INCOME

Operating Income-Related Targets and Performance in 2008

Our operating income-related internal management goals and published outlook were expressed in non-GAAP terms derived from U.S. GAAP measures in 2008. For this reason, in the following section we discuss performance against our targets exclusively and expressly in terms of non-GAAP numbers. All subsequent discussion in the Revenue and later subsections of this Income section is in terms of IFRS measures. The numbers are not explicitly identified as IFRS measures. As a consequence of our acquisition of Business Objects in January 2008, our numbers for 2008 and 2007 are not fully comparable.

Non-GAAP Software and Software-Related Service Revenue Target

At the beginning of 2008, we set ourselves the ambitious target of increasing non-GAAP software and software-related service revenue (2007: € 7,427 million) by between 24% and 27% on a constant currency basis. We defined the measure as excluding a nonrecurring deferred support revenue writedown of approximately € 180 million from the acquisition of Business Objects. We expected SAP’s business, excluding the contribution from Business Objects, to contribute 12 to 14 percentage points to this growth. In July, we also announced that in view of our successful first-half of the year operations, we expected non-GAAP software and software-related service revenue growth to be at the top end of the target range that we had announced earlier. In October, after experiencing an unexpected downturn in revenue at the end of the third quarter and in view of the uncertain economic environment, we decided we could no longer specifically forecast our non-GAAP software and software-related service revenue growth for 2008.

On a constant currency basis over the full year, our non-GAAP software and software-related service revenue grew 20% (16% without adjustment for currency effects) to € 8,919 million (2007: € 7,427 million), so we missed the revenue target we had set ourselves at the beginning of the year. The reason we failed to achieve the target was that, with prospects for the future so unclear in the financial and economic crisis, demand for our software products decreased steeply because many customers declined to make investment decisions. The fall in demand affected original SAP products more severely than the products of Business Objects. Thanks primarily to successes in the first half of the year, SAP’s business without the Business Objects input contributed 6 percentage points to non-GAAP software and software-related service revenue growth on a constant currency basis. For the fifth year in succession, we achieved double-digit percentage growth in full-year non-GAAP software and software-related service revenue growth on a constant currency basis.

Non-GAAP Operating Margin Target

At the beginning of 2008, we set ourselves a profitability target of increasing constant currency non-GAAP operating margin, which excludes a nonrecurring deferred support revenue writedown from the acquisition of Business Objects and acquisition-related charges, to between 27.5% and 28.0%. Non-GAAP operating margin is the ratio, expressed as a percentage, of non-GAAP operating income to non-GAAP total revenue. The non-GAAP operating margin outlook that we announced at the beginning of 2008 included accelerated investments of € 175 to € 225 million (2007: € 125 million) in building a business around the new SAP Business ByDesign solution to address new, untapped segments in the midmarket. In the first quarter of the year, we modified the rollout strategy for the SAP Business ByDesign solution to ensure a more focused and controlled ramp-up process. We announced that the accelerated investment in SAP Business ByDesign in 2008 would be reduced by approximately € 100 million in view of the change to the rollout strategy. We expected this would reinforce the operating margin improvement and lead to an operating margin in the range 28.5% to 29.0%. In the second quarter, we announced that we expected the year’s operating margin to be at the upper end of that range. In the third quarter, we responded to the effects of the financial and economic crisis by introducing cost-containment measures, expecting to cut around € 200 million from budgeted costs in the fourth quarter. We updated our profitability target accordingly, expecting to achieve a non-GAAP operating margin of about 28.0% on a constant currency basis provided we achieved 20% to 22% year-over-year growth in non-GAAP software and software-related service revenue on a constant currency basis.