very strong growth in Latin America, in particular driven by double-digit growth in Mexico and in Brazil. Some selected customer wins, just to put some color on this. The US Navy, that it is a fourth quarter large win, Sara Lee as well, Tyco, Magna Services, Petrobras in Brazil, GCC Cemento in Mexico, COMGAS and CTEP in Latin America, just to name a few.

In EMEA, our home market so to speak, we continued to grow very solidly in double digits with a strong performance across the entire region with 14% growth in the quarter and in the full year. We have continued very strong demand from the installed base, but we also gain significantly, in significant terms, new customers. That is very important as we want to expand our footprint in Europe as well.

We had outstanding performance in Russia, in France, and in Nordic and just for your information, Russia is now our fourth-largest country in terms of software. Quite important to remember when we talk about global economy and things like that.

We had a great performance here in Germany where we grew by 7%, which was at the higher end of our own expectations and as Werner has already mentioned, we have now our own operations in the Gulf, in particular in Saudi Arabia and we have great opportunities there. We already started with some good traction. We have some new key customer wins there. One is Saudi Arabia Airlines and the other one is a partnership with the Egyptian government, which was translated into a license agreement with Egypt Post.

Some selected customer wins, in Russia, we have Informgasinvest, RUSAL. We have in France, Veolia Printemps, La Poste and in the Nordic, Lego, Nokia and Ericsson. In Asia-Pacific, we had a very, very strong quarter. We grew by 32% in the quarter. It was extraordinary good performance, which therefore results in a full year of 24% growth. We were able to continue the transformation we started in 2006 in Japan and Japan delivered a very good year. It resulted in a strong 21% growth number. That is driven by our value approach in this market as well. You remember, we talked about the turnaround and the transformation for Japan for quite some quarters. You can now see it's a solid trend and very important, of course, to mention, China and India shine with high double-digit growth rates.

In India and in China, we are the strategic platform of choice of large and mid-sized companies and the ecosystem is helping us to drive the business in these countries. Both of these countries came in with very high double-digit growth. India, by the way, is our fastest-growing market worldwide.

Some selected customer wins in these markets -- China Tobacco, China National Chemical, Aluminum Corporation of China, Sharp, YAMAHA, Toyota Tsusho, Tata Motors and United India Insurance.

Maybe a little bit of color now on BRIC. We don't report BRIC as such. I already spoke about Brazil, about Russia, India and China, maybe a few words about Brazil as well. Fast-growing market, one of the industries that we really drive very well in Brazil and helps to support our growth, happens to be banking. As you can see, not every bank necessarily in the world has such a large exposure to subprime.

We are also the market leader in 20 out of 24 industries. We have a very balanced and a very healthy growth in these industries, including our focused ones. It is in fact our industry focus that helps us to drive our establish business forward and the ones that grew the fastest, the industries that grew the fastest in 2007 were oil and gas, consumer goods and utilities. But as you know, we are also putting a lot of emphasis into focus industries like retail banking in the public sector and I will give you some information on those as well. We are, by now, the global market leader in 20 out of the 24 industries we compete in and we want to actually widen that footprint.

The reason why we are successful is pretty simple. We have deep industry expertise. We provide deep mission-critical industry functionality. We have very strong customer relationships, which are based on the fact that not only our products but our entire go-to-market organization brings with it a lot of industry competence.

If we look at the focus industries over the years, we talked many times about the fact that we wanted to expand in banking. We have achieved that. We actually grew significantly in banking in 2007 high double digits and we have won a number of very important, very strategic banks. Lloyds TSB, for example, and Nationwide in the UK, Muenchener Hypothekenbank here in Germany, Standardbank in South Africa just to name a few.

Equally importantly than these direct wins, we have established strategic partnerships with four very important banking partners Misys, Sungard, Callatay, Wouters and CSC to whom we provide our banking platform so that they can add their own software on this platforms and provide that to their customers.

