SAP SE (SAP) 2008 Q4 法說會逐字稿

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to SAP's full year 2008 financial analyst conference here in Frankfurt.

My name is Stefan Gruber, I'm Head of Investor Relations and I would like to give you a brief overview on the agenda for today.

We have three presentations.

First, you'll hear from Henning Kagermann, co-CEO of SAP about our performance in 2008, both from an SAP perspective, but also relative to the competition.

And Henning will also comment on some medium-term and long-term metrics.

Then Werner Brandt, our CFO, will talk about the 2008 financials in detail and he will also comment on our 2009 outlook.

Then Leo Apotheker, co-CEO of SAP will talk about the current business environment, the macroeconomic environment, the challenges due to this but also the opportunities we see for SAP in 2009 and beyond.

This event today is a webcast event; we also have some people participating by phone.

We will not be taking any questions by phone, only by e-mail.

So for the Q&A session later on, please send us questions by e-mail to investor@sap.com.

And finally, I think we have some safe harbor language which I always have to read.

Please note that, except for certain information, matters discussed during 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 at the Securities and Exchange Commission.

These were all my intro comments and with that, I had it over to Henning Kagermann.

Thank you.

Welcome after a short safe harbor statement.

I think we can report a set of good results for 2008.

I would link this to the right strategy and, I would say, a very quick and agile execution after our surprise in Q3.

We are not immune against the economic environment, you know that.

A few remarks.

I think the crisis can be categorized by scope.

It's a global one and that means we cannot compensate a shortcoming in one sales region by extended effort in others.

It's the intensity; nearly all clients spoke about suddenness.

The same happened to us and continues to happen.

And the third one is the complexity, and we felt this complexity is an opportunity for us, complexity partially because we are [really leading] the network world.

There will be more requirements for compliance solutions, which is one of our key strengths.

We expect much more demand for transparency, business intelligence solution where we lucky to make the acquisition of Business Objects last year.

So it's another key strength of SAP.

And I also believe that we have highlighted some of the key topics from a business point of view, which will be on top of the agenda of many CEOs.

You remember we have spoken two years ago about business model innovation, the key topic these days.

What happens in a networked world, transparency and how to manage it, and last but not least strategic agility.

So I think we are well equipped with the topics we highlighted to address these needs.

Now I said already we are not immune against cycles.

The last one is seven years ago; you remember 2002 was a similar one.

And we reacted at that time with a twofold strategy.

The first was to improve our financial health, focusing on margin, and then later on, once it was established, we went and embarked on a very strong growth strategy.

We had double-digit growth for five years.

So therefore, if you compare 2008 with the performance of SAP in the past, I think it might make sense to just compare it against the average of the last 10 years because these are years in good and bad times.

We could see that our product revenue on average grew by 12%; we reported for 2008 16%.

Yes I know it's including a large acquisition but that is, I think, part of a growth strategy of a mature company.

If you look to the operating margin, in the 10 years we added 7.3 percentage points, we added 90 basis points in ['08].

So we did better than on average despite the integration of Business Objects, which came with a much lower margin than SAP.

Net income cash flow was more or less in line.

And I just want to highlight that we added in 2008 a huge number of new customers.

26,000 we got through the acquisition from Business Objects, and jointly SAP and Business Objects, we added another 10,000 in 2008.

So we are now at 82,000 customers.

Headcount is a similar 10% per year on average, through Business Objects 17% this year and therefore it's not a surprise for you.

But if we look to the growth expectations in the future, let's say we have to adjust the average level of headcount for the years to come.

Now for the entire year, and I will [go] later on to the seasonality but for the entire year, again we were able to outperform the market in terms of product revenues, roughly a factor of two, with our objectives over the last years.

If I look to market share for the entire year, again market share gains 4.4 percentage points, 3.5 percentage points from acquisition, 90 basis points organically.

If you look to the details, we lost 90 basis points in Q4.

I have taken this time the entire year because the market share gains and losses are heavily impacted by the currency.

The euro was extremely strong in the first half, was weak at the end, and I think here it's better to take into consideration a period where we can more or less balance these out.

Three years gains you'll see 10 percentage points.

And yes, we are lucky that we are now amongst the top 100 most largest companies in terms of market cap.

If we look to the regions, the expectation is that the US was hit most by the crisis that came from there.

Which is true by the way that America has reported 20% losses because the US benefited more than the other countries from the acquisition of Business Objects because Business Objects had a strong business there, but also because the American customer is always ahead of the curve.

There's a huge demand for this type of solutions and we expect the spillover to the other regions as well for this demand.

EMEA more or less was 19% on a same level, and largest growth from Asia Pacific 24%.

What you can see it's our growth area but we see the impact of the economic crisis in Asia as well.

And you will hear more from Werner later.

Sometimes, it's an interest what happens in the industry.

It's more or less not too much.

I can highlight two sectors, discrete manufacturing was far below average in growth, not a surprise automotive, [high categories] are aerospace and defense part; you know the situation in automotive.

On the other side, public sector surprisingly high.

Not so much everybody knows that the public sector is there in these times to buffer a little bit the demand.

SAP is extremely strong in the public sector.

You've heard a few announcements in the past about large deals.

Now it's more important if we want to prepare for 2009, and my colleagues will do it, to look really a little bit into the seasonality, and you'll see it's a polarized performance.

It was, I would say, an exceptional good first half of the year, with this 28%, half Business Objects half, organic growth.

It went down significantly already in Q3 and we see now in Q4, we ended up with 8% software and software-related services revenue growth.

So extremely tough market outside.

I think we can all be lucky that immediately after Q3, we initiated this very tough cost saving program, which paid back; we saved about EUR220 million out of it.

And you can see that our non-GAAP operating margin was highest in Q4, much higher than in the past.

So I think this pays back and helps us that we can say today we achieved our guidance and our promise to protect the earning (inaudible) of SAP.

Now this has implications.

It was announced this morning, Leo will go into this, exactly how we will bring this program forward into 2009.

We will see more in detail.

We have and will do this with the same, I think, clear focus.

I would close in just saying we are well prepared.

It was a big debate, in particular amongst the financial analyst community and investor community, is this right to invest so much in good times?

I feel it's always a time where you should invest into your product portfolio innovations and into market share.

We see it now; now is not the time to invest.

We can [might be] harvest from what we have done in the past.

I want to remind you that we had always three goals.

One was the transformation of SAP from a one-product Company to a multiproduct Company and in particular the transformation of the entire portfolio.

We did it in two steps.

We wanted to double the addressable market and we wanted to build the three pillars of growth after successful organic also growing through acquisition.

Just to remind you, three short slides.

The transformation was done in two steps after 2003, where we added to ERP supply chain management, customer relationship management etc.

It was a big decision in 2003 to say, okay, it's time now to replace Client Server, which helped us for more than 10 years to be successful, with the next generation architecture as a way.

We were one of the first in the market doing it.

I can tell you that's not an easy decision, it's not an easy execution if you have to transform the entire product portfolio to a new architecture with such a large customer base.

We were lucky that we can do it without disruption to our clients and without disruption to SAP.

We are through that; I think this will pay back.

And you also know that we have tried to invest into three new strategic areas, with the technology platform that we also sell technology, more products for the mid-market segment.

And we highlight was a business user where we have seen this year the highest growth and expect it in the future.

The second promise was doubling the addressable market.

In 2005, we painted this picture.

If I look now to 2008 and when we enter 2009, we can say with the product portfolio we have we can address roughly a $70 billion market.

All our market share figures are still related to the old level because of consistency we can [might be] changes in 2009.

