SAP AG  Q2 and H1 2003  Preliminary Results Release New York,   July 17, 2003
Werner Brandt CFO, SAP AG
Safe  H arbor  S tatement <ul><li>Any statements contained in this document that are not historical facts are forward-look...
Agenda Outlook 2003 <ul><li>2nd Quarter 2003 Financials </li></ul>First Half 2003 Financials
Key Figures –  2nd  Quarter 200 3 Q2 2002 €  millions Q2 2003 €  millions License  revenues % Total revenues Net income - ...
Key Figures – 2nd Quarter 2003 Q2 2002 € millions Q2 2003 € millions *  percentage points EBITDA (2) - Margin as a % of sa...
Group Sales by Revenue Type – 2nd  Quart er   2003 Q2 2003 €  millions Q2 2002 €  millions % Q2 2002 %  of revenue Q2 2003...
Maintenance Analysis* – 2nd Quarter 2003 – part I ** incl. sequential currency impact– in € millions  €  600  €  610  €  6...
Maintenance Analysis – 2nd Quarter 2003 – part II One time  Effects €  608 mill. 17% Maint.  on SW Q1 Q1 2003 Q1 2003 run ...
Gross Margin Analysis – 2nd Quarter 2003 Q2 2002 € millions Q2 2003 € millions % Product revenue Cost of product Product g...
Cost Analysis – 2nd  Quart er   2003 – part I Q2 2003 € millions Q2 2002 € millions Total costs Total revenues -1,298 1,63...
Cost Analysis – 2nd  Quart er   2003 – part II Q2 2003 € millions Q1 2003 € millions Operating Expenses SBC & AC Operating...
Worldwide Headcount* as of June 30, 2003 06/2003 12/2002 seq. Q2/03 Group EMEA Ameri c a s APA 156 -25 176 307 * in FTE ne...
Agenda Outlook 2003 2nd Quarter 2003 Financials <ul><li>First Half 2003 Financials </li></ul>
Key Figures –  First Half  200 3 H1 2002 €  millions H1 2003 €  millions License  revenues % Total revenues Net income -  ...
Key Figures – First Half 2003 H1 2002 € millions H1 2003 € millions *  percentage points EBITDA (2) - Margin as a % of sal...
Consolidated Balance Sheet as of  June 30,  200 3 Shareholders‘ Equity & Liabilities Assets Other assets Liquid assets Inv...
Balance Sheet & Cash Flow Analysis Dec 31, 02 H1 2002 Jun 30, 03 H1 2003 % * percentage points ** days Operating Cash Flow...
Agenda License Revenue Analysis 1st Quarter 2003 Financials <ul><li>Outlook 2003 </li></ul>
Outlook 2003 <ul><li>SAP continues to expect pro forma earnings per share for 2003, excluding stock-based compensation, ac...
Outlook 2003 cont‘d <ul><li>Management does not provide its guidance on operating margin and earnings per share based on U...
Léo Apotheker President Global Field Operations, Member of the Executive Board SAP AG
License Revenue by Region – 2nd  Quart er   2003 License Revenue  Q2  200 3: €431 mill. - 13 %* | - 5 %** of which US   € ...
Group Sales by Region – 2nd  Quart er   2003 Total Revenue  Q2 2003: €1,638 mill. -8 %* |  +2 %** of which US   €397 m -15...
Customer Wins in Q2 2003 <ul><li>AMERICAS   </li></ul><ul><li>Colgate-Palmolive </li></ul><ul><li>Fender </li></ul><ul><li...
Highlights Q2 2003  <ul><ul><li>Continued license growth in the US (currency adjusted)  </li></ul></ul><ul><ul><li>Strong ...
Market Conditions Q2 2003  <ul><ul><li>Decreasing average deal size </li></ul></ul><ul><ul><li>Higher volume of deals  </l...
US – Relative Market Shares  Source: CMI Analysis based on Company Data and Financial Analysts Estimates * Forecast by Com...
mySAP SCM and mySAP CRM Momentum 200 3 mySAP SCM as % of i2  & Manugistics 300% 200% 100% Q1/02 Q2/02 Q3/02 Q4/02 0% Q1/03...
Industry Expertise <ul><li>Customers want more than CRM or SCM – they want solutions for their unique business needs </li>...
License Revenue Analysis  – by Industry Q2   2003 * Compared to FY 2002 Service Industries 25%  | 0%* Financial Services 1...
Henning Kagermann CEO SAP AG
First Half 2003 Business Environment I <ul><ul><li>Customer spending environment remains challenging, but SAP benefits thr...
First Half 2003 Business Environment II <ul><ul><li>Operational efficiency – one of the top priorities of CEOs </li></ul><...
Customer Feedback <ul><ul><ul><li>“ The successful implementation in 2001 of our new Enterprise Resource Planning System, ...
