Welcome to the SAP's Second Quarter Results Conference call. This call is being recorded. Today's call will be hosted by Henning Kagermann, Léo Apotheker and Werner Brandt. I will now turn the conference over to Stefan Gruber. Please go ahead sir.

Good morning or good afternoon. This is Stefan Gruber. Thank you for joining us today to discuss SAP's second quarter 2008 results. I'm joined by Henning Kagermann, Léo Apotheker and Werner Brandt. Werner will discuss the Q1 financials in detail, Léo will comment on the current business environment and our regional performance and Henning will then provide some further in-depth commentary on the quarter and SAP's product successes. I will now make a few remarks about forward-looking statements. Any statements made during this call 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 anticipate, believe, estimate, expect, forecast, intend, may, plan, project, predict, should, outlook and will and similar expressions as they relate to SAP are intended to identify such forward-looking statements. SAP 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 SAP's future financial results are discussed more fully in SAP's filings with the U.S. Securities and Exchange Commission, the SEC, including SAP's annual report on Form 20-F filed for 2007 filed with the SEC on April 2, 2008. Participants are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. In addition, in this call, we will be reporting certain adjusted revenue numbers on a U.S. dollar basis. These are non-GAAP measures because the reporting currency of SAP's U.S. GAAP financial statements is not the U.S. dollar, but the euro. And because the revenue numbers are adjusted for the deferred support revenue write-down from the acquisition of Business Objects. We provide these measures to provide additional information that may be useful to investors in comparing SAP's revenue growth with the revenue growth of SAP's major competitors who report in U.S. dollars. Our U.S. dollar measures should only be considered as additional to the not a substitute for or superior to the respective euro-based U.S. GAAP measures that we report. And I would now like to turn the call over to Werner.