But it's important to say we are there with doubling.

Then we look to our revenues.

Where are we with revenues from new products from the three new areas I mentioned, mid-market, the platform and the business user?

And indeed in 2008, already 40%.

You can say we were lucky that we invested that early because, if you look to the second half, it might be already even more.

So we will achieve this 50%.

Customers under [10,000] I think with the acquisition now easy we have 82,000.

We added 10,000 in 2008, you can extrapolate.

I think this goal will be achieved in 2010 as well.

The acceptance amongst our client base is huge.

For the new technology, we have now more than 50,000 productive NetWeaver installations; you see the increase year-over-year 47%.

So 10,000 productive ERP 6.0 based on SOA, 84% more, so this is well underway.

If you look to the mid-market, we focus on Business All-in-one more from a revenue point of view; this is where we get the revenue from.

We added more than 2,000 clients.

Business One is more about new names; we added 5,000.

And I said this morning, in terms of innovation, ByDesign is leading.

We had some difficulties with ByDesign; we will not hide that.

On the other side, if you look in totality we are the only Company in the world in our industry whoever has built an entire suite from scratch like we did it.

This suite is running, productive today in four countries and in an on-demand mode.

So from that point of view, I would say it was right to make these investment decisions in good times.

It will pay back in other times in the future, and it protects SAP against disruption from the market.

Now the key success story was, as I said, the business user segment, fuelled by the acquisition of Business Objects, which was the largest in our history, the fourth largest in the software industry.

It was exactly to the point; it fits very well into our portfolio, in particular, in these times.

I have to admit the integration went even better than I expected, it went very well.

And there was a strong contribution of Business Objects to our growth in 2008, as you can deduct from the figures.

More important, our clients like these product portfolios; it's well aligned to the SAP one.

We can continue with out two-pronged strategy in selling into new accounts, but also upselling much larger into the installed base, and we will do so.

And with that, I think we have proven now and we promised a year ago, and there was a big debate, is this a shift in strategy and can you do it and should you do it?

And our only answer was okay, we prove it to you.

Now I think we have proven that SAP in the future can grow through organic growth, which we have done five years through co-innovation, and also through big acquisition, which I think is important for a market leader of our size.

Thank you.

Hello everyone.

That's the agenda for the next session.

When I finish with the outlook, I would like to make some remarks with regard to our IFRS financial reporting, and finally I want to make a general comment.

As you know that all of these results we present here are preliminary and I wanted to highlight this at the end of my presentation.

If you look to the financial highlights for the year, you see that on the software revenue side, we have an increase of 10%.

This increase is driven by 11% increase on a full year basis in EMEA, 3% in the Americas and 23% in Asia Pacific.

If you look to the fourth quarter, we have a minus 6% on the software side and we will discuss this later.

Due to the stable revenue on the support side in Q4, with a plus of 8% on the software and software-related service side, we achieved, on a full year basis, non-GAAP 20% increase in software and software-related service revenue.

This 20% increase is driven by a 16% contribution of Business Objects, for the products we acquired with the acquisition of Business Objects, and the contribution of SAP products was 6%.

If you look to the margin side, [of the house] you see that we increased our operating margin by 110 basis points on a non-GAAP basis at constant currency and achieved 28.4%.

So clear over-achievement of what we previously announced in the revised guidance for 2008 back in October.

If you look to this performance, you have to take into consideration that we have a one-time expenses related to the Business Objects integration at an amount of roughly EUR35 million which represents 30 basis points.

And, in addition, we have to acknowledge that we have settlement expenses incurred in 2008 in the range of EUR32 million, mainly driven by the settlement with I2 which we reported about in the second quarter of 2008.

If you look to the free cash flow, operating cash flow increased by 12% and free cash flow increased by 19%.

And I will give you and provide you some more details.

If you look to the income statement, then you see that I only want to highlight here one thing.

If you look to the operating income side, US GAAP versus non-GAAP, you see a difference of EUR463 million and this is the acquisition related charges mainly coming from the Business Objects acquisition.

On the cost side, EUR297 million and on the revenue side, it is EUR166 million coming from the reversal of the writedown of acquired maintenance revenue stream.

On the revenue side, I only want to make one comment.

You see here a clear shift towards the product revenue for software and software-related service side.

It is now 73% and I think the acquisition of Business Objects strengthens our SSRS revenues, the relation of SSRS revenue to total revenue quite nicely.

If you look to the regional breakdown of our software and software-related service revenue on a non-GAAP basis, you see that we had a 19% increase year-over-year in EMEA.

Germany grew 6% and the rest of EMEA 27%.

And EMEA has a weight now of 54% of our total SSRS revenue.

Then if you look to the Americas, 20% growth there, of 19% coming from -- or the growth in the United States is 19% and the rest of the Americas, 21%.

If you look to this region, it contributes to 33% of our SSRS revenue.

And finally Asia Pacific, where you see contribution is 13% to our overall SSRS revenue with the growth of 24%, Japan growing 12% and the rest of Asia Pacific grown 31% at constant currency.

If you look to the operating expense side, you see here, we've bridged it from 2007 to 2008.

The total spending was EUR7.5 billion in 2007, and we added through the acquisition mainly Business Objects, EUR953 million to our base, that's an increase of 13%.

Then we have our organic growth in our operating expenses, as SAP, it accounts for 4% growth.

Then we have currency working against it, so overall the growth of 13% to EUR8.4 billion.

And you see the fourth quarter here, Henning indicated already that we took out of the P&L compared to what we intended to spend mid of September.

In the fourth quarter, we took out EUR220 million.

And if you also take into consideration the saving we realized in Q3, then the total saving, compared to what we had in the plans mid of October before the financial crisis hit the real market, we saved EUR290 million.

Now this EUR290 million cannot be transferred into 2009 right away, as we had a positive impact in the quarter coming from expense savings measures which will not continue one-to-one -- impact of the equity program which will not continue one-to-one.

I only want to highlight that the total amount of savings cannot be transferred to 2009 on a quarterly basis.

By the way, the impact of the equity program in the fourth quarter was a positive one of EUR8 million due to the share price development in the fourth quarter of last year.

We had still expenses of EUR37 million.

And if you look to the total number of stock based compensation expenses, in 2007 we had EUR95 million and in 2008, it was EUR63 million.

Now if you look to our financial income, I would like to highlight here the decrease to a negative EUR63 million.

Of course, this is a result of the financing of the Business Objects acquisition where we initially got a finance guarantee of EUR5 billion.

You will see later on the balance sheet, we still have EUR2.3 million in debt, but consequently, this had a negative impact of our interest results.

And in addition, as a consequence, liquidity decreased.

2007 the average liquidity was EUR3.2 billion, now we have EUR2 billion in '08 and the interest also decreased 100 basis points to 3.5% on the asset side.

Now if you look to the effective tax rate, I think here we have a nice decrease to 29.5%, 270 basis points reduction, and that's mainly driven by the tax reform we have in Germany on the corporate tax side and on the trade tax side.

So we fully benefit from this reform in Germany.

If you look to the this slide, the gross margin analysis only to illustrate if you look to the software and software-related service costs side, we have here between US GAAP and non-GAAP a difference of EUR190 million.

And that's exactly the amortization of the acquired IP with its customer related or technology related; that's the difference here.

And if you look to the evolution of the non-GAAP margin, you see 10 basis points increase, so from that perspective, it's going in the right direction.

A better improvement we see on the service margin side, is 50 basis points [non-GAAP] versus non-GAAP.

And this is mainly coming from the consulting business and our hosting business which significantly increased its profitability.