Strategic Focus in 2003 <ul><li>In a challenging market environment, SAP is focused on: </li></ul><ul><ul><li>Improving pr...
Second Quarter 2003 Summary <ul><ul><li>Pro forma operating income increased 20% representing a strong performance given a...
36% 20% 20% 19% 41% 39% 37% 9% 10% 10% 13% 12% 8% 10% 12% 17% 16% 17% 16% 19% 6% 5% 4% 4% Total license revenue - Relative...
Customer Satisfaction Survey H1 2003  Source: NFO Infratest Overall Satisfaction with SAP 6.6 7.2 6.9 7.0 6.7 7.5 7.0 7.1 ...
SAP Blueprint for Sustainable Success 23 industry solutions New releases: mySAP CRM 4.0 and mySAP SCM 4.0 New user interfa...
The Best Partner to Deliver Shared Quality  Commitment Joint Business  Solutions (e.g. Midmarket) SAP NetWeaver &  SAP xAp...
2003 Looking Ahead <ul><ul><li>Economic environment remains challenging until year-end  </li></ul></ul><ul><ul><li>Confusi...
Market Shares by Industry in 2002* *Based on product revenues (license & maintenance)  /preliminary Sources: SAP Analysis ...
SAP AG  Q2 and H1 2003  Preliminary Results Release New York,   July 17, 2003
Appendix APPENDIX
Cost Analysis – 2nd  Quart er   2003 – part I Q2 2003 € millions Q2 2002 € millions Total costs Total revenues -1,298 1,63...
License Revenue Analysis  – by Order Entry Q2  200 3* % of  license  revenue Q1  200 3* % of  license  revenue % mySAP Bus...
36% 22% 22% 23% 39% 38% 38% 15% 16% 14% 8% 13% 7% 7% 7% 17% 18% 19% 20% 22% rolling last 4 quarters; as a % of license rev...
License Revenue Analysis  – by Solution Q2 2003 Total License Revenue Q2   2003 : € 431 mill. *  O f license revenue **  Y...
License Revenue Analysis  – by Solution Q2 2003 Q2 2003 as % of revenue Q2 2003 €  millions Q1 2003 €  millions mySAP SCM ...
License Revenue breakdown by solution   ( rolling 4 quarters; based on License Revenues) SCM & CRM – Relative Market Share...
22% 24% 27% 26% 15% 15% 7% 7% 21% 22% 7% 7% rolling last 4 quarters; as a % of license revenues 26% 25% 21% 21% 21% 20% 19...
License Revenue Analysis  – by Industry Q2   2003 * Compared to FY 2002 Service Industries 25%  | 0%* Financial Services 1...
License Revenue by Region – First Half   2003 License Revenue  H1  200 3: €783 mill. - 13 %* | - 5 %** of which US   € 157...
Group Sales by Region – First Half   2003 Total Revenue  H1 2003: €3,158 mill. -8 %* |  +1 %** of which US   €772 m -17%* ...
Key Figures –  2nd  Quarter 200 3 Analysis – Part I Q2 2002 €  millions Q2 2003 €  millions % Pro forma operating income  ...
Key Figures –  2nd  Quarter 200 3 Analysis – Part II Q2 2002 €  millons Q2 2003 €  millions % Pro forma EPS  excluding sto...
Pro forma information (1)   SAP has provided information in 2002 and 2001 using pro forma measures on a consolidated basis...
Pro forma information (2)  Management believes that EBITDA and free cash flow are widely accepted supplemental measures of...