It is important for two reasons. A, it expands our go-to-market and our footprint in banks and two, back to Henning's point earlier on, it is another way to actually monetize our platform because that is an indirect fashion on how we get more users to our platform in the banking industry.

Public sector continued to grow double digits as well and some very important customer wins. The US Navy I mentioned earlier earlier on, Egypt Post as well. The Ministry of Finance in Singapore and the Ministry of Finance and Economy in Greece, but we are also very proud of the fact that US Postal went live with our HR system. It is a landmark event. We actually went live with 700,000 employees on that system, which is quite a performance.

Last but not least, retail. You know that we have been focusing on retail for now quite some time and we have achieved yet again double-digit growth in 2007. It is now the third year in a row. In fact, we have doubled our retail revenues, even more than doubled, over the last three years. We are now the clear market leader in this industry. And some key customer wins here, just to name a few. Wal-Mart, a small US retailer; Marks and Spencer, a well-known English brand; Edeka; Best Buy in the US; X5, that is the largest Russian retailer; Woolworth in Australia; Printemps in France and of course, Metro as well.

If we look at the segments, large enterprise had another very good year. We did really well. And we did really well not only in actual booking and getting the license revenues and we actually closed 11 global enterprise agreements at the end of 2007, which shows that we have a real edge in establishing strategic relationships with key customers. In Q4, we closed an additional three. I can mention two of these three names. It's Lockheed Martin in the US and Nestle, which means that in 2007, we achieved six [GEAs] and it is the number we wanted to achieve, so we are exactly in line with our own expectations.

We maintain a balanced order entry structure. If I look at the percentage of deals above EUR5 million, we achieved 24% last year. The equivalent number was 21%. Quite a number of deals below EUR1 million stayed stable at 41%. Shows that we have a good balance and if I look at what is happening in SME, we are the clear market leader in this business. Our marketshare is 36%, which is a tremendous achievement. SME is about 30% of order entry on a rolling four-quarter basis in 2007. We added 7400 new customers in the SME space; 6500 came from channel. Business All-in-One is now running at about 11,350 customers at 18% more than last year and Business One, 17,780 customers to be very precise. That is 37% growth.

The indirect channel is picking up very nicely. We saw revenue growth there by 31% and Henning already mentioned this, but SAP Business ByDesign, we now have slightly more than 150 customer engagements and we have recruited slightly more than 50 partners to this business.

Now, there is an ongoing debate that we have usually when we talk to you about the whole issue of migration and how do we monetize our established basis. And it is very important maybe to talk about this for a minute or two. If you look at the slide, you will realize that today less than 10% of our order entry is generated with pure migration. So you wonder why do we bother? I will explain to you later why there is such a great monetization opportunity every time we actually migrate a customer.

In fact, I would even go as far as to say that migration isn't to a fair degree the foundation of the profitable growth of the installed base because once we have migrated the customer, the rest comes from upselling and cross-selling in the expanded usage of the SAP software in that customer and that is what really sustainable and profitable growth is coming from. It actually -- well, probably one of our biggest asset is the last installed base that we have and the capability that we have to sell into that base more and more software.

And if you look at this rather simplified slide and I will just walk you through it very quickly, I am sure you will understand. If a customer started out in live with SAP with the R/3 product, which was an ERP product, migrates to SAP ERP, the first thing that happens is ERP, as Henning already mentioned that earlier on, is service-enabled. Usually you get more users for an ERP system if it is the modern service one than the old R/3.

Typically, the next step is that customers actually expand more functionality, i.e., they migrate from the ERP-only user to the whole business suite. That's, per definition, more business for us. We drive this by selling additional or specific industry solutions, so it is either an add-on or it is a pull, but it is, in any case, more revenue. Given the fact that we shipped the suite and ERP with NetWeaver, we can then start to expand the usage of NetWeaver outside of this pure SAP space, be it to integrate non-SAP applications with SAP or be it the usage of actual NetWeaver technology components in this whole environment. Example to portal, that is revenue begin.