Now on the R&D expenses to total revenue, you see a decrease of 40 basis points to 13.8%; that's going in the right direction.

And I think that's the first fruits we are seeing from our programs in driving efficiency in R&D under the leadership of Jim Hagemann Snabe together with Ernie Gunst.

If you look to the sales and marketing ratio to total sales, you see a minus of 20 basis points; that's mainly coming from the marketing arena.

And you see a strong increase year-over-year here with regard to G&A expenses as a percent of total revenue, and that's mainly driven by the acquisition of Business Objects.

And the next slide should highlight the fact that, especially with regard to G&A as a percentage of total revenue, we will do everything to decrease this to a reasonable level being above 4% but definitely far above 5%.

You see this all the ratios now full year, half-year one and half-year two and also the fourth quarter with all the carve out I mentioned before that you cannot simply take all the savings in Q4 and transform them into the next year.

Next area is the balance sheet; here I would like to highlight four areas.

First of all, accounts receivable.

We undertook a very thorough investigation of our accounts receivable, the collectablity.

We increased our general individual bad debt reserve, our sales allowances, and feel that we are covered here quite nicely.

If you look to the goodwill, it's now EUR5 billion; thereof EUR3.3 billion is coming from the Business Objects acquisition.

All the impairment tests we did, did not reveal any sign for an impairment with regard to our entire goodwill.

On the intangible side, you see also a strong increase and that's driven by also Business Objects acquisition.

We acquired customer base technology and this accounts for nearly the entire difference you see here between EUR400 million and EUR1.1 billion.

On the liabilities side, you see the debt resulting from the Business Objects acquisition.

Here we have EUR2.3 billion left and, as we always said, we will pay this back by the end of the year according to the contracts we have with the financial institutions.

And remember, this is a very attractive interest rate we have here; it's EURIBOR plus 25 basis points.

If you look to the balance sheet and the cash flow analysis, first of all, net liquidity its clear.

We have liquidity in our book, as you saw a minute ago, of EUR1.6 billion.

We struggle a bit here with our DSO; it increased by five days.

That's a consequence of the overall economic environment we see in all of the countries we operate in.

We will ensure that it doesn't further deteriorate, but we have to respond somehow to the business we have in these countries and see that we manage this professionally.

The equity ratio went down, but I'm sure starting with next year, we will increase this equity ratio again.

Cash flow, well from an operational perspective, EUR2.2 billion.

That's an increase of 12%.

Cash flow conversion rate also increased as we put a lot of effort in managing our working capital better than in the past.

And we will have a continued focus on the cash flow conversion rate in 2009.

The capital expenditure decreased by 15% to EUR339 million.

And I think here we show a number which is significantly below our own plan for 2008.

So we really also, if you talk about expense saving control, we also control our capital expenditure, as capital expenditure, as you know, results in expenses, amortization expenses right the way through the amortization [of] the investment.

Now the Group liquidity, here the bridging between December 31, 2007 and December 31, 2008.

You see the operational cash flow coming in the capital expenditure.

You see the money we spent for acquisitions, nearly EUR5 billion.

We also have here the EUR2.2 billion net proceeds from debt, cash acquired, dividend paid, and you see all the other elements from the bridging.

Share buyback activities, I think we announced in October that we would not buy back shares in the fourth quarter.

We didn't buy back.

We have now bought back in the full year of 2008 14.6 million shares; roughly EUR490 million we spent for this share buyback.

We have now 38.5 million in treasury share, average price is EUR35.43, and the average number of outstanding shares came down to 1.2 billion.

And that's also was the reason why you see a difference in net income versus EPS.

And, of course, the EPS benefits, from a growth rate perspective, from the reduction in the number of shares.

So going into 2009, we will not buy back shares.

We only would reconsider this statement if we see an improvement in the overall economic environment, meaning that we grow again, and that's something we have to decide then.

So we go into the year with no share buyback in 2009.

However, the Management Board will propose to the Supervisory Board and this finally has to be approved by the annual shareholder meeting that we pay a dividend, that we would keep the payout ratio stable to 2008 or '07, if you will, the dividend which was paid in 2008 for 2007.

And that 30% payout ratio on the EUR1.64 we realized in earnings per share on a US GAAP basis.

Now the headcount analysis, that's very easy and I think thanks that we achieved this.

We limited the increase to 7,700.

Thereof, of course, 6,500 came via acquisitions to SAP.

But as you know, we have stopped hiring very early during the course of 2008 and that's the reason why after Q1 with 1,200 additions, organically we really had only minor additions to the Company in terms of new employees.

And on a net basis, and you even see in the fourth quarter, with a reduction here of 327.

If you come to the outlook, first of all I would like to make a comment to the business environment and the cost containment measures we have in front of us.

We expect that the operating environment will remain challenging.

In addition, in 2009, we will not see the positive impact coming from the Business Objects acquisition because we closed this transaction on January 21 of 2008, and the next point is very important.

The 2009 first half-year results will be a difficult comparison to strong results reported in the first half of 2008 which was prior to the economic crisis and disrupted the global markets in the third quarter, and that's especially true for the first quarter of 2009.

Now if you look to the financial outlook here, then you see that it includes the financial impact of the following measures.

The first one is that we continue with tight cost control, mainly related to third party expenses but not limited to third party expenses.

So we have continued to address every area in the organization whether it's travel, personnel expenses and so on and, of course, capital expenditure.

What we will do in 2009, and that's the second point, that we will freeze our salary on a worldwide basis.

There might be some exceptions in countries where we have to increase salary due to the labor regime, the regulatory environment, but it's limited to this.

The rule for the SAP globally is salary freeze for 2009.

And thirdly, as you have seen in the press release, a reduction of our workforce globally, down to 48,500 positions by year-end 2009, taking full advantage of attrition as a factor in reaching this goal.

Now the objective behind this, having 48,500 employees at year-end of 2009 is that we decrease our personnel expenses in 2010 to EUR350 million; that's the objective behind it.

And if we are successful in bringing down the positions we have today, 51,500 down to 48,500 then we will see a decrease in our plans for 2010 on the personnel expense side by EUR300 million to EUR350 million.

Having said that, I would like to provide the outlook which we follow and I think you understand that I read it.

It's too important because we have a lot of participants via the web.

Due to the continued uncertainty surrounding the economic and business environment, the Company will not provide a specific outlook for software and software-related service revenue for the full year of 2009.

The Company expects its full year 2009 non-GAAP operating margin, which excludes a [non-recurring] deferred support revenue writedown from the acquisition of Business Objects of approximately EUR9 million and acquisition related charges to be in a range of 24.5% to 25.5% at constant currencies.

This includes one-time restructuring charges, and we will report on these charges on a quarterly basis, between EUR200 million and EUR300 million expected to result on the reduction in workforce, which negatively impacts the non-GAAP operating margin of 24.5% to 25.5% by approximately 2 to 3 percentage points.

And it continues; the 2009 non-GAAP operating margin outlook is based on the assumption that 2009 non-GAAP software and software-related service revenues, which excludes a non-recurring deferred support revenue writedown from the acquisition of Business Objects, will be flat to a decline of 1% at constant currencies, and you see the number for 2008 here, it was EUR8.6 billion.

Finally, we project an effective tax rate of 29.5% to 30.5%, based on the US GAAP income from continuing operations.

So far the outlook, and now I would like to enter into two topics.

The first one is this one, the information on SAP, our financial reporting framework.

Since 2007, we prepared consolidated financial statements, as you know, under both US GAAP and IFRS.