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  • Width = Marketsize height = share SAP outperformed the market in all „big“ segments (represented with help of arrows green/yellow/orange arrows) SAP outperformed the total market SAP market leader in allmost all strategic segments except CRM / strong momentum – market leadership possible this year (if Siebel doesn´t get grip) CRM still most attractive market (relation of size &amp; growth) / pent-up demand for ERP (stable &amp; solid growth)
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    1. 1. SAP AG Q2 and H1 2003 Preliminary Results Release New York, July 17, 2003
    2. 2. Werner Brandt CFO, SAP AG
    3. 3. Safe H arbor S tatement <ul><li>Any statements contained in this document that are not historical facts are forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995. Words such as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “project,” “predict,” “should” and “will” and similar expressions as they relate to SAP are intended to identify such forward-looking statements. SAP undertakes no obligation to publicly update or revise any forward-looking statements. All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. The factors that could affect SAP’s future financial results are discussed more fully in SAP’s filings with the U.S. Securities and Exchange Commission (“SEC”), including SAP’s most recent Annual Report on Form 20-F filed with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. </li></ul>
    4. 4. Agenda Outlook 2003 <ul><li>2nd Quarter 2003 Financials </li></ul>First Half 2003 Financials
    5. 5. Key Figures – 2nd Quarter 200 3 Q2 2002 € millions Q2 2003 € millions License revenues % Total revenues Net income - Margin as a % of sales Operating income - Margin as a % of sales Income before income taxes Earnings per share (in €) - Margin as a % of sales * percentage points 336 21 347 219 13 0.71 21 1 , 638 431 1,778 320 -107 18 -232 na -0.74 na 496 -8 6 3* na na na na na -13 340 2** -5** ** % currency adjusted – actuals 2003 converted with the exchange rates of 2002
    6. 6. Key Figures – 2nd Quarter 2003 Q2 2002 € millions Q2 2003 € millions * percentage points EBITDA (2) - Margin as a % of sales Pro forma Operating income excl. stock- based comp. and acquisition-related charges (1) - Margin as a % of sales na 37% na Effective tax rate Pro forma EPS excluding stock-based compensation, acquisition-related charges, and impairment-related charges (1) 62 0.81 0.49 324 20 6* 18 388 24 % 377 4 392 3* 21 24
    7. 7. Group Sales by Revenue Type – 2nd Quart er 2003 Q2 2003 € millions Q2 2002 € millions % Q2 2002 % of revenue Q2 2003 % of revenue Product 1,091 61 -2 1,064 65 Maintenance 595 33 6 633 39 License 496 28 -13 431 26 660 545 37 31 -16 -12 554 479 34 29 115 6 5 Other revenue Total Consulting Service Training 20 1,638 75 27 1,778 -26 -8 -35 1 2 ** % currency adjusted – actuals 2003 converted with the exchange rates of 2002 % currency adjusted 7** 18** -5** -7** -3** -13** 2** -28**
    8. 8. Maintenance Analysis* – 2nd Quarter 2003 – part I ** incl. sequential currency impact– in € millions € 600 € 610 € 620 € 630 € 640 € 590 Q2 02 Q3 02 Q4 02 Q1 03 Q2 03 623** 644** € 580 595* 603* 628* 608* 633* * actuals – in € millions
    9. 9. Maintenance Analysis – 2nd Quarter 2003 – part II One time Effects € 608 mill. 17% Maint. on SW Q1 Q1 2003 Q1 2003 run rate Calculated Maintenance Q2 Currency Sales Allowance Other effects € 633 mill. Q2 2003 Transition Maintenance Revenue Q1 – Q2 2003
    10. 10. Gross Margin Analysis – 2nd Quarter 2003 Q2 2002 € millions Q2 2003 € millions % Product revenue Cost of product Product gross margin in % -205 -8 -189 82 81 1,091 -2 1,064 1* * in percentage points Service revenue Cost of service Service gross margin in % -480 -14 -411 660 -16 554 27 26 -1* 61 63 1,751 -8 1,618 -685 -12 -600 2* Product / Service revenue Product / Service cost Gross margin in %
    11. 11. Cost Analysis – 2nd Quart er 2003 – part I Q2 2003 € millions Q2 2002 € millions Total costs Total revenues -1,298 1,638 * In percentage points % yoy Research & Developm. as % of sales Sales & Marketing as % of sales 3 -8 -358 -99 0 -100 22 5 6 0 -3* 1* 0* -241 15 -438 -231 -96 13 25 -18 4 2* General & Admin. as % of sales Other income/expenses as % of sales 0 % yoy excl. SBC/AC -12 -100 -21 2 -1,458 -11 1,778 -8 -14