Thank you, Stefan. Before I begin, let me inform you that I will be speaking mostly about non-GAAP figures as it relates to the operational performance of the company. Also, non-GAAP measures are the basis of our guidance. The differences between U.S. GAAP and non-GAAP figures are the result of two effects in the second quarter. Number one, the exclusion of a write-down of deferred software revenues in the amount of €52 million and second, the exclusion of acquisition-related charges in the amount of €66 million compared to €13 million in the second quarter of 2007. With that, let me say that we are pleased to report another very strong quarter. Non-GAAP software and software-related services for the second quarter of 2008 were €2.1 billion, which represented a year-over-year increase of 32% at constant currency. The contribution from SAP's stand-alone business was 16 percentage points at constant currency. The growth in non-GAAP software and software-related service revenues came from year-over-year constant currency increase of 34% in software revenue, 29% in non-GAAP support revenues and 60% [ph] in subscription and other software-related service revenues. A large part of the sequential increase in subscription and software-related service revenues was a result of global [ph] enterprise agreements we signed in May with Daimler AG, bringing the total number of DAs [ph] to 12. Second quarter professional services and other service revenues were €768 million, which was an increase of 19% at constant currencies. Consulting revenues of €628 million increased 20% at constant currencies and training revenues increased 16%, also at constant currencies. Non-GAAP operating expenses increased by €372 million to €2.2 billion or 20% year-over-year. Of this increase, 65%, or approximately €241 million euros related to the Business Objects acquisition and 35%, or approximately 131 million, represented an organic increase in operating expenses of approximately 7%. The bulk of this increase is a result of higher personnel expenses. Over the last 12 quarters, we added a total of 9711 employees, of which 6224 came from the Business Objects acquisition in the second quarter of 2008. Included in the non-GAAP operating expenses are €24 million of one-time expenses for the i2 settlement and €11 for the Business Objects integration, which are not acquisition-related charges, and therefore not eliminated. Non-GAAP R&D expenses increased 19% for the second quarter and represented 14% of total revenues compares to 15% of total revenues for the second quarter of last year. The increase in non-GAAP R&D was the result of addition of personnel. We hired an additional 1121 net FTEs since the second quarter of last year. Of that total, roughly 40% or 453 FTEs were hired in low-cost locations. We also added 1697 FTEs from the acquisition of Business Objects. Non-GAAP sales and marketing expenses increased 24% for the second quarter and represented 23% of total revenues compared to 22% of total revenues in the last year's second quarter. The increase in non-GAAP sales and marketing expenses was again mainly due to additional sales and marketing head count year-over-year, which grew by 797 FTEs. We also added 2132 FTEs from the acquisition of Business Objects. Non-GAAP G&A expenses increased €33 million or 42... 33% or €42 million for the second quarter and represented 5.8% of total revenues compared to 5.2% of total revenues in the same period of last year. The majority of the €11 million we spent for the Business Objects integration are included in G&A. Overall, the company's non-GAAP operating margin at constant currency was 25% for the second quarter, which represents an increase of 50 basis points year-over-year. As you know, we settled a litigation with i2 Technologies in the second quarter of 2008. The total amount of the settlement was $83 million or €53 million. Of the €53 million, €24 million were expensed in the second quarter. The remaining €29 million will be amortized on a straight-line basis over a 12 year period. Excluding the second €24 million effect from the settlement and the €11 million in costs related to the Business Objects integration, the non-GAAP operating margin at constant currency would have been higher by 120 basis points, 80 basis points from the settlement and 40 basis points from the cost of integration. The increase in overall operating margin was also partly the result of the ongoing successful integration of Business Objects, which Henning and Léo will touch on later. The non-GAAP software and software-related service margin was 82.3% for the second quarter of 2008, which is a decrease of 40 basis points year-over-year. The decrease in the margin was mainly the result of the 24 million expensed in the second quarter from the settlement of the i2 litigation. The professional service margin was 40... 24.3% for the second quarter, which was an increase of 50 basis points year-over-year. The increase in the margin is mainly the result of higher utilization rate of consultants. As a result of the mixed margin performance in products and services, our 2008 second quarter non-GAAP gross margin increased by 110 basis points to 66.9%. Our non-GAAP effective tax rate for the second quarter was 30.7% compared to 25.8% for the second quarter of last year. The reduced second quarter 2007 effective tax rate was a result of a large non-recurring effect. For the full year, we continue to expect the tax rate of 31 to 31.5%. Free cash flow for the first half of 2008 was €1.2 billion, which was an increase of 45% year-over-year. For the first half of 2008, the primary use of free cash flow was for our annual dividend, which was paid in June's acquisition and share buyback activity. For the second quarter, we brought back 3.8 million shares for a total of approximately €124 million. As we previously stated, we expect to spend an amount of around €500 million on share repurchase for the full year. The second quarter, we added 173 FTEs, which brings the total head count at the end of the second quarter to 51,447 full-time equivalents. For the full year, we are targeting a total of 3500 FTEs [ph] compared to 2007, not including the head count from acquisitions. Let me finish up by saying that we have redefined our outlook for the full year 2008. please refer to the press release issued today for the complete business outlook. With that, I would now like to pass it over to Léo. Léo Apotheker: Thank you, Werner. Welcome everyone to today's call. I am pleased to provide you with some highlights on the current business environment we operate in and give you some insights into SAP's regional and sector business [ph] performance. Our string of double-digit growth continues. Q2 was our 18th consecutive quarter of reaching this achievement. The strong performance in the second quarter, both organic and including Business Objects was the result of solid execution in almost all areas of the business. The established business continued to show strength. The volume business in the middle market [ph] continued to grow and Business Objects was a key contributor to the overall growth for the quarter. As demonstrated by our share of the core enterprise application market, we expanded our leadership position and we remain the undisputed leader by a wide margin, in particular, against our next largest competitor. Our win rate against the same competitor was 