WALLDORF, Germany - October 20, 1999 - SAP AG (NYSE: SAP), the leading provider of inter-enterprise solutions, today announced that its sales for the first nine months of 1999 grew 14% to €3.46 from €3.04 billion in the same period last year. Net income in the first nine months fell by 24% to €285 (1998: €375) million. Third quarter revenues rose 7% to €1.12 (1998: €1.05) billion. Net income in the quarter decreased 64% to €45 (1998: €125) million.

"Even though we are in a difficult market environment, we are still disappointed by these results," said Hasso Plattner, Co-Chairman and CEO of SAP AG, "However, with the overwhelmingly positive reception given our new mySAP.com Internet products, which we presented in the US in mid-September, as well as our overall Internet strategy, we are moving quickly to seize the leadership position in business-to-business e-commerce. Therefore we continue to invest in mySAP.com."

Revenue by Region and Activity
SAP's Europe, the Middle East and Africa (EMEA) region reported 21% revenue growth to €1.66 (1998: €1.37) billion in the first nine months of the year. In the Americas, revenues rose 5% to €1.46 (1998: €1.39) billion for the same period. Sales in the Asia Pacific (APA) region were up 18% to €339 (1998: €287) million in the first nine months. Third quarter sales in EMEA rose 13% to €506 (447) million. In the Americas, revenues were down 5% to €492 (517) million in the third quarter, while they increased by 51% to €125 (83) million in the Asia Pacific (APA) region.

Product revenues rose 2% to €1.96 (1998: €1.93) billion in the first nine months and again comprised the largest share of total sales. Product sales figures for the first nine months broke out as follows: software revenue, which consists of license sales and sales of new software releases, was lower by 6% to €1.54 (1998: €1.63) billion; service-related maintenance revenues grew 43% to €420 (€293) million. Consulting revenues showed even stronger growth in the first nine months, increasing 50% to €1,139 (€758) million. Training revenues fell slightly (by 1%) to €306 (1998: €308). Product revenues accounted for 57% of total sales, compared to 63% in the first nine months of 1998.

Lower than expected product sales in the third quarter were due mainly to slower license sales in the Americas region and Japan, as well as weaker revenues in the United Kingdom. In Japan and the UK management has been strengthened, while in the Americas the company continues to focus on the introduction and marketing of the mySAP.com offerings to customers and prospects. The fall in the proportion of total sales constituted by product revenues led to a lower pre-tax profit margin for the third quarter in 1999 compared to the same period in 1998. The Board now expects the 1999 pre-tax profit margin to fall below the 1998 level instead of increasing slightly, as was originally expected.

Towards 2000
"We think that we can achieve software revenues for the fourth quarter of this year that will exceed those posted in the fourth quarter of last year. This would mean that total sales for 1999 would show an increase of 15 to 20% compared to 1998," said Henning Kagermann, Co-Chairman and CEO of SAP AG, "A lot, of course, depends on the effect of the new millennium on customers' purchasing behavior."

The investments in marketing and development that are vital to the success of mySAP.com leave SAP little possibility for extensive cost containment measures. As a result, this investment will also negatively impact the pre-tax profit margin for 1999.

Third-Quarter Highlights

Highlights from the third quarter include:

• SAP presented mySAP.com, its new Internet-enabled product, at its eleventh North American user conference, SAPPHIRE'99, in Philadelphia in mid-September. This open, e-business solutions environment enabling business-community collaboration, began shipping to first customers at the end of September. Another highlight of the Philadelphia conference was the inauguration of the virtual Internet marketplace at www.mySAP.com. The mySAP.com strategy is based on the following four elements:
• The mySAP.com Marketplace, an open, virtual hub enabling inter-enterprise purchasing, sales and communications.
• The mySAP.com Workplace, a business-oriented company portal that allows users to conveniently access all the functions and data they need to do their job via a personalized, browser-based work environment
• The mySAP.com business scenarios, which provide collaborative, role-based solutions for fully integrated business processing between enterprises and between providers and end consumers based on SAP and third-party software
• Access to applications via the Internet as a cost-effective means of benefiting from the entire scope of the mySAP.com solutions within a very short timeframe.

In total over 18,000 people attended SAPPHIRE'99 and SAPTechEd'99, a conference for software developers that was held the previous week.

• Over 850 Business Information Warehouse (SAP BW) systems have been shipped to date. Another business intelligence software product, the SAP Knowledge Warehouse, has been delivered to more than 420 customers. The organizations that have installed this knowledge management and training solution include Stadtwerke Mënchen, International Paper and Schott Glaswerke.
• SAP's Internet-enabled Business-to-Business Procurement (SAP B2B Procurement) solution that began shipping in March has now been shipped to over 200 customers worldwide. Customers that have opted for SAP software to manage their Internet purchasing transactions include Delta Air Lines, Ericsson and Osram.
• SAP's Advanced Planner and Optimizer (SAP APO) has been delivered to nearly 300 customers. Among the customers that deploy the SAP solution for controlling and optimizing supply chains are Bayer and ThyssenKrupp. The next, enhanced release-Version 2.0-will start shipping on schedule at the end of October.
• SAP's Customer Relationship Management solutions has been installed over 300 times into the customer base. Customers that have opted for SAP software to manage and optimize their customer relationships include Hoechst Marion Roussel, Grundig and Peugeot Citreon.