    12. 12. Cost Analysis – 2nd Quart er 2003 – part II Q2 2003 € millions Q1 2003 € millions Operating Expenses SBC & AC Operating Expenses excl. SBC&AC Q2 2002 € millions -1,222 -1,298 -1,458 6 48 4 -1,216 -1,250 -1,454 % yoy -14 -11 -6 -3 % at const. curr. % seq. 3 6
    13. 13. Worldwide Headcount* as of June 30, 2003 06/2003 12/2002 seq. Q2/03 Group EMEA Ameri c a s APA 156 -25 176 307 * in FTE net new hires 28,961 19,379 6,097 3,485 Q2 2003 307 R&D Service & Support Sales & Marketing G&A 41 67 3 196 8,391 12,473 5,108 2,989 28,797 19,235 6,311 3,251 7,966 12,753 5,067 3,011 Q1 2003 -143 03/2003 28,654 19,223 6,122 3,309 8,195 5,041 2,986 yoy Q2/03 -75 -544 226 -393 -715 -180 -117 619 06/2002 29,354 19,454 6,641 3,259 7,772 13,188 5,288 3,106 12,432
    14. 14. Agenda Outlook 2003 2nd Quarter 2003 Financials <ul><li>First Half 2003 Financials </li></ul>
    15. 15. Key Figures – First Half 200 3 H1 2002 € millions H1 2003 € millions License revenues % Total revenues Net income - Margin as a % of sales Operating income - Margin as a % of sales Income before income taxes Earnings per share (in €) - Margin as a % of sales * percentage points 336 20 658 405 13 1.31 21 3 , 158 783 3,436 506 20 15 -167 na -0.53 1 898 -8 26 5* 3190 na na na 20* -13 638 1** -5** ** % currency adjusted – actuals 2003 converted with the exchange rates of 2002
    16. 16. Key Figures – First Half 2003 H1 2002 € millions H1 2003 € millions * percentage points EBITDA (2) - Margin as a % of sales Pro forma operating income excl. stock- based comp. and acquisition-related charges (1) - Margin as a % of sales na 38% na Effective tax rate Pro forma EPS excluding stock-based compensation, acquisition-related charges, and impairment-related charges (1) 71 1.45 0.84 562 23 6* 16 692 22 % 617 20 740 5* 18 23
    17. 17. Consolidated Balance Sheet as of June 30, 200 3 Shareholders‘ Equity & Liabilities Assets Other assets Liquid assets Inventories/ Accounts receivable Fixed assets Other liabilities Deferred income Shareholders‘ equity TOTAL TOTAL Dec 31, 02 Jun 30, 0 3 436 1,782 1,925 1 , 588 5, 731 in € millions Reserves, accrued liabilities Minority interest Jun 30, 0 3 699 833 3,014 5 , 731 1, 130 55 Dec 31, 02 490 1,239 2,242 1 , 639 5 , 610 758 362 2,872 1, 562 56 5 , 610
    18. 18. Balance Sheet & Cash Flow Analysis Dec 31, 02 H1 2002 Jun 30, 03 H1 2003 % * percentage points ** days Operating Cash Flow CapEx Free Cash Flow Free Cash Flow as a % of Revenue 739 9 807 -126 -29 -90 613 17 717 18% 5* 23% in € mill. DSO -7** 80** % 87**
    19. 19. Agenda License Revenue Analysis 1st Quarter 2003 Financials <ul><li>Outlook 2003 </li></ul>
    20. 20. Outlook 2003 <ul><li>SAP continues to expect pro forma earnings per share for 2003, excluding stock-based compensation, acquisition-related charges and impairment-related charges, to be in the range of €3.45 per share to €3.60 per share. The Company has slightly increased its target for pro forma operating margin, excluding stock-based compensation and acquisition-related charges. Previously, the Company expected its 2003 pro forma operating margin to increase by around 1 percentage point compared to 2002. The Company now expects its 2003 pro forma operating margin to be between 1 and 1.5 percentage points higher than the level achieved in 2002. While the Company continued to not provide revenue expectations, it expects to achieve its pro forma operating margin and pro forma earnings per share targets through continued market share gains and cost containment amid the current business environment and business seasonality in line with historical patterns. </li></ul>
    21. 21. Outlook 2003 cont‘d <ul><li>Management does not provide its guidance on operating margin and earnings per share based on US GAAP measures because t hese measures include expenses like stock based compensation, impairment related charges and acquisition related charges. Management deems these expenses as either not being meaningful to fully assess the financial performance of our core operations or as highly dependent on the movement of SAP’s share price, or the share price of companies we acquire or in which we invest. </li></ul>
    22. 22. Léo Apotheker President Global Field Operations, Member of the Executive Board SAP AG