We can then take it a level higher as we also ship with the business suite an ERP in order to enable the services, the enterprise service repository and now that we have created the composition capabilities of NetWeaver, we can now help customers to actually start to compose their own applications. We can start to replace homemade, self-made, self-developed applications as well. By the way, that is more revenue. And last but not least, of course, Business User Solutions, that could sit on this entire platform.

So as you can see very simply, what happens by simply migrating a customer from our suite to ERP, we open up numerous additional revenue opportunities. You might even say it would be worthwhile to give us the migration that way for free, but we don't like doing that.

What are the growth opportunities beyond the established business? This has already been addressed by both Henning and by Werner. Of course, by design, clearly, 2008 is the year where we are going to transform our Business ByDesign approach into a volume capability. We want to create a real volume processes. We are going to roll out into additional countries. Right now, we are in Germany, UK, France, the US and China and we are going to try to go into 15 additional ones in 2008.

We will continue to build a partner network. We are trying to attract resellers and we are trying to attract, and usually these are already existing partners, complementary content providers. And Business Objects, of course, I have little to add to what has already been said.

It is clear that the combination creates huge opportunities for us, upselling and cross-selling into the mutual customer base, of course, but I would also like to stress the large SME opportunity that we have here. Business Objects has a great reseller structure. We have one too and by the way, one of the things we have done when we announced the nine packages that both companies will bring to market, three of these nine are dedicated to the respective channels.

What are we going to do in 2008 to wrap up? Well, we are well-positioned for profitable growth in 2008 again. We will, of course, continue to drive the growth in the established business. We will benefit from the continued adoption. We will drive that very hard of our ERP 6.0 product for the reasons I just explained earlier on. Also, of course, net Weaver. CRM 2007 is a fantastic opportunity. It will attract lots of demand, which will help to drive the machine as well. So we are very, very optimistic about that. And yes, we will continue to expand the large enterprise business. I know that people believe that there is nothing to be gained anymore in large enterprise. That is completely wrong. We can do up and cross-selling in that installed base. We can do lots of competitive replacements. We have done 800 by now and there are new names to be won in strategic industries as well. We will go aggressively after those. We can gain them in the established markets and in the emerging markets such as the BRIC countries.

SME is a huge greenfield opportunity. We are the market leader; that is true, but is still so much to be gained there and we want to do this in an effective, professional and profitable way by pushing the volume business there and at last but certainly not least, we will focus, of course, into achieving a successful and profitable leveraging of the acquisition of Business Objects. Thank you very much.

Thank you, Leo. We now have time for Q&A. Again, as a reminder for those on the Internet or on the phone, please do send us questions by e-mail to investor@SAP.com. We make sure we take a lot of questions from the web. It is almost a standard tradition here for the Frankfurt kind of event that we give the first question to a Frankfurt-based participant. I haven't asked you before, but I'm sure you have a question, so I would like to ask Johannes Reese to open up the discussion.

Maybe -- good afternoon. Let's start with a more general question because I think there is strongest concern of the market regarding SAP is concern about the economy. You have given us a rather detailed guidance, but we would like to hear a little bit what are the assumptions of SAP regarding the economy and the impact of your business on Reuters. You said so far you have not seen such a customer intend to cut in any way their budgets, but maybe you can give us more the general view of the world you have based on your guidance.

Two answers to this and the first you have heard indirectly from all of us. That is the demand is there, at least at the moment. We are living in a time today in all regions. From Leo, we have heard that in particular Asia is pretty -- yes, we can say bullish. If you look to the category where we are working -- IT is not IT, you know. We are not an IT services -- our service business is pretty small. We are not in the IT consumer space, so what we are delivering is fundamental for successful companies to weather the storm either in good, as well as bad days. And to this capability to deliver an efficient solution in bad days has increased in the last three to four years.