Key figures at a glance
SAP Group
(in €millions)

	Jan.-- Sept. 1999	Jan. - Sept. 1998	Change	% change
Revenues	3,459	3,043	416	14
Income before income taxes	499	662	- 163	- 25
Net income	285	375	- 90	- 24
Headcount (September 30)	21,086	18,330	2,756	15
- of which in Germany	8,352	7,256	1,096	15

Any statements contained in this documents 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 "believe," "estimate," "intend," "may," "will," "expect," and "project" and similar expressions as they relate to the Company are intended to identify such forward-looking statements. The Company 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 the Company’s future financial results are discussed more fully in the Company’s filings with the U.S. Securities and Exchange Commission (the "SEC"), including the Company’s Annual Report on Form 20-F for 1998 filed with the SEC on May 18, 1999. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates.

SAP AG preference and common shares are listed on the Frankfurt Stock Exchange as well as a number of other exchanges. In the US, SAP’s American Depositary Receipts (ADR’s), each worth one-twelfth of a preference share, trade on the New York Stock Exchange under the symbol "SAP". SAP is a component of the DAX, the index of 30 German blue chip companies.

Information on the SAP AG preference shares is available on Bloomberg under the symbol SAP3 GR, on Reuters under SAPG_p.F or DE and on Quotron under SAGVD.EU. Information on the SAP common shares is available on Bloomberg under the symbol SAP GR, on Reuters under SAPG.F and on Quotron under SAGR.EU. Additional information is available on SAP AG's home page: http://www.sap.com.

 

Consolidated Income Statements SAP Group
3rd Quarter
(in €millions)

			1999	1998	Change
	Product revenue		611	626	-2%
		Consulting revenue	398	287	39%
		Training revenue	90	109	-17%
	Service revenue		488	396	23%
	Other revenue		24	25	-4%
Total revenue			1,123	1,047	7%
	Cost of product		-103	-89	16%
	Cost of service		-401	-312	29%
	Research and development		-173	-143	21%
	Sales and marketing		-287	-245	17%
	General and administration		-67	-53	26%
	Other income/expenses, net		-10	-3	233%
Total operating expense			-1,041	-845	23%
Operating income			82	202	-59%
Other non-operating income/
expenses, net			-6	16	-138%
Finance income, net			3	3	0%
Income before income taxes			79	221	-64%
Income taxes			-33	-96	-66%
Minority interest			-1	0	n.a.
Net income			45	125	-64%
DSO (in days)			110	104

 

Consolidated Income Statements SAP Group
1st - 3rd Quarter
(in €millions)

			1999	1998	Change
	Product revenue		1,962	1,927	2%
		Consulting revenue	1,139	758	50%
		Training revenue	306	308	-1%
	Service revenue		1,445	1,066	36%
	Other revenue		52	50	4%
Total revenue			3,459	3,043	14%
	Cost of product		-306	-245	25%
	Cost of service		-1,207	-880	37%
	Research and development		-481	-403	19%
	Sales and marketing		-790	-714	11%
	General and administration		-168	-154	9%
	Other income/expenses, net		-28	-19	47%
Total operating expense			-2,980	-2,415	23%
Operating income			479	628	-24%
Other non-operating income/
expenses, net			-19	23	-183%
Finance income, net			39	11	255%
Income before income taxes			499	662	-25%
Income taxes			-212	-287	-26%
Minority interest			-2	0	n.a.
Net income			285	375	-24%
DSO (in days)			110	104

 

Consolidated Balance Sheet SAP Group
1st – 3rd Quarter
(in €millions)

		ASSETS
	09/30/1999	12/31/1998
Intangible Assets	90	75
Property, plant and equipment	750	645
Financial Assets	364	184
FIXED ASSETS	1,204	904
Inventories/ Accounts receivable
and other assets	1,584	1,676
Liquid assets	616	670
CURRENT ASSETS	2,200	2,346
DEFERRED TAXES	250	182
PREPAID EXPENSES AND DEFERRED CHARGES	58	21
TOTAL ASSETS	3,712	3,453

SHAREHOLDERS' EQUITY AND LIABILITIES
	09/30/1999	12/31/1998
SHAREHOLDERS' EQUITY	2,039	1,818
MINORITY INTEREST	9	7
RESERVES AND ACCRUED LIABILITIES	720	721
OTHER LIABILITIES	587	600
DEFERRED INCOME	357	307
TOTAL SHAREHOLDER'S EQUITY AND LIABILITIES	3,712	3,453