80% for the second quarter. Let me briefly discuss the market environments in all regions with varying degrees. The markets remain value-driven as it has been for quite some time, meaning that customers demand a proven business case as part of their buying decision. In our largest region, EMEA, the environment has not really changed compared to the first quarter. Customer sentiment is cautious but resolute with demand for SAP products at the same sound level compared to previous quarters. In the U.S., customer sentiment was better than what we saw in Q1. But it was also supported [ph] with good demand for our solutions. Deal slippage was not an issue for Q2 and we hope to keep it that way for the rest of the year. We continue to see strength in the markets of Latin America and Canada, and for APJ, the market environment remains healthy. Let me now move on to provide you some color on the regional performance. In the year, we had yet another solid quarter, on top of a very good performance one year ago. The midmarket continued to strengthen and Business Objects is helping to drive the pipeline and the improvements [ph]. In EMEA, non-GAAP software and software-related service revenues increased by 27% at constant currency with Germany increasing by 11%. Regions of strengths included the UK, the Nordics and Italy. Key contracts won in the EMEA region were Brenntag Holding GmbH, Micksi Gas Spa [ph] and Dansk Supermarked A/S. The Americas performance was very strong in the second quarter with non-GAAP software and software-related service revenues increasing by 37% at constant currencies and the U.S. in particular increasing by 39% at constant currency. Execution in the U.S. was very good, especially against our competitors as we continue to see more customers consolidating on SAP. There was a good mix of deals with new and existing customers. In addition, Business Objects had tremendous traction in the market. The midmarket remained a solid growth area was good overall traction volume. Results in Latin America were good on top of a very strong performance one year ago with a gas tender [ph] in region in the second quarter. Key contracts win in the Americas region were H.J. Heinz Company, Hallmark Cards and Smurfit-Stone Container Corporation. In the APJ region, non-GAAP software and software-related service revenues grew 40% at constant currencies with very strong performances from China and India, which reported high double-digit growth rates. In Japan, non-GAAP software and software-related service revenues were up about 10% at constant currencies. Japan was weaker than expected and it was more of an issue with execution rather than the market [ph]. Measures have already been taken to address these execution issues. Key contract wins in the APJ region were China Central Television, Mochida Pharmaceutical Company and Essel Group. Touching on industry performance, we performed quite well in discrete and process industries with all subsegments of these industries reporting strong growth. In automotive, we signed a global enterprise agreement with Daimler AG in the second quarter. SAP has been Daimler's software partner since 1984 and became Daimler's top strategic software partner by entering a software development partnership in 2002. Today, Daimler has more than 65,000 SAP users, which will extend to more than 100,000 users under the new agreement, which include software, maintenance, strategic software developments, 'maximum attention' support and high-profile consulting services. Other industries that performed well in the second quarter included consumer products, utilities, insurance, healthcare and higher education. Financial services remained a key growth area for SAP and we continue to make important announcements in this area. On the banking side, we announced that the Commonwealth Bank Group will undertake a comprehensive program to modernize its existing banking legacy systems with SAP for banking solutions. Another customer, Commerzbank, Germany's second largest bank has successfully implemented the SAP for Banking solution portfolio in just nine months. The system will process 1.2 million loans yearly. Also, Bank of Ireland has selected Business Objects as its business intelligence standard following an extensive review of available business intelligence solutions. In insurance, we announced that both the AAA Auto Club Group and ICW Group will be implementing SAP's insurance solutions. Second quarter key contract wins in financial services included Suvoshe Cantenal Bank [ph], Farm Credit Canada, Banco de Drogas Antineoplásicas [ph] and Unipol Gruppo Finanziario S.p.A. Public services, which includes healthcare, public sector and higher education is also a key strategic area for SAP. In higher education, Miami-Dade County Public Schools, the fourth largest school system in the U.S. with 42,000 students, more than 50,000 employees across 850 work locations and an annual budget of over $6 billion will be implementing SAP ERP. In the public sector, Mississauga, Canada's sixth largest city with 700,000 people and 7500 employees is replacing its legacy Oracle PeopleSoft software with SAP ERP Human Capital Management. Second quarter key contract wins in public services included the city of Edmonton, state of Louisiana and University of St. Gallen [ph]. For the second quarter, we maintained our unwavering commitment to expanding our partner ecosystem, a key contributor to our growth and success. Examples were the announcements of both Infosys Technologies and Satyam has become SAP's global services partner. We also announced an expansion of our partner ecosystem by making available immediately our SAP Partner H program [ph] previously available only to SAP channel partners to all SAP software solution partners and service partners, including technology and service partners from Business Objects. Let me wrap up by giving you an update on Business Objects. While there are always some integration challenges associated with large acquisitions, we are very pleased with the performance of Business Objects after only two quarters of being an SAP company. The strong momentum generated in the first quarter found its way into the second quarter as the Q2 results were even better than the results we reported in Q1. In the first quarter, Business Objects represented 12 percentage point of the company's gross rate and in the second quarter, it represented 16 percentage points, signifying healthy organic growth rates at Business Objects. This is something usually not seen so quickly for an acquired business in our industry. We witnessed solid growth from almost all products, the BI platform, the POA and ERP applications despite maintaining aggressive sales targets. We believe we have a very successful go to market strategy for Business Objects that will enable us to maintain our growth. The four pillars of the strategy are, first of all, selling Business Objects' products into the SAP only customers; second, expanding the footprint of Business Objects in Business Objects' only customers; third, expanding Business Objects products into joint customers and last of all these [ph], selling Business Objects products into new customers. Of course, we are leveraging our dual sales forces to cross sell SAP into this four pillar go to market strategy. Thus far, we have seen solid growth in all four pillars. Let me turn it over to Henning.