One of the issues -- not issues, but one of the challenges we had in 2002 and 2003 was the customers saying we like the product, but they are not flexible enough if something happens in the market to shift the strategy completely. This was more or less the reason why we invested from 2003 until more or less today 2007 to completely change the architecture, you have seen this from more vertical applications, 5.5 to a more horizontal layered structure where we have these platforms, which stands for integrity, stability, volume, efficiency. This is the machine running and the layer on top, which stands for flexibility, innovation, etc. And if you remember three years ago, we always said, okay, what we will achieve is that somebody, as a CEO, can shift his strategy more or less on the slide.

I think we are ready on time because our product portfolio is on such a business process platform composition, environment is out. But from my side, most important, our customers are following us. It doesn't help you if you're sitting there with the best possible let's say next-generation application, but customers still sit on the old stuff. And in our case, and I think this is a big achievement, people are not valuing enough. We have moved our installed base significantly if you look to the figures. Therefore, we are pretty confident in this environment.

Thank you. In the meantime, we have got a lot of questions already from the web. I would like to take two of them. The first one is more a product-related question coming from Charlie DiBona, Sanford Bernstein. Referring to the new business model. I assume he means SAP Business ByDesign, one of our new businesses. You indicated the new business model was a work in progress. Can you give us an update, especially regarding the partner strategy and how you incentivize them?

And as a second question, I would like to take the question we got from Michael Briest, the question to Werner, can you please elaborate a bit on cost synergies, ideally by line item? I don't know whether we want to go that far and do we expect restructuring charges? And similarly a question to Leo, can you please elaborate on the Business Objects and SAP sales force alignment and how to incentivize cross-selling?

Maybe, Henning, I think you will probably take the first question on the business model, the question from Charlie DiBona.

Okay, but the second part was partly Leo too. Yes, it is indeed work in progress. Charlie, as we indicated, first step in a new business model is the new product. We are a product company and we are building new business models on new products. It is key because we have this new business model in mind when we designed the new product. It's, by the way, one of the reasons why it is called Business ByDesign. And the new business model was that we are not splitting between the product supply SAP and the service suppliers that are implementing, etc., but we believe we can only bring TCO significantly down if we start looking to the entire lifecycle from how to discover the opportunity, how to do presale, which is more in the trial system mode here, how to do implementation, which is done more or less in a hosted mode. So we are doing the work with what might be a consultant on-site and later on, we do the operation.

So therefore, we have it in our hands to bring TCO down to 10% as we promised. That cannot be done overnight. I think that is a big, big task, but if we achieve it, I think that is a big competitive differentiator. So therefore, we go now for the second phase and we ramp up the machine because we know the product is ready for this business model.

Yes, and it gives me the great leeway to give you the answer, Charlie, on the second part. It is a machine and because it is a machine, we need all of the moving parts of the machine to really come together, so you can't really (inaudible) partners from the infrastructure from the core centers, from the telesales, from the web environment, etc., etc. or the partners can't really do their job either.

But specifically talking about partners, the strategy has not changed. We have a mixed model. Customers can access and can engage with Business ByDesign via the web, via the phone, via any modern telecommunication device there is. They can come through via partners. They can come through us via resellers and in fact, they can come to us by our direct salesforce as well. So that is moving along well.

What we are trying to do is we're trying to respect the economic model of our partners and not get them to engage too early into the Business ByDesign investment phase if there is one. So we ramp them up -- as we ramp up the rest of the machine, that is why these things take some time, but it is going well and we have good feedback from the partners.

And just to continue on the question regarding Business Objects and SAP on the sales side, we respond -- we have spent elaborate time between the two companies to align our sales models. We actually went almost account by account, have preplanned those, have reallocated the salesforces. You know that Business Objects will be run as an independent unit inside SAP with their own salesforce, but what we have done is we have created a mapping of the accounts, engagement models per account have been defined. There are some SAP people who have now joined the BOBJ organization to bring some of our sales methodology there as well and of course, we launched on the [1.9] common product with the two sales organizations, we will sell in parallel as well. So I feel very confident that we are hitting the ground running. Werner?

