SAP announces 2006 second quarter preliminary results

SAP AG announced today that after a preliminary review of its 2006 second quarter results, it expects second quarter 2006 software revenues to be approximately EUR621 million, representing an increase of 8% (10% at constant currencies1) compared to the second quarter of 2005.

Second quarter 2006 product revenues are expected to be approximately EUR1.48 billion, representing an increase of 9% (10% at constant currencies1) compared to the same quarter last year. Total revenues for the 2006 second quarter are expected to be approximately EUR2.20 billion, which represents an increase of 9% (9% at constant currencies1) compared to the 2005 second quarter.

The second quarter 2006 pro forma operating income is expected to be around EUR558 million, representing an increase of 13% compared to the second quarter of last year and the pro forma operating margin is expected to increase by approximately 80 basis points to 25.4% compared to the second quarter of 2005. The second quarter pro forma net income is expected to be approximately EUR432 million, representing an increase of 38% compared to the same quarter last year and pro forma earnings per share is expected to be approximately EUR1.41 per share, which represents an increase of 38% compared to the second quarter of 2005. The second quarter 2006 pro forma operating margin can be reconciled to the operating margin by adjusting operating income for stock-based compensation (approximately EUR16 million) and acquisition-related charges (approximately EUR11 million).

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The Americas region, which includes the US, Canada and Latin America, is expected to report software revenues of EUR239 million for the second quarter of 2006, representing an increase of 18% (21% at constant currencies1) compared to the second quarter of 2005. In the US, software revenues for the second quarter of 2006 are expected to increase by 16% (20% at constant currencies1) to EUR201 million compared to the second quarter of 2005. In the EMEA (Europe, Middle East and Africa) region, second quarter 2006 software revenues are expected to increase 3% (3% at constant currencies1) to EUR296 million. Second quarter 2006 software revenues in Germany are expected to increase 8% to EUR100 million. In the APA (Asia/Pacific) region, second quarter 2006 software revenues are expected to be flat (4% increase at constant currencies1) at EUR86 million. Second quarter 2006 software revenues in Japan are expected to decrease 4% (4% increase at constant currencies1) to EUR23 million.

The company also announced that it reaffirmed its outlook for 2006 and as a result it continues to provide the following outlook for the full-year 2006 as described in its 20 April 2006 first quarter results press release.

* The company expects full-year 2006 product revenues to increase in a range of 13% - 15% compared to 2005. This growth rate is based on the company's expectation for full-year 2006 software revenue growth in a range of 15% - 17% compared to 2005.
* The company expects the full-year 2006 pro forma operating margin, which excludes stock-based compensation and acquisition-related charges, to increase in a range of 0.5 - 1.0 percentage points compared to 2005.
* The company expects full-year 2006 pro forma earnings per share, which exclude stock-based compensation, acquisition-related charges and impairment-related charges, to be in a range of EUR5.80 to EUR6.00 per share.
* The outlook is based on an assumed US dollar to euro exchange rate of $1.23 per EUR1.00.

"With our results in the first half of 2006, we are within our targeted range for product revenue growth, pro forma operating margin growth and pro forma earnings per share," said Henning Kagermann, CEO of SAP. "Therefore, we remain confident for the remainder of 2006 as demonstrated by the reaffirmation of our full-year 2006 outlook."

Kagermann continued: "Our order entry is strong and we continue to see a robust pipeline. Product launches are moving forward as planned and customer interest in new solutions like mySAP ERP 2005, Duet and SAP Analytics is strong."

SAP will provide further details of its second quarter and first half 2006 preliminary results on 20 July.

SAP senior management will host a conference call today at 4pm (CET) / 3pm (GMT) / 10am (Eastern) / 7am (Pacific). The conference call will be Webcast live on the company's Web site at http://www.sap.com/investor and will be available for replay purposes as well.

1) SAP calculates "constant-currency" year-on-year changes in revenue and operating income by translating foreign currencies using the average exchange rates from 2005 instead of 2006. SAP believes that such constant-currency measures provide supplemental meaningful information for investors as they show how the company would have performed if it had not been affected by changes in exchange rates.