    23. 23. License Revenue by Region – 2nd Quart er 2003 License Revenue Q2 200 3: €431 mill. - 13 %* | - 5 %** of which US € 86 m -14 %* | +6%** Americas € 112 m -1 2 %* | +9%** of which Japan € 25 m -26%* | -12%** APA € 58 m 0%* | +16%** EMEA € 261 m - 16 %* | -15%** of which Germany € 97 m -4%* | -4%** * y-o-y growth ** % currency adjusted – actuals 2003 converted with the exchange rates of 2002
    24. 24. Group Sales by Region – 2nd Quart er 2003 Total Revenue Q2 2003: €1,638 mill. -8 %* | +2 %** of which US €397 m -15%* | +5%** Americas €506 m -15%* | +6%** of which Japan € 91 m -23 %* | -10%** APA €190 m -9%* | +5%** EMEA €942 m -3 %* | -2%** of which Germany € 392 m -1%* | -1%** * y-o-y growth ** % currency adjusted – actuals 2003 converted with the exchange rates of 2002
    25. 25. Customer Wins in Q2 2003 <ul><li>AMERICAS </li></ul><ul><li>Colgate-Palmolive </li></ul><ul><li>Fender </li></ul><ul><li>Sony Pictures </li></ul><ul><li>Univ. of Cincinnati </li></ul><ul><li>Wrigley‘s </li></ul><ul><li>EMEA </li></ul><ul><li>Allied Irish Bank </li></ul><ul><li>European Central Bank </li></ul><ul><li>Ferrero </li></ul><ul><li>Swisscom </li></ul><ul><li>Telecom Italia </li></ul><ul><li>Vattenfall </li></ul><ul><li>ASIA / PACIFIC </li></ul><ul><li>Australia Department of Defense </li></ul><ul><li>J-Oil Mills </li></ul><ul><li>Sharp </li></ul><ul><li>Shougang </li></ul><ul><li>Toyota Tsusho </li></ul>
    26. 26. Highlights Q2 2003 <ul><ul><li>Continued license growth in the US (currency adjusted) </li></ul></ul><ul><ul><li>Strong results from APA – specifically China </li></ul></ul><ul><ul><li>SAPPHIRE Orlando - demonstration of clear leadership with the mySAP CRM 4.0 Launch, SAP NetWeaver, SAP xApps </li></ul></ul><ul><ul><li>SMB momentum with key partnerships announced and US launch of Business One </li></ul></ul>
    27. 27. Market Conditions Q2 2003 <ul><ul><li>Decreasing average deal size </li></ul></ul><ul><ul><li>Higher volume of deals </li></ul></ul><ul><ul><li>Sales team better aligned to exploit all opportunities at lower cost </li></ul></ul><ul><ul><li>Shifting competitive environment </li></ul></ul><ul><ul><ul><li>Creates price pressures </li></ul></ul></ul><ul><ul><ul><li>Continued uncertainty in the market </li></ul></ul></ul>
    28. 28. US – Relative Market Shares Source: CMI Analysis based on Company Data and Financial Analysts Estimates * Forecast by Company Data and Financial Analysts (I2, JDE, PSFT, SEBL) ** Fiscal year is not calendar year - Comparison based on most recent quarter (e.g. SAP Q1 vs. Oracle Q3) Q2 2000- Q1 2001 Q3 2000- Q2 2001 Q4 2000- Q3 2001 Q1 2001- Q4 2001 Q2 2001- Q1 2002 Q4 2001- Q3 2002 Q1 2002- Q4 2002 Q2 2002- Q1 2003 Q3 2001- Q2 2002 SAP Siebel* Oracle ** PeopleSoft* I2* JDE** Q3 2002- Q2 2003E 0% 5% 10% 15% 20% 25% 30% 35% 25 26 30 25 25 20 8 6 6 5 5 6 7 7 8 8 20 19 18 17 18 19 23 23 21 23 20 21 21 24 25 25 12 16 16 14 10 8 7 6 6 20 20 18 16 14 24 23 22 21 18 18 18 5 8 19 17 20 19 31 (rolling 4 quarters; based on license revenues)
    29. 29. mySAP SCM and mySAP CRM Momentum 200 3 mySAP SCM as % of i2 & Manugistics 300% 200% 100% Q1/02 Q2/02 Q3/02 Q4/02 0% Q1/03 Q2/03 mySAP CRM as % of Siebel 0% 20% 40% 60% 80% 100% 163% 140% 113% 188% 241% 231% 41% 48% 54% 67% 86% 96% Q1/02 Q2/02 Q3/02 Q4/02 Q1/03 Q2/03
    30. 30. Industry Expertise <ul><li>Customers want more than CRM or SCM – they want solutions for their unique business needs </li></ul><ul><ul><li>mySAP CRM 4.0 – more than 280 end-to-end industry-specific processes </li></ul></ul><ul><ul><li>Leasing for the High Tech industry </li></ul></ul><ul><ul><li>Basel ll and IAS for Banking industry </li></ul></ul><ul><ul><li>Maintenance repair and overhaul for Aerospace industry </li></ul></ul><ul><ul><li>Sarbanes-Oxley for Financial Services industry </li></ul></ul><ul><ul><li>Service parts management for Automotive and heavy equipment manufactures </li></ul></ul><ul><ul><li>RFID for smart shelves for the Retail industry </li></ul></ul>
    31. 31. License Revenue Analysis – by Industry Q2 2003 * Compared to FY 2002 Service Industries 25% | 0%* Financial Services 10% | 2%* Consumer Industries 18% | 0%* Discrete Industries 22% | 1%* Process Industries 15% | -5%* Public Services 10% | 2%*
    32. 32. Henning Kagermann CEO SAP AG