Michael and Mark, you had questions related to cost structure, cost synergies and the hiring in 2008. Before I answer this question, let me spend a minute on explaining what we exclude as acquisition-related charges. I think it is important that you understand that we have a very clear definition of what we exclude and everything else will not be excluded and the acquisition-related charges will include the amortization of intangibles and this has two components -- acquired as a business combination and acquired in the standalone acquisitions of intellectual property. That is what we always do. We have acquisitions where we simply buy intellectual property. As SAP, we did it in the past and might do it in the future. Number one.

Number two, we exclude expenses from purchased, in-process research and development. So in-process R&D is the second component, which will be excluded from the operating income -- operating expense base and finally, it's restructuring expenses and these restructuring expenses have to meet the following conditions. Number one, incurred in connection with the business combination. That is very important. And secondly, it must qualify under SFAS 146 before we can include it and consider it in our non-GAAP measure.

Having said that, coming back to the cost structure, if you look to our cost structure, I think the flexibility we have is at least 10% of our overall operating expenses. That is the first part. The second part is regarding the cost synergies. I think if you look to the combined organization, then we have clearly identified synergies on the third-party side, especially if you put together our purchasing power as a combined organization that we are then able to reduce the overall purchasing expenses by better leveraging the third-party expenses.

On the personal side, that is the second area, personal side, because we, of course, will look into the combined organization and see whether we can leverage what we have rather than using what we have in the budget as additional hiring for 2008. And thirdly, of course, also on the infrastructure side, aligned with what we do on the IT on the facility side.

If we look to the hiring for 2008 based on what I said before, we anticipate that we will add roughly 4000 people to the overall base we had in 2007.

Thank you. I think we will take another question here in the room in Frankfurt. Maybe Mr. Klusmann.

I am coming back to the guidance for 2008. I mean I am kind of like trying to find out -- like the 12% to 14% you are guiding is exactly the same number you had for 2007. I guess you are not expecting the same year as in '07. Like if you go through your model or your [match], where do you think we will see the most change? I mean will we see more business coming from the existing customer base or will it be more new customer base? Will we see more SMB business? I mean pretty much ever since you showed us the shot how much SMB uses, around about 30% or no clear acceleration here, will it be more subscription? I mean where do you think we are going to see more growth in '08 and where will we see less growth in '08?

And then a second question would be on Business Objects. If I look at your target of 24% to 27%, including Business Objects, if I do the math right, that means that you expect for Business Objects standalone a growth between 5% and 15%, which, to me, seems quite aggressive considering there will be some integration problems and probably not everybody is happy in the organization and so maybe it is something -- (inaudible), maybe you can give us an idea of where you see or what do you expect from Business Objects in '08?

Why don't I try to give you first an answer on the growth expectations for 2008. The honest answer is probably all of the above, so we expect good, continuous business from our established installed base, which is what I tried to indicate to you earlier on by showing you all of the upsell and cross-sell capabilities that sit in our in installed base.

From a regional perspective, it is pretty obvious that Asia-Pacific, Japan will be the fastest growing region, but if you want the BRIC countries, they will pull their weight in as well, no question about it. But in fact, we do expect that all regions will come in at double digits. Also, the Americas, also the US for that matter.

SME will continue to outgrow. The reason why it stays at 30%, by the way, is purely the law of large numbers. You need to sell lots of SME to compensate for one very large transaction in a large enterprise space. But from a volume perspective, we will see lots of growth going from the SME and from an industry perspective, we will continue to drive both the established industries, of course, but we will continue to push hard on the focus industries because that is also good business that you will see coming to SAP.

Maybe I can answer the second one. There are definitely some assumptions in it. The range is a little bit broader than your math. We can might be find out if we are the same, so at the lower range, we, in a worst case, expected not plus five, but I think a little bit minus. So therefore, the range is broader and is more realistic than you thought. So we think we have all options of more or less flat up to a significant growth.

The question is -- it is a little bit difficult in this case how you value it. We were definitely split in a way that we acquire products from Business Objects that is more or less what we later on will say is the business coming, so Business Objects, because that is the acquired business you are after. You want to know what is organic and what is acquired.

