Organic Growth
We remain strategically committed to primarily organic growth. That is why we will continue to invest in developing our products, along with our investment in infrastructure, sales, and marketing. Our platform strategy also enables us to leverage the innovative potential of our partners for the use of our customers. We expect to make targeted acquisitions to improve our coverage in key strategic fields. We intend to fund all of our capital expenditure in 2007 from operating cash flow.

Operational Targets for 2007: Profitable Growth
In 2007, we intend to finish our enterprise SOA road map by delivering the service-oriented versions of the SAP Business Suite and our proven SAP All-in-One solutions for the midmarket. In addition, we intend to offer a completely new product for smaller business, which is easy to try, easy to run, and easy to adapt.

Our business outlook for 2007 (full year) assumes an effective tax rate in the range 32.5% to 33%.

We expect year-over-year software and software-related service revenue growth in the range 12% to 14% on a constant currency basis. The corresponding rate of growth in 2006 on a constant currency basis was 12%. We expect subscription and other software-related services to account for approximately 2% to 4% of total software and software-related services revenue. 

To tap new business in the lower midmarket in the years to come, over a period of eight quarters we intend to invest about €300 million to €400 million more in sales channels, process, infrastructure, and human resources, all oriented toward new customer relationships and a big, diversified partner ecosystem. Depending on when we actually make these extra investments, in 2007 we expect to reinvest the equivalent of about one to two operating margin percentage points in preparing for additional future growth opportunities. Therefore, we assume our 2007 operating margin will be in the range 26.0% to 27.0%. Our 2006 operating margin was 27.3%.

We plan to increase our headcount by 3,500 FTEs in 2007, and we expect 5% to 10% of the new jobs to be in Germany.

To ensure shareholders benefit appropriately, we will continue to buy back shares and, if the Annual General Meeting of Shareholders so resolves, we will pay a dividend that provides a payout ratio of 30%.

The capital expenditures we have planned for 2007, which we can cover in full from operating cash flow, will mainly be on the completion of new office buildings at various locations. We plan to build liquid assets and reinforce our healthy financial situation.

Assumptions underlying this outlook include future economic conditions as described herein and customer purchasing behavior exhibiting the accustomed seasonality with sales peaking in the fourth quarter. 

Prospects Through 2010
In the medium term, we expect further advances and continuing revenue growth. The completion of our enterprise SOA road map and the introduction of our new business model for the smaller business segment will open up potential for us to address more markets. We anticipate that the total volume of the software and software-related services segment of which our revenue is a share will grow from currently about US$30 billion to more than US$70 billion by 2010.

By 2010, we aim to earn approximately half of our orders received with new, as yet unavailable, products, and to increase our customer base to approximately 100,000. We expect 40% to 45% of our orders received to be for small businesses or midsize companies.

In our new business we see a US$1 billion opportunity and expect approximately 10,000 new customers per year by 2010. We expect the margin on the new business to exceed the margin on our established business from 2010. We expect double-digit growth to continue in our established business.