    33. 33. First Half 2003 Business Environment I <ul><ul><li>Customer spending environment remains challenging, but SAP benefits through market share gains </li></ul></ul><ul><ul><ul><li>Deal sizes continue to decline as customers prefer smaller deals with a quick ROI, providing advantages for SAP </li></ul></ul></ul><ul><ul><ul><li>SAP’s integration platform, SAP NetWeaver, combined with open standards help to integrate isolated projects, ensure interoperability of the systems and provides lower TCO </li></ul></ul></ul><ul><ul><li>Pressure on CIOs to reduce TCO leads to: </li></ul></ul><ul><ul><ul><li>Consolidation and simplification of IT landscapes (e.g. Novartis) </li></ul></ul></ul><ul><ul><ul><li>Strategic projects with SAP (e.g. Ford/Caterpillar etc.) </li></ul></ul></ul>
    34. 34. First Half 2003 Business Environment II <ul><ul><li>Operational efficiency – one of the top priorities of CEOs </li></ul></ul><ul><ul><ul><li>Demand for ERP solutions remains strong, in particular in EMEA and APA </li></ul></ul></ul><ul><ul><ul><li>Announcement of mySAP ERP was well received in the market </li></ul></ul></ul><ul><ul><li>Recent industry consolidation increases customer confusion in the short term </li></ul></ul><ul><ul><ul><li>Competitors discount heavily with pricing pressure on software licenses and consulting </li></ul></ul></ul>
    35. 35. Customer Feedback <ul><ul><ul><li>“ The successful implementation in 2001 of our new Enterprise Resource Planning System, SAP, has provided a very effective tool for managing changes in demand.“ </li></ul></ul></ul><ul><ul><ul><li>“ When faced with a choice between stand-alone systems or a suite solution, the added value, scalability, and flexibility of mySAP Business Suite made SAP the clear choice. “ </li></ul></ul></ul><ul><ul><ul><li>Peter Sany, CIO, Novartis </li></ul></ul></ul>Sir John Rose, Chief Executive, Rolls-Royce (2002 annual report)
    36. 36. Strategic Focus in 2003 <ul><li>In a challenging market environment, SAP is focused on: </li></ul><ul><ul><li>Improving productivity </li></ul></ul><ul><ul><li>Increasing market share </li></ul></ul><ul><ul><li>Adapting to the new environment </li></ul></ul>
    37. 37. Second Quarter 2003 Summary <ul><ul><li>Pro forma operating income increased 20% representing a strong performance given an 8% revenue decline and more than 300 new employees </li></ul></ul><ul><ul><li>Software revenues down 5% currency adjusted – SAP continued to gain market share </li></ul></ul><ul><ul><li>Deal size was down significantly, but SAP signed more deals with lower cost of sales </li></ul></ul><ul><ul><ul><li>Deal size based on order entry shifted significantly </li></ul></ul></ul><ul><ul><ul><ul><li>>€3 mill. 27% (Q2 2002: 42%) </li></ul></ul></ul></ul><ul><ul><ul><ul><li><€1 mill. 44% (Q2 2002: 33%) </li></ul></ul></ul></ul><ul><ul><li>Strengthened long-term partnerships with clients </li></ul></ul>
    38. 38. 36% 20% 20% 19% 41% 39% 37% 9% 10% 10% 13% 12% 8% 10% 12% 17% 16% 17% 16% 19% 6% 5% 4% 4% Total license revenue - Relative Market Shares ( rolling 4 quarters; based on license revenues) 43% 45% 47% 51% 19% 18% 17% 15% 16% 15% 15% 14% 12% 12% 12% 11% 6% 5% 4% 3% 4% 5% 5% 5% Q2 2000- Q1 2001 Q3 2000- Q2 2001 Q4 2000- Q3 2001 Q1 2001- Q4 2001 Q2 2001- Q1 2002 Q3 2001- Q2 2002 Q4 2001- Q3 2002 Q1 2002- Q4 2002 SAP is still gaining market share from key competitors 54% 13% 14% 12% 3% 5% Q2 2002- Q1 2003 55% 12% 14% 3% 5% 11% Q3 2002- Q2 2003E Source: CMI Analysis based on Company Data and Financial Analysts Estimates * Forecast by Company Data, Financial Analysts (SEBL, PSFT, I2, JDE) and latest SAP internal estimate ** Fiscal year is not calendar year - Comparison based on most recent quarter (e.g. SAP Q1 vs. Oracle Q3)
    39. 39. Customer Satisfaction Survey H1 2003 Source: NFO Infratest Overall Satisfaction with SAP 6.6 7.2 6.9 7.0 6.7 7.5 7.0 7.1 7.0 7.5 7.1 6.9 GLOBAL Asia/Pacific The Americas Europe/Middle East/Africa 2000 2001 H1 2003 7.2 2002 7.1 7.6 7.1
    40. 40. SAP Blueprint for Sustainable Success 23 industry solutions New releases: mySAP CRM 4.0 and mySAP SCM 4.0 New user interface for mySAP ERP announced First demo of Master Data Management Adaptive Computing Infrastructure announced Enterprise Services Architecture