IFRS has been mandatory for SAP since 2007, but focus of communication has been based on US GAAP and non-GAAP numbers.

The US has allowed foreign filers as SAP to file IFRS since 2007, and has approved a roadmap to help to migrate US filers to IFRS by 2014.

That's as it stands today.

However, SAP has voluntarily also provided US GAAP numbers.

At SAP, differences between US GAAP and IFRS have not been significant.

And I will show you the difference between our US GAAP financial statements and the IFRS financial statements in a minute, and you will see that the difference is completely immaterial.

And the consequence is the following.

During 2009, SAP will continue to report its financials according to both IFRS and US GAAP.

So we will not only provide US GAAP financial statements; each quarter we will provide to you also the IFRS financial statement.

That's the first bullet point.

The communication, the outlook, will be based on non-GAAP measures derived from US GAAP numbers, as we just did.

The outlook we gave is based on US GAAP numbers, no change there.

The press release for Q4 2009 will be the last document providing US GAAP financial information.

And our annual report for 2009, as well as the 20-F for 2009, then will only provide IFRS financials.

This means, beginning with 2010, we will then provide IFRS only information to the capital market.

It means we will change our reporting standards to IFRS only, and then the guidance in 2010 will be based on IFRS and non-IFRS numbers.

Now, if you look to the difference in revenue and in operating income between US GAAP and IFRS, you see first, if you look to US GAAP software and software-related service revenue, there's a small difference.

And this difference is simply coming from the different way how the Tomorrow Now business is presented.

Under US GAAP, it's discontinued operations; under IFRS, this is not possible.

That's the only difference.

But if we use non-IFRS numbers, we extract the Tomorrow Now business.

And if you compare, then, non-GAAP versus non-IFRS, there is no difference.

That was one of the most important decisions in connection with implementing IFRS for SAP, that from a revenue recognition perspective, we would use and continue to use, also under IFRS, the US GAAP rules.

That's very important.

From that perspective, there shouldn't be any difference except the one I just explained to our top line to our software and software-related service revenue and other revenue in SAP.

Now, coming to the operating income; you see there is a difference between the US GAAP and IFRS operating income by EUR111 million only.

And this is driven by the discontinued operations I mentioned before; that's roughly EUR70 million.

And the remaining EUR40 million is related to the different treatment of certain acquisition-related charges, which under US GAAP can be charged against goodwill, and under IFRS have to be expensed.

But if we exclude all acquisition-related charges from our US GAAP IFRS numbers anyhow to come to non-GAAP numbers, you see here that on a non-GAAP versus non-IFRS side, there is EUR1 million difference only.

So from that perspective, moving in 2010 to IFRS shouldn't be any issue for the capital market.

We have, in between, one year of education where we show you on a quarterly basis the impact from moving from US GAAP to IFRS.

And after this, I would say in quotes, please [don't take it wrong], after this educational session, especially for analysts not located here in Europe, I think they might, and I'm sure that they will feel comfortable with SAP providing IFRS financial statements.

Now, I come to the final comment I have to make.

You all know that what we present here at the end of January are preliminary numbers.

And I want to reiterate that our final numbers will be presented by the end of March in our annual report, so the 20-F is the key for closing our books, from a timing perspective.

Subsequent events that may occur until then are to be reflected in our 2008 financials, as far as they provide additional evidence with respect to the conditions that existed by the end of the fiscal year, so by the end of December 31.

And here's one point I want to make, and that's among others, this applies to the legal proceedings that Oracle has instituted against Tomorrow Now Inc.

SAP has recorded a provision for these legal proceedings, as far as a loss is probable, and the amount of loss can be reasonably estimated.

We've talked about it several times and, by the way, it hasn't changed as of December 31, 2008.

For this case, another case settlement conference is scheduled for February.

There's a sequence of different dates in February, and February 23 is a date where a settlement conference will take place, based on the request from the Judge in California.

And we cannot exclude now that this event may provide SAP with additional information that might impact SAP's assessment of the appropriate loss accrual.

So we have to see what will come, then, to the table.

Both US GAAP and IFRS would require us to reflect such updates of our loss assessment in the financial statements for 2008.

As the litigation result from the activities of Tomorrow Now, such change in loss assessment would most likely only affect income from discontinued operations under US GAAP.

We do not anticipate any impact on continued operations.

What we are talking about today, what we presented is our results from continued operations.

An impact on our US GAAP operating income would only occur if a loss became probable that does not result from the activities of Tomorrow Now.

That was my final comment.

I think it's prudent that I made this comment.

It's no surprise, due to the subsequent events we have to take into consideration.

Leo?

Thank you, Werner.

Good afternoon, ladies and gentlemen.

Thank you for being here in Frankfurt or on the web with us.

I'd like to give you a little bit of a perspective on what's going on out there.

And in fact, as Henning already indicated very clearly, 2008 was a year with two very distinct faces.

We started very well; we had a very strong start.

We had healthy organic growth, we had excellent traction regarding Business Objects, and in fact, as you will probably remember, at the end of Q2 we adjusted our guidance slightly to the higher end of the range, because we rather felt very confident.

In fact, I think we can talk about this today, we were on a trajectory at the end of Q2 that would have delivered the best year in the history of SAP.

No question about it.

Then you know what happened from that point onwards.

The financial crisis accelerated dramatically as of mid-September, with Lehman going under.

And as we came into end of Q3, we had a chance to talk about that during the earning call, we were basically facing a totally frozen, panicky customer base.

Many companies were actually close to panic, a large number of them were truly shocked, and you know the results of Q3.

In Q4, the situation somewhat normalized.

People got out of their shock and out of the freeze.

People became, again, more rational, but of course, at a significantly lower level of activity.

The good news is, a good number of [slip deals] in Q3 actually closed in Q4.

The fact is, we sold more than EUR1.3 billion software in Q4, which if you look at the absolute number is a pretty staggering amount of software.

We signed important deals, people like ITT, Merck, Enel in EMEA, Sharp in APJ.

But still, the environment has changed, and of course, it has also affected buying patterns from people.

You will not be able to sell any software project today if it hasn't got an ironclad business case, a demonstrable, ironclad business case.

In fact, not only do you need a business case, you need an ironclad delivery model to deliver the value that you're talking about.

It has to be a very tangible and a very short ROI, time to value is as important as the amount of ROI.

And therefore you have to deliver short, quick time to value, and that requires a significant approach change.

And, of course, there is a big appetite, or a significantly larger appetite out there for limited scope and limited duration of projects, because people are managing their liquidity and their expenses very tightly.

SAP Business Objects had a very good performance during the entire year, in particular the second half of the year.

By the way, that's very logical, if you look at our product portfolio, and the analytical parts of it can be implemented very quickly.

They go on top of any existing infrastructure.

Of course, the data will be better if they're using SAP infrastructure.

You can very rapidly get, from those things, a very visible return on investment.

That was one of the reasons, by the way, why we wanted to acquire this company.

As you know, and both Henning and Werner talked about that, we implemented very rapidly a rather stringent cost-containment program immediately after Q3.

We were all of us convinced that we were not facing a temporary event, so we thought, we have to do something rather quickly.

We can have a long debate if the communication around that was good or bad.

The fact is, it was a very effective program, and it helped us significantly in Q4 and as we are moving forward as well.

I don't think that it is prudent to expect that the macroeconomic environment will improve in 2009.

In fact, we don't.

And in fact, at least from our perspective, this is the most challenging environment that SAP has ever faced.

All of the economic indicators, as you can see on the graph, are signaling severe downturns.