Yes, thank you Léo. We are pleased to report another strong quarter. In my view, this quarter underscores our ability to deliver strong results even in an arguably more difficult market environment. In fact, if we were a company reporting in U.S. dollars, second quarter growth would have been even higher. Our non-GAAP software and software-related service revenues in U.S. dollars would have increased 44% in the second quarter compared to the same period one year ago. This compares to our euro-based non-GAAP growth rates of 32% at constant currencies. We also once again achieved significant share gains in the core enterprise application software market. At the end of the second quarter, our share, based on a $38.1 billion market was 33.7%, representing an increase of 1.1 percentage point compared to the first quarter of 2008 and an increase of 7.7 percentage points compared to the second quarter of 2007, of which 4.5 percentage points represented organic growth. These are very strong share gains and demonstrate our undisputed leadership in business applications. Another example of our growing leadership position can be seen in the fact that for every one dollar of application product revenue added by our closest competitor last year, we added around $2 of product revenue. Let me now talk about the core areas of our business. The established business continues to move along as planned. We continue to see strong adoption of SAP ERP 6.0 as more customers realize the benefits of moving to our new platform. In fact, we surpassed the 10,000 customer mark, reaching 11,500 ERP 6.0 customers at the end of the second quarter. That's more than double the amount we had at this time last year. 7200 of these are productive, which represent approximately 25% of our relevant customer base. Therefore, you should see the momentum continue here for quite a while. The adoption of NetWeaver within our customer base also continued to make excellent progress. At the end of Q2, we had 42,800 productive systems, representing an increase of 67% year-over-year. On a rolling full quarter [ph] base, SAP NetWeaver revenue increased to approximately €1.1 billion, of which 38% was stand-alone. As you know, organic growth coupled with tuck-in acquisitions to help strengthen our technology and product portfolio is a primary growth strategy at SAP. Let me touch on a tuck-in acquisition that we made recently. The acquisition was a company called Visiprise. It provided us a big step forward in realizing our perfect plan vision for discrete manufacturing. Moreover, like our acquisition of Virsa, it's an excellent example of how SAP benefits of having in place an industry leading business process platform and a best-in-class ecosystem of independent software vendors building on this platform. Visiprise first received an investment from the SAP NetWeaver Fund in 2006. Soon after that, its solution became an SAP endorsed business solution, powered by NetWeaver and we then also signed the resale agreement with them. Since there was significant demand for the solution and we received very positive customer feedback, we decided to acquire the company in order to tap the solution's full potential. Such a process represents a win-win situation. For SAP, it's an opportunity to rapidly bring to market cutting-edge, highly innovative solutions with significant revenue potential at a lower risk. While for companies like Visiprise, getting acquired by SAP represents a viable exit [ph] channel. Best of all, since these companies build their solutions based on SAP's open platform from the start, there is no overlap with existing SAP solutions and technology and architects are consistent. Our new CIM solution, CIM 2007 is off to a strong start. Customers are excited about the new product which includes a brand new user interface and much broader functionality. KVBW, one of Europe's fastest growing providers of cable television and Internet and telephone services with more than 2.3 million subscribers selected SAP CIM to build its foundation for future growth and to leverage the integration with its existing ERP application from SAP. And finally, SAP and RIM a significant co-innovation partnership in which mobile users will soon be able to work freely on SAP using RIM products. The first output expected from this new partnership is a native BlackBerry smartphone client that will merge SAP CRM capabilities with core BlackBerry smartphone applications. As you know, another core area of our business is the small and mid-sized enterprise market. For SAP Business All-in-One, we continue to make excellent progress. In the second quarter, the number of customers increased 18% year-over-year to over 12,100 which the number of partners increased 10% for the same period to over 1000. To further the good momentum, we have expanded our fast track [ph] program. In addition to Intel, we have also now partnered with IBM and HP. This program is already up and running in 21 countries across all regions. For Business One, the number of customers increased by 32% year-over-year to over 20,000 while the number of partners selling the products stood at 1100 at the end of the second quarter. For SAP Business ByDesign, we have continued to work on a product based on the feedback we have received from our customers. We are continuing to execute on our adjusted go to market approach. And as we outlined during our last call, our priority is ensuring that we deliver a top quality product with high profitability by optimizing the end-to-end process of delivering, selling and supporting the solution. Let me touch on the third area of our business, the business user. As Léo mentioned, Business Objects is performing very well. Driving the success at Business Objects is a product portfolio as the products are better recognized in the market. The product roadmap was published early to provide security and investment protection for our customers. We are seeing that both IT and business are very enthusiastic about the product, demonstrating strong endorsements from all types of users. The integration of Business Objects will continue and the primary parts of the integration are expected to be completed by the end of this year, helping us to further reduce operating expenses and improve the operating margin. I am sure most of you have already read about our plans to move all of our customers to the enterprise support beginning in January 2009. The six months since its release, the offering has experienced positive market adoption with more than 350 new customers signed on. Let me finish up by providing some detail on the rationale behind it. There still is an enormous potential for efficiency increases and corresponding cost reductions when it comes to the management of entire application landscapes. We have seen... we have been working very hard to bring down these costs for our customers. An example was the introduction of our unique enhancement pack technology which has dramatically reduced the cost of implementing new solutions. We started to roll out the set of tools that greatly facilitates the management of not only the SAP landscapes, but multi-vendor landscapes including a growing number of composite applications and processes that link several companies and constantly adapting and transforming business networks. So in a sense, enterprise support and supervision of the corresponding technologies and services represents the logical transfer of our business process platform strategy to our support operations. We are convinced that enterprise support will ultimately lead to a net decrease of the total cost of ownership for the overwhelming majority of our customer base. In closing, as our second quarter performance demonstrates, we remain focused on profitable growth and all of our core business areas, the established business, the midmarket and business user solutions are contributing. Our path to continued growth is primarily focused on organic with tuck-in acquisitions to augment our products and technology. We continued to outperform the market with organic growth even during the integration of Business Objects, which has been very successful to date from both the financial and product perspective. Now I would like to end here. Thanks for listening and we will be happy to take your questions.