Please have in mind that the Business Objects entity has also some SAP products, so there is synergy from combining the products. And what is very difficult to look from outside is the synergy that is coming from Leo's operation. That means if an experienced salesforce like that from Leo is pushing Business Objects product to the installed base. That is a little bit difficult, yes? So therefore, at the end of the day, the assumption was what can we do with business product, with product acquired from Business Objects?

Thank you. Another question here. Mr. [Rudy].

(inaudible). First, maybe two points. One, when you talk about Business ByDesign, you talked about the 150 custom engagements and the 3000 registrations. Can you give us an idea what your plan is for 2008 with regards to the 3000 turning to engagements? And potentially you can put a number next to it.

And coming back to the non-cash charges, mostly I guess non-cash, with Business Objects you gave earlier on 190 million for deferred revenue write-downs and in-process R&D as one of indication and you gave I think it was 210 to 230 in terms of recurring plus then, as a third number, you talked about synergies in the range -- I think it was a minimum expectation -- 300 to 320. I am not quite sure if all those numbers referred to 2008 and just to clarify, could you give an update on those three items? Thanks.

Might be I answer the first one. It is pretty simple. We have only given these numbers not to give you a feeling about how many will want to convert, but that you are seeing we have started already with the volume processes at the very beginning. I could have said 300 and then you would have said, it is not volume, it is the beginning. That was the only indication.

I think it is fair now not to speculate about the figures you are asking for. I think we have huge spreadsheets where we have all these machines written down and we will monitor this in the future very carefully, but I guess, honestly, that we will learn during 2008 what the exact figures are and then we will start to communicate once the machine is running. We should not talk about those things once you build the machine. You should do it if it is running and we will do that.

Regarding these acquisition-related charges, I think I explained in connection with the guidance that the write-down of maintenance would amount to roughly approximately EUR180 million and I hope you understand we have not completed the purchase price accounting. So I only can refer with regard to the amortization of intangibles and the write-down expenses from purchased -- in-process R&D. This will be in a range of roughly 210 plus $30 million for Business Objects according to the business case we have set up, but the actual numbers will then be provided during our Q1 call where we will show you how the PPA at the end of the day will result in acquisition-related charges as it is not yet completed. But I do not think that the numbers will differ materially from the one we provided to you.

I think if you look to the side of SAP that we had EUR60 million in 2007 and I think a comparable number for 2008 would be roughly EUR80 million acquisition-related charges for SAP on a standalone basis. So you can calculate this then together for your model.

I think I answered the question with regard to the synergies already. I think what we indicated when we announced the acquisition was a number on an annualized basis and we have embedded all the synergies we think we can realize in 2008 into our guidance and I think I do not need to go into further details.

Thank you. I think we can take two questions from the web. The one is from James Dawson from Morgan Stanley referring to your midterm outlook. Can we expect the Business User segment to outperform the growth rate of the established business already in 2008? Probably not.

Now we have just discussed it. If everything goes perfect for Business User and not so good for the established one, there might be. I don't hope so because I would prefer more that we come to the end of the established. Therefore, then it will be tough.

And maybe then a clarification question. We got this from several analysts -- [Adam Vote], Ross MacMillan, Neil Steer -- referring to the constant currency operating margin guidance. I think it would be helpful if we could provide the average US dollar exchange rate that corresponds to this constant currency margin guidance. I am not sure whether we can give that, but they asked for whether we can indicate what the margin guidance would have been if today's foreign exchange rates prevailed throughout the year.

I think let me explain how this works. The exchange rates we use to calculate constant currency growth rates will be the ones we had in 2006 and average by quarter. So the average exchange rate by country in the first quarter is then used to calculate or to translate the revenue and costs in the local financial statements in local currency into euro. So that is the only rates which are secure now because we know these rates and I don't have all of them in my mind now for the first quarter 2006, second, third and fourth quarter. But what I agreed with Stefan that we will put these on our webpage so that you have exactly the exchange rates we use, the average exchange rates we used in the fourth quarter of 2006 so you can calculate the translation effects out of this.

