Constant Currency Period-over-Period Changes
We believe it is important for investors to have information
that provides insight into our sales growth. Revenue
measures determined under U.S. GAAP provide information
that is useful in this regard. However, changes in sales
volumes, prices, and currency exchange rates affect period-over-period changes in sales revenue. We do not sell
standardized units of products and services, so we cannot provide data expressed in such units to show changes in
the volume of products and services sold. To provide information that may be useful to investors in breaking down
and evaluating sales volume growth, we do present information
adjusted for foreign currency effects about our
revenue growth and various values and components relating
to operating income. We calculate constant currency
year-over-year changes in revenue and operating income
by translating foreign currency items using the average exchange
rates from the previous (comparator) year instead
of the report year.
We believe that data on constant currency period-over-period changes has limitations, particularly as the currency effects that are eliminated constitute a significant element of our revenues and expenses and may materially affect our performance. We therefore limit our use of constant currency period-over-period changes to the analysis of volume and price changes as elements of the overall change in a financial measure. We do not evaluate our growth and performance without considering both constant currency period-over-period changes on the one hand and changes in revenues, expenses, income, or other measures of financial performance prepared in accordance with U.S. GAAP on the other. We caution the readers of this report to follow a similar approach by considering constant currency period-over-period changes in measures of financial performance only in addition to, and not as a substitute for or superior to, changes in revenues, expenses, income or other measures prepared in accordance with U.S. GAAP.
Constant currency year-over-year changes in revenue and operating income reconcile to the respective unadjusted year-over-year changes as follows:
| Percentage Change from 2007 to 2006 (U.S. GAAP) |
Percentage Change from 2007 to 2006 (Constant Currency) |
Currency Effect |
|
| % |
% |
Percentage Points |
|
| Software revenue | 13 | 18 | – 5 |
| Support revenue | 11 | 15 | – 4 |
| Subscription and other software-related service revenue |
41 | 46 | – 5 |
| Software and software-related service revenue |
13 | 17 | – 4 |
| Consulting revenue | – 1 | 2 | – 3 |
| Training revenue | 7 | 11 | – 4 |
| Other service revenue | 18 | 23 | – 5 |
| Professional service and other service revenue |
1 | 4 |
– 3 |
| Other revenue | 3 | 7 | – 4 |
| Total revenue | 9 | 13 | – 4 |
Software revenue by region1): |
|||
| EMEA region2) | 14 | 15 | – 1 |
| Americas region | 8 | 16 | – 8 |
| Asia Pacific Japan region | 28 | 32 | – 4 |
| Software revenue | 13 | 18 | – 5 |
Software and software-related service revenue by region: |
|||
| Germany | 7 | 7 | 0 |
| Übrige Region EMEA | 17 | 19 | – 2 |
| EMEA region | 13 | 14 | – 1 |
| United States | 6 | 16 | – 10 |
| Rest of Americas region | 18 | 22 | – 4 |
| Americas region | 9 | 17 | – 8 |
| Japan | 10 | 21 | – 11 |
| Rest of Asia Pacific Japan region | 25 | 26 | – 1 |
| Asia Pacific Japan region | 19 | 24 | – 5 |
| Software and software-related service revenue |
13 | 17 | – 4 |
Total revenue by region: |
|||
| Germany | 5 | 5 | 0 |
| Rest of EMEA region | 13 | 14 | – 1 |
| EMEA region | 10 | 11 | – 1 |
| United States | 4 | 13 | – 9 |
| Rest of Americas region | 12 | 15 | – 3 |
| Americas region | 6 | 14 | – 8 |
| Japan | 4 | 14 | – 10 |
| Rest of Asia Pacific Japan region | 22 | 24 | – 2 |
| Asia Pacific Japan region | 15 | 20 | – 5 |
| Total revenue | 9 | 13 | – 4 |
| Operating income | 6 | 8 | – 2 |
1) By customer location.
2) Europe, the Middle East, and Africa.
Cash Earnings According to DVFA/SG
Cash earnings according to DVFA/SG is an adjusted cash-flow measure developed by the Society of Investment Professionals in Germany to improve comparability between companies.
Cash earnings according to DVFA/SG should be considered in addition to, and not as a substitute for or superior to, cash flow or other measures of liquidity and financial performance prepared in accordance with U.S. GAAP. The reconciliation from cash earnings according to DVFA/SG to net income is shown in the Investor Relations section.
Free Cash Flow
We believe that free cash flow is a widely accepted supplemental measure of liquidity. Free cash flow measures a company’s cash flow remaining after all expenditures required to maintain or expand the business have been paid off. We calculate free cash flow as operating cash flow from continuing operations minus additions to long-lived assets excluding additions from acquisitions.
Free cash flow should be considered in addition to, and not as a substitute for or superior to, cash flow or other measures of liquidity and financial performance prepared in accordance with U.S. GAAP.
Free cash flow reconciles to net cash provided by operating activities as follows:
| € millions | 2007 | 2006 |
| Net cash provided by operating activities from continuing operations |
1,950 | 1,855 |
| Additions to long-lived assets excluding additions from acquisitions |
– 400 | – 367 |
| Free cash flow | 1,550 | 1,488 |
|
Want to learn more? Contact the SAP sales office nearest you. |
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