Operator, we are now ready to take some questions. Question And Answer

Thank you, sir. [Operator Instructions]. The first question comes from Raimo Lenschow.

Hey, good afternoon and well done on a great quarter. Two questions, if I may. First of all, I have been covering SAP now for quite a while, and one thing you learn is Q2, you want to stay conservative, you don't want to raise guidance because Q3, Q4 are very large quarters for the company. Now you surprised us all with the change of guidance. Can you maybe talk us through your thinking there, especially as we all assume that we actually heading into tougher times? What gave you the extra confidence there? And a question maybe for Werner. Can you maybe talk a little bit about the BOBJ integration on the cost synergies? Just describe [ph] what has been achieved so far in terms of IT, G&A overhead and what's the impact then that we could assume for the second half. Thank you.

Yes, it's Henning. It's several things. I think it starts with the excellent results in the first half; not just the second quarter. I think we are standing now at 28% SSRS revenues. And you know, our range was 24 to 27. In parallel, we had, as you can imagine, a lot of debates internally with our regional heads about the outlook in particular to the third quarter and from the management team. I think we feel that despite all the toughness in the market, demand of SAP products is there. So if we put these together with a healthy pipeline, we feel that it's right and prudent to not change the guidance, but to refine the guidance that we expect is coming in the upper end of both ranges. And Werner, will you say something?

Yes. Raimo, Henning referred to this. We have accomplished a lot with regard to the integration of the infrastructure. We started... or we completed the migration to, for example, to SAP ERP. As of the 1st of July after 3.5 months preparations, we did other things and accomplished other things on the infrastructure side. So this means that we, in the first half, actually had more an investment. That's the reason for the integration expenses in the second quarter of 11 million. If you look to it, from a half year perspective, it's even 20 million which went there. And we will see the benefits coming even in the second half of the year by then really capturing all the synergies you can capture by this harmonization of the infrastructure. So bringing Business Objects completely on the infrastructure of SAP in all areas. Henning mentioned on top of it, all the work done so far on the global procurement side on the facility side. All this will then lead to a reduction in operating expenses on the Business Objects side. You know that this company on a stand-alone basis acted on a very low margin. We will bring this up now in the second quarter, quarter by quarter and will then achieve next year the level we see also within SAP.

Perfect. Thank you

Thank you. Next question please.

And the next question comes from Charlie Di Bona. Please go ahead with your question.