And this is the OECD Composite Leading Indicator; it shows clearly that all major economies were going significantly downwards.

I believe that the crisis is deeper than in 2001/2002 and it has a different characteristic.

2001/2002 was about IT; it was about one bubble that had burst.

In fact, not all the geos in the world were affected in the same way.

This time, it is the first really true global crisis that we are witnessing.

What we're seeing is the interconnection of very sophisticated networks.

Therefore, it's spread so fast, and therefore, it goes and reacts so quickly.

And the disconnect between Asia and the rest of the world was obviously a pipedream.

We are all living, on the contrary, in a very connected world, and therefore, we are seeing what we are seeing.

All of the GDP forecasts, therefore, are not very optimistic.

The last one that came out from IMF indicates contraction in all of the major markets.

And you know this as well as we do, there is a very strong correlation between IT spending and GDP and GDP growth.

And no surprise therefore that Forrester in its latest research report, January '09, is indicating we're talking about a 3% decline in global IT spending compared to an 8% increase the year before.

By the way, if you read some of the CIO spending reports that are published by major investment banks, they all seem to be going in the same direction.

Many companies are downsizing.

Therefore, there are less people there, or they're postponing some planned investments.

The good news is, though, and it's very important to indicate here as well the good news, is there are still a significant number of companies who actually take the right decision, who actually believe that it's in hard times that you have to make the necessary changes that you can drive the infrastructure or the capacity to change your business model, and are investing into IT.

I have seen a very clear example of that with a very large deal that occurred in the end of last year in the United States of America.

But the environment is what it is, and as we can't predict how deep and how long this crisis is going to be, we decided that we had to respond in a very clear and a very decisive manner.

As Werner has already told you early on, we based our plans on the assumptions of a flat or slightly decreasing SSRS top line for 2009.

And therefore, we decided that we had to take further cost containment measures in order to ensure the long-term competitiveness of SAP.

So all of the cost control measures that we have implemented in the fourth quarter are remaining in full force.

We will also adjust the number of positions that we have in the Company to the current market conditions, and we will reduce the positions to 48,500 positions by the end of the year.

It's important that we quickly talk about that, and I'll give you some perspective on it.

You saw already in Henning's presentation how much we have been growing our headcount over all of these years.

The reason for that is very simple.

We have been growing organically over all of these years, and because we want to attract good people and train them in depth, you always have to hire ahead of the curve.

We have done that very successfully over all of those years.

I think we had the opportunity to discuss this in meetings like this on a regular basis.

And the same thing happened actually in the beginning of 2008 as well.

So the number that Werner indicated, that was already to fuel some of the growth that we were expecting for this year.

Therefore, we need to make that adjustment in order to rebalance the number of positions we have out there with the growth expectations that we have.

From this, as Werner has already indicated, we expect an annual reduction of personnel expenses in 2010 of about EUR300 million to EUR350 million on a continuous basis.

However, it goes without saying that we will continue to invest in the development and in the training of our employees.

They are, at the end of the day, the most important asset that any software company can have.

We want, therefore, to make sure that SAP will remain a very attractive employer.

And at the same time, we will make sure that we keep the focus on shareholders, and we want to be a very strong and reliable partner for our customers with our three main stakeholders.

And we actually believe that this is a triangle that we have to keep in good balance.

Henning has led a very strong, very impressive drive to take SAP from a single product Company to a dominant, multiproduct Company.

It was a major effort; it was a hard journey.

But we now have the deepest, the highest-quality portfolio that we have ever dreamt of.

We cover all aspects of a business.

We can support the work of every employee in every company in every industry, never disregarding if we're talking CEO, or if we're talking about somebody in the warehouse.

We can cover the needs of every person in every company, disregarding its size, in every industry, in every location.

We cover the core processes in industry-specific solutions for companies of all sizes.

Efficiency is provided out of the box through process automation, through insight and through transparency.

We have taken the Company all the way up to its mobility.

We provide access for mobile devices, for example, CRM on a Blackberry.

You have probably read about the announcement we have made with IBM concerning a product called Alloy, where through Lotus Notes you have full access to SAP as well.

So you can see we have a very broad spectrum, and through this environment, we can actually generate significantly new demand from our customers, be it by bundling certain parts of it, or be it by actually generating demand for the entire stack.

Let me briefly elaborate on SAP Business Objects.

I think we have already said before that it was a very successful acquisition.

The fact is, from a market perspective, by combining SAP and Business Objects, we became the instantly, very rapidly, very important growth market for business intelligence.

It's a $20 billion market.

We helped Business Objects through our sales methods, and we made that commitment to you when we acquired the company, that we would increase the average deal size, which happened in a significant way.

We put in place our cost management capabilities in Business Objects as well, and therefore, we have an outstanding contribution from Business Objects both on the revenue side, but also from a cost perspective.

We have Business Objects to boost the margins and bring them close to the SAP level.

Business Objects, in the meantime, continued to innovate; we have major new product launches coming up.

On top of that, what we did for our customers is that we consolidated the portfolios into one and made it a lot easier for an SAP customer to upbuy instead of always upselling.

They were upbuying to the Business Objects capabilities.

We have announced a certain number of new products.

I don't want to take you through each one of them, maybe a couple.

Most important platform launch is SAP Business Objects XI3.0 and XI3.1.

And we will also be launching some new additional capabilities, but I'll talk about in a few minutes.

Because of all of these efforts we were capable of operating a certain number of competitive implementations on SAP installed base with the SAP Business Objects products.

And actually we overshot our own target and we're very pleased with that.

In 2009 we want to continue to implement the vision that we have been talking about since quite some time.

You will remember that the key vision that is moving us forward is the seamless integration and the seamless flow of helping companies take a strategic decision, gain the insight, execute in the platform and gain automatically back the insight of the quality of that decision.

And create a closed loop between insight, execution, business user transactional so that you can drive a company from end-to-end process from that perspective as well.

That is one of the key reasons why we acquired Business Objects.

It's also one of the key reasons why this acquisition is so impressively successful.

We will be also launching a new release of the Business Suite next week in New York; stay tuned for that.

I think it's going to be a very important announcement.

It is completely based on our Enterprise service-oriented architecture and we are very confident that we can deliver through the new Business Suite a certain number of very important innovations.

Maybe the most important, from a pure business perspective, is the end-to-end capability that we will be providing.

We will start to forget about [3-data] acronyms that come from another age and actually were invented by some market analyst companies.

And we are going to start to talk again about true end-to-end business processes and the metrics and the KPIs that you can use to drive those.

And through our new Business Suite, that is going to be the backbone of the way we want to proceed.

We have also increased the number of enterprise services that come with it, refined some of the technologies that go with it in order to create more composition and combination capabilities.

From a business object perspective, we will push EPM, Enterprise Performance Management, and GRC, governance, risk and compliance, significantly forward for two very obvious reasons.

These are products that are in high demand, given the environment we are in.

There will be also a new product that will be coming out in the BI space, very important.

There will be a release of Polestar and we will start to combine Polestar with our BIA capability, our in-memory database, so that we can really start talking about analytics at the speed of thought, and it can be provided to everyone within the Company.

We'll continue with our very successful approach of SAP Best-run Now packages, you probably heard about that in Q4, where we create specific very quick, very easy to implement, very fast to consume software and service packages that address specific pinpoints in the Company.

Example, liquidity management; example, supply chain transparency; example, purchasing, so that they can really just address a specific area in the Company, solve that pinpoint, very quick return and it's very high demand these days as well.

And our mid-market focus will continue to be centered around our two very successful products, SAP All-in-One and SAP Business One.

