Letter to the Shareholders

innovation Starts with an Idea

Dear Shareholders, Customers, Partners, and Colleagues

A substantial part of the global economy now runs on SAP software. More than 82,000 companies and organizations of all sizes trust our innovative products and services – in every sector of industry and every region of the world. We are quite proud of that. This strong global presence, together with a well-diversified customer base, often makes us more resilient in times of crises in individual industries and regions. However, we are not immune to the current economic crisis, which is global in scale. Half way through September, business fell off sharply and unforeseeably. Thereafter, for the remainder of the year, we were unable to match the extraordinary growth we reported in the first-half of the year. Nonetheless, over the full year of 2008, we achieved 20% more revenue from software and software-related services compared to the year before on a non-GAAP, constant-currency basis. Our market share grew 4.4 percentage points, of which 0.9 percentage points were from organic growth, while the acquisition of Business Objects accounted for 3.5 percentage points.

The stringent cost-containment measures we initiated in October have proven to be the right action to take. Without compromising the delivery of services and promised new products to our customers, we saved around € 220 million of costs in the final quarter, leading to an approximately one percentage point increase in our non-GAAP operating margin for 2008. Such agility in a company of our size was well received by investors, and SAP stock outperformed the major benchmark indexes in 2008.

However, the economic crisis has worsened and uncertainty has spread. Therefore, we must further reduce our costs. One area we must address is payroll, therefore, we intend to reduce our workforce globally by 3,000 positions by year-end 2009, taking full advantage of attrition as a factor in reaching this goal. This is a modest reduction, considering we created 14,000 new jobs in the past five years alone, not counting our Business Objects people. We recognize that it is our committed and innovative workforce that drives our success, and we remain steadfast in maintaining SAP’s status as a great place to work.

SAP is well positioned to successfully handle a sustained economic crisis. We have doubled our addressable market since 2005, we are on track to pass 100,000 customers in 2010, and by then new products should be generating more than half of our license revenue. We also continued to improve our market lead in the small business and midsize company segment.

The investments of recent years are proving their worth. We have successfully transferred our portfolio to a service-oriented architecture (SOA) and continued to expand our offerings – including those from the recently acquired Business Objects. With SOA, our customers can flexibly adapt their business processes and business models, including those that involve other organizations; and with SAP BusinessObjects solutions, customers have the best real-time tools to analyze all of their relevant business information - more insight for better informed decisions, more flexibility to implement those decisions quickly, and, of course, the most efficient processes achievable. We offer our customers the strategic agility they need to weather the current storm and to start growing again.