Maybe this is most directed at Henning. We saw the... Business ByDesign, you didn't talk much about it in the press release. You mentioned a little bit in the conference call here. But maybe you can give us a little more color on sort of the evolving the plans there and how that's affecting both your sort of forward-looking guidance in terms of revenues but also in terms of operating margin as you sort of pair back your spending there.

Yes, thank you. I think it's important to know that in all our outlooks, in all our planning in the near future, we were extremely conservative with regards to ByDesign. I think it was right decision at the end of the first quarter to say quality and in particular profitability for SAP is priority number one. Because let's say that we are well underway with the other two products and gaining share in the midmarket and on the other side by design is, in its approach, unique and we have time enough for that. So our approach is the following. We will shift our focus in and we are now in the phase of preparing the next release, let's say, to key indicators, which is not primarily the number of customers or whatever. It's much more how can we improve factors like TCO and others so that we really achieve these goals of extreme high quality and high profitability for SAP that we have shifted. And that's the reason why I haven't touched it much today because I wanted to wait until we have the next release in the market and I can more, I would say, based on facts, report on progress we have made. Let me add that that doesn't mean we are not, let's say, bringing it [ph] to market, but we have refocused ourselves to six markets. I think we have mentioned these six markets at the end of the first quarter and still these six markets.

Thank you.

Thank you. Next question please.

And the next question comes from Sarah Friar. Please go ahead with your question.

Great. Thanks for taking my question and congrats on a good quarter. Two questions. First, the impact from the maintenance raise. I think you have been a little bit more vocal recently talking about your intention to lift maintenance pricing. How should we think about that, Werner, as we factor it into guidance through the next, call it, 12, 18 months? Léo Apotheker: Maybe before Werner answers, Sarah, just a small comment. We didn't increase our maintenance price. We have launched a whole new service, which is a totally different matter. It is a holistic service offering. Henning described it briefly in his opening remarks as an end-to-end solution that is there to provide a lot of support for our customers and therefore, you can't qualify this as a price increase. Just wanted to make sure that you have this clear understanding. By the way, it will be announced to all of our customers in 2009. In 2008, we proposed this service to our new customers and our new customers have actually adopted this with quite some enthusiasm. We are seeing [ph] that in 50 customers approximately have signed up for it since the beginning of the year. Second half of the year, we will propose it to all of our customers as an additional service free of charge, part of the normal maintenance service. Werner?

Yes. Sarah, this means that if you look to 2008, we are more in an investment mode, because we ramped this additional service capabilities up. And if you look down to 2009, what I evidently [ph] stated is that we will see a margin increase of 100 to 200 basis points in 2009. And this is one, related to increasing the efficiency in our organization and secondly, also associated with this higher contribution coming from enterprise support revenue. And as of today, we cannot specify what will come from what. We will provide this in connection with our guidance we will deliver for 2009 in January of next year.

Got it. But is the assumption that ultimately most customers will make the shift up to this higher end support contract? Léo Apotheker: Definitely.

Yes. Léo Apotheker: That is --

Okay. Léo Apotheker: That is our full expectation.

And then if I may, just a quick follow up. I mean you have come up with a great quarter. Oracle's quarter, it was their fourth, but was also strong. And even on your market share diagram, you show kind of your Big Three gaining. I mean is that part of what's going on in the market here where the bigger guys are really wining out from a consolidation standpoint, and so definitely part of your growth is coming at the expense of the smaller guys? Because I think we struggle a little with hearing CIOs talking about maybe wanting to delay bigger deals and yet, the big guy... the big vendors are still doing phenomenally well.

Yes, it's Henning, Sarah. I think if you follow our presentations over the last years, I think we have shown that two or three years ago that there is a huge untapped market which we call... which is not yet by the Big Three, which is... that was at that time two-thirds. And we always pointed to it and said, okay, to the one extent, we will definitely compete against each; that's one thing. But on the other side, there is a large white space, so to say, of smaller vendors which, you are right, normally, struggle a little bit if it comes to a tough environment because what companies are buying is also, I would say, the future. If they buy SAP, they are convinced that they can run on SAP for the next 10, 15, 20 years. I think this reliability and long-term strength is key and therefore I agree that such an environment is always in favor of strong, large players.

Great. Thank you very much.

Thank you.

And the next question comes from Michael Briest. Please go ahead with your question.