    41. 41. The Best Partner to Deliver Shared Quality Commitment Joint Business Solutions (e.g. Midmarket) SAP NetWeaver & SAP xApps Partner Programs Joint TCO Reduction Program
    42. 42. 2003 Looking Ahead <ul><ul><li>Economic environment remains challenging until year-end </li></ul></ul><ul><ul><li>Confusion in the market due to industry consolidation leads to increased price pressure in the short-term, but SAP should benefit in the medium-term </li></ul></ul><ul><ul><li>2003 pro forma EPS target confirmed; pro forma operating margin target increased slightly </li></ul></ul><ul><ul><li>Comprehensive product portfolio combined with strong technology offering enables SAP to capture a larger “share of wallet” </li></ul></ul><ul><ul><li>Further industry focus will enhance SAP’s leading position </li></ul></ul><ul><ul><li>SAP xApps provide additional opportunities for cross-functional & vertical solutions </li></ul></ul>
    43. 43. Market Shares by Industry in 2002* *Based on product revenues (license & maintenance) /preliminary Sources: SAP Analysis 2003, IDC 2002 & 2003, Company filings Discrete Process Consumer Services Financial Serv. Public Serv. Total $26.5 bn Ø SAP 17.5% 12% 8.4 31% 3.3 15% 4.9 20% 5.8 14% 2.3 20% 1.9 SAP others
    44. 44. SAP AG Q2 and H1 2003 Preliminary Results Release New York, July 17, 2003
    45. 45. Appendix APPENDIX
    46. 46. Cost Analysis – 2nd Quart er 2003 – part I Q2 2003 € millions Q2 2002 € millions Total costs Total revenues -1,298 1,638 * In percentage points % yoy incl SBC/AC Research & Developm. as % of sales Sales & Marketing as % of sales 3 -8 -358 -99 0 -100 22 5 6 0 -3* 1* 0* -241 15 -438 -231 -96 13 25 -18 4 2* General & Admin. as % of sales Other income/expenses as % of sales 0 % yoy excl. SBC/AC -12 -100 -21 2 -8 -441 -225 -101 -1,250 -348 -88 0 -229 incl SBC/AC incl SBC/AC excl. SBC/AC excl. SBC/AC -1,458 1,778 -1,454 -11 -8 -14
    47. 47. License Revenue Analysis – by Order Entry Q2 200 3* % of license revenue Q1 200 3* % of license revenue % mySAP Business Suite % new customers mySAP BS % new customers R/3, etc. % new customers TOTAL * Based on order entry -4 3 -9 0 82% 32% 10% 28% seq. in percentage points 86% 29% 19% 28% 1 -2 -4 -2 YoY in percentage points Q2 2003 Q2 2003
    48. 48. 36% 22% 22% 23% 39% 38% 38% 15% 16% 14% 8% 13% 7% 7% 7% 17% 18% 19% 20% 22% rolling last 4 quarters; as a % of license revenues 40% 39% 20% 21% 21% 21% 11% 12% 7% 7% Q1 2001- Q4 2001 Q2 2001- Q1 2002 Q3 2001- Q2 2002 Q4 2001- Q3 2002 Q1 2002- Q4 2002 License Revenue Analysis – by Solution Q2 2002- Q1 2003 Q3 2002- Q2 2003 39% 21% 21% 12% 7%
    49. 49. License Revenue Analysis – by Solution Q2 2003 Total License Revenue Q2 2003 : € 431 mill. * O f license revenue ** Y-o-Y growth in percentage points mySAP SCM 20%* (-1**) mySAP Financials / mySAP HR 41%* (+1**) mySAP CRM 20%* (0**) mySAP BI/ mySAP Enterprise Portal/ mySAP SRM/ Marketplaces 11%* (-1**) mySAP PLM 8%* (+1**)
    50. 50. License Revenue Analysis – by Solution Q2 2003 Q2 2003 as % of revenue Q2 2003 € millions Q1 2003 € millions mySAP SCM mySAP Financials / mySAP HR mySAP PLM mySAP BI / mySAP Enterprise Portal / mySAP SRM / Marketplaces mySAP CRM 85 33 49 178 86 74 33 44 172 79 -16 -3 -16 -11 -17 20 8 11 41 20 Q1 2003 as % of revenue 21 7 15 33 24 YoY in % Q2 2003 15 0 11 4 9 seq. in % Q2 2003
    51. 51. License Revenue breakdown by solution ( rolling 4 quarters; based on License Revenues) SCM & CRM – Relative Market Shares 0% 50% 100% 150% 200% 86% 163% 140% 113% 41% 37% 48% 54% 188% 241% 67% 86% Q1 2001- Q4 2001 Q2 2001- Q1 2002 Q3 2001- Q2 2002 Q4 2001- Q3 2002 Q1 2002- Q4 2002 Q2 2002- Q1 2003 231% 96% Q3 2002- Q2 2003E 250% Source: CMI Analysis based on Company Data and Financial Analysts Estimates * Forecast by financial analysts (I2, SEBL) ** Fiscal year is not calendar year - Comparison based on most recent quarter (e.g. SAP Q1 vs. MANU Q4) mySAP SCM as % of I2* and Manugistics** mySAP CRM as % of Siebel*
    52. 52. 22% 24% 27% 26% 15% 15% 7% 7% 21% 22% 7% 7% rolling last 4 quarters; as a % of license revenues 26% 25% 21% 21% 21% 20% 19% 17% 19% 19% 8% 8% 7% 8% Q1 2001- Q4 2001 Q2 2001- Q1 2002 Q3 2001- Q2 2002 Q4 2001- Q3 2002 Q1 2002- Q4 2002 License Revenue Analysis – by Industry 24% 19% 8% 8% Q2 2002- Q1 2003 26% 22% 20% 19% 7% 8% 19% 20% 22% 24% 9% 7% Q3 2002- Q2 2003