Henning already talked about ByDesign; I'd like to add a couple of comments there as well.

We will continue our work on Business ByDesign.

There will be a new release in the near future that will give another jump in functional scope.

We will continue a very, very, very disciplined and a very focused approach on the rollout of this product.

The reason for that is quite simple.

If you compare our margins, that we have just demonstrated to you, to the margins that you can see from even the best on-demand providers, you will see that there is a significant gap there.

If we would bring this product now to the market, they would be very expensive from a margin perspective.

We do believe, however, that if we continue our focused approach, and if we continue doing the efforts that we are doing right now around TCO of that product, and I mean TCO from an end-to-end perspective, we can actually be in a position, if we continue to do this very well, that we can bring this product gradually more and more to the market and actually avoid the pitfall of the significant drop in profitability.

So maybe one last point that has made some headlines in Q4 as well, Enterprise Support.

I'm sure you'll ask me a few questions about that; let me anticipate.

Enterprise Support, this might come as a shattering surprise to many of you, will be a competitive differentiator for SAP; not a handicap, a competitive differentiator.

We will impose a new standard when it comes to support in the market.

We will be, and are going to be, this year already, the first vendor in the market who is going to make support KPIs public, and is going to get itself be measured according to these support KPIs.

And I challenge everyone else in the industry to do the same thing.

And if you think about it, if software is indeed mission critical, and it is mission critical for 82,000 of SAP's customers, then Enterprise Support is the only support that goes, logically, with mission criticality.

So therefore, we are firmly convinced that it will become a competitive advantage for us.

Actually, more and more customers are getting on that bandwagon again as well, so you'll see that that topic is going to start to have less headline news from the perspective that you have read about it in Q4.

And you'll hear more and more about Enterprise Support as a competitive differentiator.

So if you look at how we will act in the market itself.

Clearly as we are the Company that has the capability to offer the entire bandwidth of capabilities from a sales perspective, we can take everything to the market, from small projects with great tangible ROI, but also strategic transformations through big projects such as Global Enterprise Agreements; that's the huge strength of us.

We combine this with the broadest solution portfolio in SAP's history.

And we have re-tooled again and again and again the sales force to turn it into a sales force that is totally value based.

So we can talk the language of the customer, we can engage any type of project.

When people don't want to talk technology to us, that's great, we will talk business to them.

And we are very capable in identifying all of these [paying] points and deliver ROIs through very, very, very stringent business cases to our customers.

And because this crisis was actually created through a financial meltdown, we decided that we would also help customers in financing.

And therefore we have an agreement with a large financing provider and we arrange third party financing for software projects, for customers.

By the way, this is very successful in the SME arena.

We are well prepared as we move forward as a Company.

If you look at us, we have a high level of protected recurring revenue; that's a very important thing.

We have a diversified revenue stream across geos, across industries, across customers segments.

We have the broadest and strongest solution portfolio in this industry.

We have an unmatched domain expertise as the dominating vendor in 20 out of 25 industries.

We have a very skilled, highly motivated workforce.

Our brand equity is the highest ever.

We have almost doubled our brand equity since the year 2000, therefore we have a very good reputation in the market.

We have a unique ecosystem and, combined with our own workforce, we have a very high capability of innovation.

We continue to have good win rates, very strong competitive win rates against the competition.

We are very proud of the fact that, now that we have 82,000 customers we also have the highest customer rating satisfaction in the history of SAP, which makes us feel very, very good.

We have strong cost discipline in the Company.

We have a very healthy cash generation and a solid financial posture.

And at the end of the day, I think the strongest currency in 2009 is going to be trust and I believe many companies have a high degree of trust in SAP.

Thank you very much.

Thank you Leo.

We now have time to take your questions.

Again a reminder for those of you who are on the Internet or are listening to this event by phone, please do send questions to investor@sap.com.

But I think we'll start here in the room in Frankfurt.

I see one question here from Raimo Lenschow, Merrill Lynch, and he's already using the microphone.

This is the proper protocol.

Thanks.

Two questions if I may?

First of all, if I look into 2009 and to the cost situation there and the drivers for profitability, first of all on the Enterprise maintenance side, can you give us an idea about the uptick when you heard some numbers in Germany; 25% and a much higher number outside?

Just to give us a feeling how the acceptance level is in reality.

Also Business ByDesign costs.

I believe that's an item that shouldn't really happen 2009 and give us some benefit that maybe we can go into more detail on that one?

And then the second question is, on the Q4 savings of EUR220 million, I remember in the last recession, Werner, you were able to give us a bit of a breakdown to get a feeling where the savings were coming from and hence how sustainable they were in terms of travel, third party services.

Maybe that's possible this time around as well?

Thanks.

The first question is for Enterprise Support, and I understood it in a way that you were interested to see how this will impact our ability to increase support revenue in 2009.

Is it correct?

Yes, I think we said that the contribution on the top line of Enterprise Support in 2009 would be roughly, we said at that point in time I think EUR150 million.

That's still the case.

All the discussions we have in specific countries might result in us saying that it's around 10% to 15% less, but definitely not more.

And we have embedded this in our plan for 2009 already.

The second question was related to ByDesign costs.

I think when we announced the change [adoption] in our go-to-market strategy for Business ByDesign back in April, we said that we would stop accelerated investments for Business ByDesign.

So for the rest of 2008, and going into 2009, this is part of our overall R&D spending we have in our Company.

And as you know, we do not break this down to different areas in R&D, and I hope you understand that we are not going to do this for Business ByDesign going forward.

So be sure no accelerated investment, it's part of the overall R&D budget of SAP.

Now if you look to the EUR220 million, I tried to make clear that you cannot extrapolate these into 2009.

We have one-time expense items included on non-expense items if you will; I'll give you some examples.

Some of our AEs around the world haven't made their quota at all because at the end of the day it didn't deliver on the threshold, say X% of the quota, and therefore didn't receive their commission in 2009.

On the other side, we know that this very restrictive no travel for internal purposes cannot be held throughout 2009.

We have a lot of projects ongoing and we have to also travel for internal projects, internal purposes, so I would say that's the reason why we were so cautious that you cannot take the entire amount.

And I cannot give you an indication what the overall amount will be.

We tried to package all of this into the guidance we have.

And if you go through your model, you should come to an operating expense number if you stick with the indications we gave you.

Thank you.

We do take the second question from Elizabeth Buckley please?

Okay, yes just going back to the Enterprise Support question, you were talking EUR150 million in potential revenues, minus 10%, 15%.

But just to understand the policy here, to what extent are you seeing clients in other markets ask for a maintenance reprieve for 2009?

And do you plan to offer them equal treatment when indeed they ask?

And then you've talked about the revenue impact.

Can you also talk about the margin impact?

Because clearly you are adding costs to provide this additional selling point, and so how do you see the impact on margins for 2009?

Thanks.

Maybe I'll just give you an answer to the first part of the question, and maybe we should explain what happened exactly in Germany so that you understand why it's not an issue anywhere else.

For historical reasons that go way back into the history of SAP, it so happens to be that some of the support contracts that we have in Germany, and in Austria, have a different language than those that we have anywhere else in the world.

But for historical reasons we don't need to elaborate on those.

When we decided to introduce Enterprise Support, the only way to do this legally in Germany was to withdraw, was to cancel the contract that people had here and give them new ones.

That was felt to be a little bit of a unilateral decision by SAP.

We did not have the same situation anywhere else in the world; I insist on that.

Therefore we decided that we [set the clock] in Germany and do it in a different way; I want to be very clear.