Thank you very much. Good afternoon. Léo, or Henning perhaps, if you could talk to the German performance in Q2. I think that [ph] although it's commendable if you did... are a lot weaker than the rest of Europe and maybe also on Japan, whether there is any major fixes you need to do there? And then secondly, you've in the past given us some metrics on the size of deals, and I am wondering if there is any change in the shape of the business? Were you dependent on seeing some large deals, smaller deals that came through just to make the numbers? Thanks. Léo Apotheker: Hi Michael. I will try to give you the answer to your question. Germany grew by about 11% is ex-U.S., and it did a good job. I just want to remind everyone that we have said at the beginning of the year that we expect Germany to grow in single digits and with 11% the absolute profit [ph], I actually expect them to come in at high single digits. So they are doing a good job. And if you look at the absolute numbers that are being generated here in the German market, it is actually a phenomenal job. As to Japan, you were right to point that out. That is not a market issue. We had some operational issues in Japan in Q2, which we have already addressed by the way. And we hope that we can consider Q2 as just a glitch and recover from that and have normal performance in the Japanese market. As to the deal metrics, we... deals invested in €1 million were about 45% of order entry. Last quarter, Q2 2007, it was about 43. So no really big change. And deals bigger than €5 million were 24% of order entry. And Q2 2007, it was about 22% of order entry. Again, not a revolutionary big change.

Thank you very much. Werner, perhaps just a final one for you. Could you give us an idea of what DBD [ph] costs were in the quarter and whether you are sticking to your earlier guidance for the year there?

Yes. We... remember, we have set the spending in 2008 would be around 100 million and we will come to this 100 million in 2008. We do not want to provide quarterly details now.

Okay, thank you.

Thank you. Next question please.

And the next question comes from James Dawson. Please go ahead with your question.

Yes, hi guys. I have a couple of questions. Firstly, in terms of the head count target, Werner. You didn't add too many people in the second quarter. And your target is now 3500. So it looks like you are going to reaccelerate in the second half or is there a possibility that you might end up below your 3500? My second question is around just the emerging markets business. You talked about China and India. In previous quarters, you've kind of given us a growth rate for the BRICs just to give us an idea of how they are going on as a group of countries. Can we get that again?

Let me start with head count growth for 2008. It's true; in the first half, we had roughly 1400 added to our base, if you forget about all the acquisitions. Now we reduced our original target of 4000 to 3500. Maybe that's already the high end of the rage we will achieve, and that's what we have as intention so far. But be aware and be sure that it will be only higher according to the progress of the business we make from a quarter-to-quarter basis. Léo Apotheker: Yes. And regarding BRIC, James, thank you for the question. China had an extraordinary high performance, way above 50%. Actually, India was in the same range. Brazil also had a spectacular quarter on top of a very spectacular quarter in Q2. That kind of gives you a indication of how the three [ph] countries performed.

Is there... in terms of pipeline there, Léo, do you see anything altering there? Nothing [ph] to change this kind of pattern? Léo Apotheker: Not really, no. We are still very optimistic about our overall business performance in the three countries. We might have a one quarter here or there, but that's not really the issue. The perspective that we have for the BRIC [ph] countries is very healthy.

Okay. Thank you very much.

Thank you. Next question please.

And the next question comes from Ross MacMillan. Please go ahead with your question.

Thank you. Just a question on the four spot 6E [ph] or install base transition to ERP 6.0. That seems to have kind of really accelerated. And I just wondered if you could give us your perspective on whether you think that transition drives license revenue in its own right, or whether you think it paves the way to more opportunity to sell licenses as we go forward. So is it kind of benefiting you now or is it more that you will get the benefit to come? Thanks.

Ross, it's Henning. And I think it's to some extent both. It's key that our client are seeing this momentum, because if you are in constant touch with our user groups, you can see that this momentum is to some extent several [ph] billing processes... hypothesis the others are just following because it seem to be easy and beneficial. I think that overall, it's more benefiting us in the periods to come because once customers are there, I think the next, hopefully, the next that is to go from ERP to the suite. And as you know, the entire product strategy around the suite is to make the suite a harmonized suite where it's not so much about this IT-related suite, acronyms like CIM, ERP et cetera, but more end-to-end business processes which are addressing the lines of business in a company. So I think if ERP as frontrunner goes well, I think there is a high likelihood that there is an impact, a positive impact on the other component of the suite.

Thank you.

Thank you. Next question please.

And the next question comes from Gerardus Vos. Please go ahead with your question.

