Review of Operations Review of SAP's Group Operations Income INCOME
REVENUE
Double-Digit Software and Maintenance Revenue Growth
In the guidance for investors we published at the beginning
of 2006, we announced the ambitious target of increasing
software and maintenance revenue between 13% and 15%
compared to the previous year. This growth rate was based
on our prediction of software revenue growth in the range
15% to 17% compared to the previous year, and on an
assumed U.S. dollar to euro exchange rate of US$1.23 per €1.
Later in the year, we added that it appeared less likely that
software revenue growth or software and maintenance
revenue growth would reach the upper end of the original
guidance ranges. We did not achieve those guidance targets:
Software and maintenance revenue rose 11% (12% on a constant
currency basis) to €6,605 million (2005: €5,958 million;
2004: €5,184 million), while software revenue increased 10%
(12% on a constant currency basis) to €3,072 million (2005:
€2,783 million; 2004: €2,361 million). However, both software
revenue growth and software and maintenance revenue
growth were in double-digits for the third successive year.
We define our segment share as SAP’s share of the total software revenues of organizations offering core enterprise applications. Based on information from industry analysts, we estimate that total to be US$16 billion in 2006. In 2006, we increased our share of the global segment 2.8 percentage points to 24%. In the U.S. market our segment share, similarly defined, was 13% at the end of 2006 (2005: 11%). In this improvement in our market position and healthy, doubledigit growth we see vindication of our approach, which is to earn the confidence of customers with our clear, innovative product strategy, in-depth understanding of the industries our customers operate in, and a superior product offering – and on that confidence to build long-term business relationships.
Our customer base continued to grow, and in 2006,
based on the number of contracts among orders received,
31% of our software revenue was attributable to contracts
with new customers (2005: 33%; 2004: 32%). The number of
new software license contracts valued at €10,000 or more
increased 17% to 10,288 (2005: 8,820 contracts; 2004: 7,216 contracts).
The total number of orders we received grew 14%, so
the trend toward more but smaller contracts continued.
PRETAX INCOME; INCOME TAXES; NET INCOME