    53. 53. License Revenue Analysis – by Industry Q2 2003 * Compared to FY 2002 Service Industries 25% | 0%* Financial Services 10% | 2%* Consumer Industries 18% | 0%* Discrete Industries 22% | 1%* Process Industries 15% | -5%* Public Services 10% | 2%*
    54. 54. License Revenue by Region – First Half 2003 License Revenue H1 200 3: €783 mill. - 13 %* | - 5 %** of which US € 157 m -8 %* | +13%** Americas € 200 m - 8 %* | +16%** of which Japan € 60 m +22%* | +38%** APA € 117 m +14%* | +30%** EMEA € 466 m - 19 %* | -18%** of which Germany € 183 m -9%* | -9%** * y-o-y growth ** % currency adjusted – actuals 2003 converted with the exchange rates of 2002
    55. 55. Group Sales by Region – First Half 2003 Total Revenue H1 2003: €3,158 mill. -8 %* | +1 %** of which US €772 m -17%* | +2%** Americas €974 m -17%* | +4%** of which Japan € 202 m -2 %* | +10%** APA €388 m -2%* | +12%** EMEA €1,796 m -4%* | -2%** of which Germany € 755 m -2%* | -2%** * y-o-y growth ** % currency adjusted – actuals 2003 converted with the exchange rates of 2002
    56. 56. Key Figures – 2nd Quarter 200 3 Analysis – Part I Q2 2002 € millions Q2 2003 € millions % Pro forma operating income excl. stock-based compensation and acquisition-related charges (1) Operating income as reported under US GAAP Acquisition-related charges Stock-based compensation Finance income thereof impairment-related charges 324 20 388 320 6 340 -3 na 42 7 -14 6 na -455 5 EBITDA (2) Operating income as reported under US GAAP Depreciation & amortization 377 4 392 320 6 340 57 -9 52 na -390 -2 LTI 2000/STAR -18 na 41 Settlement of stock-based compensation prog. 15 -93 1
    57. 57. Key Figures – 2nd Quarter 200 3 Analysis – Part II Q2 2002 € millons Q2 2003 € millions % Pro forma EPS excluding stock-based compensation, acquisition-related charges, and impairment-related charges (1) Earnings per share (in €) as reported under US GAAP Stock-based compensation Acquisition-related charges Impairment-related charges 0.49 62 0.81 na -0.74 0.71 na -0.01 0.09 0 0.01 0.01 -100 1.23 0.00 Pro forma Net income excluding stock-based compensation, acquisition-related charges, and impairment-related charges (1) Net income as reported under US GAAP Stock-based compensation, net of tax Acquisition-related charges, net of tax Impairment-related charges, net of tax 155 62 251 na -232 219 na -2 27 -29 4 3 -99 385 2
    58. 58. Pro forma information (1) SAP has provided information in 2002 and 2001 using pro forma measures on a consolidated basis and released guidance based on these measures for 2003. Management believes that those pro forma measures provide supplemental meaningful information to the investor to fully assess our financial performance of the core operations. Management excludes stock-based compensation expenses because we have no direct influence over the actual expense of these awards once we enter into Stock-Based Compensation Plans. Eliminated expenses in the pro forma measures are defined as follows: - Acquisition-related charges include amortization of intangible assets acquired in acquisitions   -  Impairment-related charges include other than temporary impairment charges on minority equity investments.   - Stock-based compensation includes expenses for stock-based compensation as defined under US GAAP (STAR and LTI 2000) as well as expenses related to the settlement of stock-based compensation plans in the context of mergers and acquisitions. However these measures should be considered in addition to, and not as a substitute for, or superior to, operating income, cash flows, or other measures of financial performance prepared in accordance with generally accepted accounting principles. The pro forma measures used by us may be different from pro forma measures used by other companies.
    59. 59. Pro forma information (2) Management believes that EBITDA and free cash flow are widely accepted supplemental measures of evaluating operating performance and liquidity among companies. However these measures should be considered in addition to, and not as a substitute for, or superior to, operating income, cash flows, or other measures of financial performance prepared in accordance with generally accepted accounting principles.
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