I think you refer to 2007.

Yes, sorry. I meant 2007.

Okay. We have more time for questions here in the room. I see one -- Elizabeth Buckley and then Heinz Steffen.

Hi, good afternoon. Just to clarify once again on the synergies, do you expect revenue synergies then in 2008 given the risk of revenue attrition for BOBJ sales into non-SAP platforms? That is my first question. And then the second question comes on NetWeaver. I looks like the growth rate actually came down a bit in the second half relative to the 50% growth we saw in the first half 07. Could you just talk a bit about what you are seeing there in terms of demand trends and also how you see the consolidation that we are seeing among your peers affect your growth potential in 2008 and any acquisition plans that you may have in the middleware space? Thanks.

Might be we can split between us and Leo might be commenting on our competition. I will say something to acquisition and to the other topic. There are good reasons that we have given the guidance in a way we gave it. We can give hundreds of details, but later on, we have to (inaudible) hundreds of components of the guidance. I think we gave enough and there is room for a lot of speculation what is better and less, but I think the guidance is a good and ambitious guidance and keep it like that.

From the acquisition point of view, we have a lot on our plate. I think we are determined to make Business Objects acquisition a success, so that is our number one priority in 2008. We will continue with organic growth. We don't believe that we will change in our strategy, but -- there is always a but -- as you have seen with Business Objects, there are sometimes opportunities, unique opportunities. We are not going for everything, but in this case, we could become the instant market leader immediately in a segment where we have not so much overlap, 10% overlap of the products. If such an opportunity is there again, we would consider it, but don't expect me here to speculate about those opportunities. Okay, Leo.

Yes, and the competitive situation in the market hasn't really changed that much. We are competing on a daily basis with the same competitors. Nothing really new has happened there. On the contrary, with the consolidation driven by one of the two, it becomes in a certain sense even simpler. You know in advance against whom you are going to compete.

Interestingly enough, I think our competitor is focusing a lot on what is left of their installed base. I would -- I can easily understand that after we have managed to convince about 800 of their customers to move to SAP. I would also try to, first of all, protect my installed base and not compete too much on the other stuff. Even though it is clear that the vast majority of the new deals that are happening are all competitive.

We have a very high win rate. We win about 80% of the deals and that is a positive thing. We will continue to fine-tune our competitive skills both from a product point of view and then from a go-to-market point of view to make sure that we can stay competitive.

And on the SME side, it is basically the same story. We compete against two global players and a host of local players and that is going as you can see reasonably well as well, but, of course, you should never say that you have won this kind of a situation. You always want to be better yesterday -- tomorrow than yesterday.

And NetWeaver is actually growing very strongly. Henning indicated the number of installed -- of installations that are up and running. We are adding about 1000 a month. That is a huge number. We compete against other providers of this kind of an environment. We have our particular strength and I do not expect -- actually no one expects that a given customer will always have only one platform. Why should they? And therefore, this market has a lot of potential in it and we will continue to compete very successfully.

Heinz Steffen.

Are you presently satisfied with last year's performance of Business Objects, I mean in respect to EBIT margin? and in respect to your guidance for 2008, how much of the total EBIT margin can be contributed by Business Objects? I mean what type of EBIT margin you have recommended to Business Objects? That is the first question.

The second question, can you explain the Nestle deal? If I am remember correctly, Nestle already bought in the past all the latest and the upcoming products and I am not quite sure whether this was in euro or daymarket was around 120 million, so why should Nestle now buy again?

Why don't we answer the second question first because it is actually a perfect illustration of our model. So you are absolutely right. Nestle did buy everything SAP had to offer in the year 2000. It went so well that we actually reached delivered off that contract sooner than expected. So not only will they renew that relationship, they want actually to expand it. There was an exploration date to that contract. We have now a new extension of that so that all new new things that we will develop will flow into this contract as well and the footprint has been widened so that you have more engines, more users and it is a classical illustration of the type of business model I tried to illustrate earlier on. Once you're in and you start to replace, you just keep on widening the relationship.