By the end of 2009, once we enter into 2010, everyone is treated equally around the world.

And the investment in the Support organization to deliver Enterprise Support, we invested already in 2008.

We will continue in the first half of 2009.

I hope you understand that I cannot give you a precise margin number for this one, but if you start into the year it might be lower than the average support margin we have, but throughout the year it should come to this level.

Thank you.

I just think we take one question from the web which we got from several analysts, among them Sarah Friar of Goldman Sachs, Ross MacMillan, Jefferies and Rajesh Balasubramanian from Credit Suisse.

It's again on the topic of the operating margin.

Can you give us further color on how we should think about margin sensitivity?

Is your guidance built on flat, declining or even increasing revenue expectations?

In other terms, should operating expenses be flat or actually down in 2009?

I'm not sure whether we can provide more detail.

We cannot provide more detail as we provided with the guidance itself.

But we make strong indication, if you look to the software and software-related service revenue.

We said to achieve this 24.5% to 25.5% we assume that the increase or the SSRS revenue is flat or up to minus 1%.

If this happened, we achieve our guidance on the margin side.

A question here from Mr.

Steffen.

You mentioned the Business Objects effect or impact in the last year; it was around 6% revenue increase in software and software-related revenues.

And in the fourth quarter it was around minus 6%, the impact of Business Objects.

And if my calculation is correct, in the whole year license revenues, including maintenance of Business Objects, declined 36.5%, and on the other side, in the fourth quarter, it increased by around 24.5%.

I already calculated these figures in euro, not in US dollar, so maybe you can shed some light on it?

Second question is in respect to the workforce reduction.

You mentioned that you will reduce workforce by 3,000 people in the current year.

Can you give us an indication in which areas?

And second, you also mentioned in the press release it would be done by attrition.

Why should I have then additional expenses?

Thank you.

Let me maybe address your second question first.

We will do the reduction in positions globally, everywhere; so all countries, all Board areas, all departments, all divisions, all businesses.

Of course not as a haircut.

It will be done by distinguishing the various needs, where we're coming from, but you should assume it will be happening everywhere.

Now what we said also in the press release is that we would be using, first of all and primary, attrition, and combined with a very stringent hiring policy, a very, very limited hiring policy.

We also said that if this will not achieve our objective then we will take some additional measures.

We will always try to go for the socially most acceptable ones.

And now, like any prudent CFO would do, and knowing that you can't really forecast an attrition rate, we only have historical attrition rates, we have to make an assumption and therefore you have a range of restructuring costs that are there to cover what might happen if we can't achieve that objective through the normal fluctuation.

The question with regard to the Business Objects contribution, I couldn't follow you.

I'll give you my perspective on this and then we can have a chat on it; I do not want not to answer the question.

But if you look to the increase in software and software-related service revenue, we said 20%.

Thereof, 16% is coming from Business Objects product.

We increased by EUR1.5 billion; this is 20% so we can calculate what does it mean the 16% out of this 20%.

That's Business Objects on the product side.

We have not disclosed anything on the service side, so from that perspective I cannot follow you that you say that Business Objects, in euro, decreased its revenue since it was with SAP.

That's something we can work upon both together, but I cannot answer this question with all the limited information I have with me right now.

Okay, thank you.

We have another question, or two questions actually from the web again from various analysts; Mark Bryan, Deutsche Bank; Michael Briest, UBS; Adam Wood, Exane BNP Paribas; Jonathan Crozier, WestLB; Gunnar Plagge, Nomura.

The first one is, cash flow conversion rate in the fourth quarter.

2008 seems to be down a lot year-on-year.

What is behind that?

Also, is this a result of a backend loaded quarter?

And DSOs went up five days year-on-year; I think Werner, you mentioned this in your presentation.

Can you please explain why?

And the second part of the question is on the services business.

Services revenue were a lot stronger in Q4 than analysts expected.

Does it mean that you are taking more revenue back from the channel?

How sustainable is service for the year?

And can you give us more color on the pipeline for consulting projects?

Okay let me start with two.

Clearly, we are not taking revenue back from the channel.

That's not our strategy, not our policy.

In fact, there's a very logical explanation for the service or the consulting revenues in this case.

They are trading, the software numbers that are generated one or two or three quarters before we actually start to book the service revenue.

And that's a normal phenomena, people buy the software, you announce the projects, people come in to implement it and therefore if you have a big headwave of software revenues, you will see a trading effect on the service revenues.

As we are coming off 19 quarters of double-digit growth in software revenues, actually the analysts would have expected something different.

[If you look] to the cash flow conversion rate, could you repeat the question?

The cash flow conversion rate in Q4 2008 seems to be down a lot year-on-year.

What's the reason?

Is this a result of a backend low quarter?

And the second one, was an explanation on the development of DSOs which went up five days?

The cash flow conversion rate for the quarter or the full year?

Because for the full year, it increased, as I showed from 102% to 116%.

If you look to Q4, of course we had a completely different situation in Q4 compared to Q4 of 2007, and definitely many factors play into -- or have to be taken into consideration here.

That's number one.

The accounts receivable side, it was definitely a much tougher environment, as we had it in the fourth quarter of 2007.

The working capital came into play and I'm not so worried about the performance in Q4.

For me, it's more important to look to the full year performance of 2008, and I think there we had a very positive development, saw a positive development on the cash flow conversion side.

Going forward, I think the environment is tough and I think often there's a question, is it part of a deal to extend the payment terms?

And we have then the choice, neither to close the deal or to look for the DSO.

And I think we are trying to manage very carefully the DSO, but definitely it is a must for customer, we would also accept an increase in DSO here on an exceptional basis.

Thank you.

We continue here in Frankfurt, Mr.

Rode?

Thank you, I would like to ask two questions.

One, on the 2010 cost saving statements that you gave, I was just wondering whether you wanted us to think along the lines we take 2009 adjusted maybe for the, it's quite a range, but EUR200 million to EUR300 million one-off costs to get to the cost savings and then which is about 1.5% to 2%, say of revenues, and then add for 2010 what would be another 2.5% to 3% of margins?

Or whether there is any conceptional error in that thinking?

Everything else obviously would be assumed the same and unchanged.

And the second point, I know we've spoken about Enterprise Support, and I'm not going to call it a price increase, but let's call it a mandatory upgrade for a lot of customers outside Germany and Austria.

Did you experience in the fourth quarter any pushback in other areas, like people also wanting to have had the choice not to take it, perhaps arguing a bit more about the license payments or anything in that order?

Thanks.

Let me pick up on your last question first.

I've been doing this business for quite some time.

I cannot remember a single customer decision with Enterprise Support, without Enterprise Support, with whatever or without whatever, where there wasn't a pricing discussion.

So we're almost there, without wanting to sound cute, almost have said so what is else is new, right?

The fundamental point, though, is a slightly different one.

The real question is can you demonstrate value?

If you can demonstrate value, really demonstrate value, it's actually a very pretty easy discussion to have.

If you can't, it gets a little bit tougher, which is why we're insisting so much on these KPIs for Enterprise Support because these are demonstrable value points for a real customer.

It might sound a little bit arcane to you, but if you're running a 24 by seven IT shop, it's mission critical, it contains SAP and non-SAP software, it contains custom codes, and one half an hour downtime might cost you hundreds of millions.

Having this value discussion and demonstrating to that customer that through Enterprise Support you won't be, or she won't be in discussion, is a pretty important one.

So that's the point I wanted to make on this.

Now of course, we're living in hard times and of course, everyone is trying to get a better deal, but that was the case in good times as well.

Okay and to your first question, it is our clear objective to decrease our personnel expenses in 2010 by EUR300 million to EUR350 million.

To achieve this, we anticipate to spend between EUR200 million and EUR300 million for restructuring in 2009.

And what you said is absolutely correct under the (inaudible) condition.

Thank you.

We take one question from Jochen Klusmann and before that, we have a question from the web.

It's a question asked by Gerardus Vos of Citi and James Dawson, Morgan Stanley.

The first one is on the small and mid-sized enterprises business and the BRIC countries.

Can you provide some color on the current market dynamics in the SME and BRIC markets?

Did the financing offering for SME customers have any impact?

And finally, is Russia open for business?

The second part of the question is on Business Objects.

Can you help us to understand why Business Objects grew so well and how we should think about the future Business Objects' growth rate?

Let me try to answer first the SME/BRIC question.

Answering the question if Russia is open for business or not is a politically loaded question.

Of course, Russia is open for business, but there's less business to be done in Russia than before.

In fact, Russia is a pretty well example for what you see in the BRIC countries.

If you go back in time for SAP, you could have seen how much BRIC grew faster than the so-called developed world, and the economic crisis has hit the BRIC countries really hard.

And therefore there was an adjustment effect that was equally brutal on the other side of the pendulum.

They're all smooth now; it's just a question of time.

It goes without saying that if oil prices and gas prices drop the way they dropped, raw materials drop the way they dropped, and if you're an economy that is depending significantly on the extraction of raw materials, clearly there has to be an effect.

And among the BRIC countries there are some prominent ones that have the business model.

SME, that's a bit more of a nuanced picture.

In the beginning, right after Lehman and the credit freeze-over, SMEs were hurt really badly.

The liquidity crunch happened on SMEs immediately and for reasons that you understand better than I do.

The financing did alleviate that to an extent, but it takes some time for the financing machine to really gain traction in the SME market.

I think it's now running at a satisfactory speed.

Did it compensate for the entire effect of the credit crunch?

No, but that takes some time and we will be a very good, long-term partner to our SME customers.

Thank you.

We'll take the question from Jochen Klusmann.

Yes, a couple of smaller questions.

First on the EUR200 or EUR300 million restructuring charges for this year, can you give us an idea on how we should split that over the quarters?

From what I understood is, you're probably going to ask first to see who's going anyway.

So should we think of that more backend loaded for the end of the year, all these charges?

Secondly, can you give us an idea how much of acquisition related charges we should expect from BOBJ in '09?

You mentioned the EUR9 million in maintenance writedown, I guess we're going to see more on the cost side.

And lastly, according to your cash flow statement, you had allowance for doubtful accounts last year of EUR76 million compared to nil the year before.

That's a little bit of a high number.

Has there been anything major happening, especially in Q4, or is it just bits and pieces and reflecting a little bit the economic uncertainty?

I'll take these points and start with the Business Objects related charges.

I think also in 2009, we will see roughly EUR290 million on the expense side coming from the amortization of all the assets acquired.

This year it was EUR297 million, so this will not change.

On the support revenue writedown, we had EUR166 million in 2008, and I think we said that it will be EUR9 million in the first quarter of 2009.

So I would assume here roughly EUR300 million also in 2009.

The allowance for doubtful accounts is EUR76 million, was it as this year [2000 and] -- the increase.

Yes and I think this reflects the seriousness in the market we see that we have a lot of customers who struggle, we had a lot of bad news beginning of the year with many of our customers simply going under Chapter 11, if you look to the US.

So this was the reason for the increase, and I would say we have to keep a very close look to our receivables also going forward, as regards this year.

And the question in the middle, if you could --?

Okay.

The phasing of the restructuring expenses.

I think if you listen to the way how we want to achieve it, let me say, we reduce or we ensure that by the end of 2009, we had 48,500 positions within SAP.

And that we use the attrition to achieve this shows that first of all we have to see how the attrition worked throughout this year.

And this is an indication that it's probably not front-end loaded here, that we have a more balanced restructuring expenses throughout the year.

This is not a guidance.

As we are just going through all of these programs, this might change and we will speak about this when we release our Q1 earnings in April.

Thank you.

I do see one other questioner here in the room in Frankfurt.

Mr.

Knut Woller.

Yes hello.

Just one question regarding the restructuring program.

I think if I remember correctly, in the last downswing you said you won't make any significant reductions due to the use of growth opportunities if the crisis is over.

I think basically the same rationale should apply then from 2010 maybe onwards.

So what is the rationale behind the restructuring?

Is it that SAP is going to head towards a leaner, more efficient organization, trying to be or to do things with less cost or what is the rationale behind that?

The rationale is actually only limited to the economic environment.

At the end of the day, no one really knows how long this thing will take.

If you're optimistic, you might believe that we'll see an uptake in early 2010; if you're pessimistic, you might have to wait until 2011.

We don't know if the uptake is going to be steep or shallow, and you don't even want to start speculating about that because that's too dangerous speculation.

So the measures that we have taken are only in relationship to our growth that we see or that we expect in 2009, and we want to be prudent from that perspective.

Now you should not to read into this anything concerning anything else.

If you look at the textbook cases about agile or lean management, you will see that these are long-term measures or long-term processes that you need to put into place over many, many years, and lean has nothing to do with cost cutting.

Might be I can add something because I was responsible for the measures in the last crisis.

It was a completely different situation.

We are just in a better situation.

At that time, it was not a global one, it was an IT one.

And honestly, the situation for SAP was not that good because our customer satisfaction was not very high and people were questioning at that time our ability to compete against the new kids on the block, Internet etc.

In such a situation, you feel it's not the environment, it's yourself.

Now let's face the fact we are very well prepared and the environment is the only factor; I completely agree.

At that time, it was really different.

Thank you very much.

This concludes our financial analysts conference for today, and our next event will be the Suite launch in New York.

I do see one final question, I think -- Mr.

[Nakel]?

My question relates to R&D expenses.

Henning, you show us in impressive numbers at the beginning of the transformation of SAP and respect and thanks from investors' side for this entrepreneurship.

And my thoughts are going to -- this was connected with high R&D expenses and we saw some decrease in R&D expenses in '08 to 13.8%.

What will be the direction of R&D expenses in the coming years?

What's your thinking about this?

Well that's a very good question and let me make a few statements on that.

And it shouldn't come as a surprise to you because we've been saying this now for quite some time.

You cannot be in this business if you're not an innovative company.

Innovation doesn't just happen, you really have to do the best you can do in research and development.

And therefore SAP will continue to be an innovative Company and will continue to invest in research and development.

I think it's true for the last 10 years and it will be true for the next years, at the end of the day, you still want to do it as effectively as possible.

It's not just about how much do you spend, it's also about how well do you spend it.

And we have invested a lot into core competencies.

Let me give you an example, and we invested into SOA.

If we now assume that SOA is the core architecture that is going to drive this industry for a few years, then you don't need to reinvest into SOA.

Now it's about making it better, extracting more value out of it; it's a different type of investment.

It doesn't mean that you won't hear about new innovation, new avant garde sort of SAP, but it's a different approach.

So we will continue to have a significant portion of investment into R&D, we'll try to optimize it.

But you can rest assured that SAP will continue to drive its business model first and primary around innovation.

Thank you very much, Leo, for this answer.

Thank you Mr.

[Nakel] for your more long-term orientated question.

So this concludes our financial analysts conference for today.

Our next event is the Business Suite launch in New York next week on Wednesday, and the Q1 earnings announcement on April 29.

Thank you very much.