Might be a short comment in addition. You see how important it is that we have declared some years ago we want to have 50% of our revenue from new products. You control such a flow of innovation. I don't think it would be -- and it is tough on Leo to sign such a deal, right?

Of course.

So a little bit explanation why we do what we are doing.

And with regard to the margin. First of all, the results of Business Objects, which were published yesterday, show a very strong top-line growth, total revenue 20%, on the product side is 18%. If you look to the margin on an adjusted non-GAAP basis, it is 17%. That is, of course, lower than SAP's margin, but I think that is one of the advantages we have now as a combined organization to really look for these cost synergies, implement them and then increasing the margin of this business unit. That is exactly what we intend to do.

(inaudible).

A follow-up here. Just the recommended margin for Business Objects in the current year?

You mean the underlying margin?

Yes.

No, that is not what we want to disclose. I think we have one margin for the entire company. It is the same as on the top line and I hope you understand that we put everything together, all the different parts of our business, established business, Business ByDesign and then Business Objects, Business User organization and then come up with one guidance from a top-line perspective and from a margin perspective.

So I am looking to my watch. We have been discussing for almost 90 minutes. I think we can take two final questions. I will take the one from Ross MacMillan here by e-mail and I saw an earlier question from [Knute Waller]. Maybe we start with Ross MacMillan from Jefferies first. He wants a clarification on the investments on the incremental investments on Business ByDesign and Werner, you refer to the potential spillover in 2009. How should we think about maybe additional incremental investments in Business ByDesign beyond 2008 and maybe it is just a clarification?

If we disregard the potential spillover into 2009, there will not be any incremental investment in Business ByDesign beyond 2008.

And now we have one final question from [Knute Waller], UniCredit.

Yes, Knute Waller from UniCredit. Thanks. Just regarding your hiring, looking at your hiring, it seems that R&D has peaked because it was down year-over-year. So should we expect R&D spending as a percentage of revenues to come down to the 12% that we have seen? It was always 12% to 14% and yes, at which time frame? And second, regarding sales and marketing, that was significantly up in '07 and so I just want to understand regarding your SSR guidance, 12% to 14% unchanged compare to the start last year, is that a bit cautious or where do I get the math if you look at your sales and marketing hiring significantly increased for '08? Thanks.

I will answer the R&D question. Yes, we have promised several times that R&D will peak. I wasn't sure if it would peak in '07 or already in '06. You have seen now, it is flat in '07 compared to '06 and it will definitely go down in '08. It is too early to give an exact prognosis how far. That depends on many things in a market. But I think it is clear it will go down in '08 and it will go down further in '09. There is no doubt about that. How much we will see? It depends a little bit of the overall business you know and the opportunities in the market.

Yes, and maybe I'll try to answer the second part of the question regarding the guidance and the hiring in sales and marketing. We hired in sales and marketing in 2007 in order to make sure that we were not leaving any part of the portfolio uncovered. In particular, when you talk about things such as NetWeaver and some of the technology elements that are in NetWeaver. That investment has paid off. We will continue to pay off in 2008 as well. And as you can see, by hiring all of these people, we also managed to grow very significantly in some of these new markets where a lot of the hiring did occur.

The average selling price in these markets is slightly different from other countries so that you have a slightly different margin mix, but that will level out over time. So that is the explanation when it comes to the hiring and when I look at the guidance of 12% to 14% in constant currency for the established business, that is an ambitious, strong guidance and I am confident that we can deliver that by working very hard with all of the people that we have hired.

So thank you very much. This closes our analyst conference today. Thank you for all your questions and our next event will be the Q1 earnings announcement, which is scheduled for Wednesday, April 30. This is the first time for us to announce consolidated results with Business Objects. Thank you for your attention and goodbye.

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.