Hi. Thanks for taking my question. Just two questions, if I may. First of all, in the U.S., if I calculate the underlying organic growth rate there that there was a decline there in the first quarter and it bounced back very strongly in the second quarter. Could you just give me a bit of a feeling how the sales cycles are there and what is really driving this strong growth in the second quarter? And then secondly, also on BOBJ, if you do the kind of same calculation, you get to the conclusion that BOBJ organically was growing around kind of mid-teens for the second quarter, again, very strong given the kind of integration again. Could you just give me a bit of a feeling what is really driving that? Is that driven by kind of an increase in standardization deals or is this also volume? Thank you. Léo Apotheker: Hi Gerard, this is Léo. I'll try to give you the answer to the question. What happened in the U.S. in the first quarter was probably a bit of a overreaction to the overall market sentiment that people had. So you basically had a lot of hesitation in the market, people becoming very nervous and actually even freezing or making small transactions. You will remember in Q1, we had actually a very large number of transaction in the U.S. The average deal size was more. In Q2, the situation has somewhat normalized from that perspective. We are now facing with demand that is strictly value-driven where people demand high and very demanding business cases and moreover, checking out the capability of the particular vendor to deliver that value. Value delivery is as important as value expression and that is an environment that suits SAP extremely well. We are ideally placed to both expand the value and then deliver the value, be it to help either to achieve growth or efficiency or both, whatever the case might be. This situation has happened in the U.S. in Q2. And when we look at the pipeline in Q4, we actually see a similar situation for the future as well. As to Business Objects, we see that the business is actually doing very well, as already mentioned. What you see happening is that some companies in the South [p] extended us now on the wall to wall basis on Business Objects. It is a bit likely doing around SAP as well. But I'm very pleased to see that also the volume side of Business Objects is growing fast. And we are actually penetrating a large number of accounts with Business Objects products and they are exceeding if you want [ph] and they represent future opportunities there as well.

Fine, thank you.

Thank you. And the next question comes from Knut Woller. Please go ahead with your question.

Yes, Knut Woller with UniCredit. Thanks for taking my question. In this year you were reviving margins dollar, you were indicating that R&D costs as a percentage of revenue should decline from the current 14% peak. If we look at your historical range, maintenance revenues should benefit from the measure you were announcing for starting January '09. And one important trigger I'd see at least is the contribution from the indirect channel. Could you give us an idea where we are in this indirect channel and what your plans are? If I remember correctly, it should be around 10% of your license revenues. Where do you want to go from here in this direction to further utilize margin potential? Thanks. Léo Apotheker: Yes, this is Léo. You mentioned a certain number of aspects. Let me just try to pick up your comments on the indirect channel. The indirect channel had good performance in Q2. And actually continue to grow fast. We are currently at a small double-digit number in channel contribution. And if it continues like that, we feel comfortable that we will actually be in a situation where the indirect channel will contribute a symbol for the 10% that we had earmarked to achieve. May be this is a little bit speculative, so I don't want to take too... maybe even slightly more. But we feel reasonably confident that the 10% channel contribution will be achieved. The channel is performing well. You know we have a slightly different channel strategy than many of our partners. We don't look too much to volume. We look for quality. Therefore we have master channel partners for All-in-One, and we have roughly 1100-1200 partners each for Business Objects, for Business One and for All-in-One. And these are high quality partners and they are doing a very good job.

Right. Thanks very much.

Thank you. Next question please.

And the next question comes from Mark Bryan. Please go ahead with your question.

Yes, hi there. Good afternoon. Most of my questions are gone. But I will pool [ph] to just ask a couple, if I may. Firstly on Japan, could you just explain a little bit more about the execution issues and how quickly you'd expect to bounce back there? Were there similar sort of issues you had in Q1 in North America? And secondly perhaps one to Werner, on the gross margins in services, they bounced quite strongly sequentially. Should we consider that sort of level as sustainable as we head into the second half? Thank you. Léo Apotheker: Mark, this is Léo. Let me just give you some color on Japan. First of all, to sensitive perspective, half year SSRS growth in Japan is 24%. So it's not exactly bad. We had a few strictly purely operational issues, internally operational issues in that market in Q2. It has nothing to do with behavior in the... like we had... of the over market like we saw in the U.S. in Q1. It therefore was easy to address, that has been addressed. And as I said earlier on, I hope it is not going to have any long-lasting replications [ph] on our business.

Okay. Thank you.

And with regard to the margin, I think it's a starting point, Q2, with the expansion of 50 basis points. But in order to achieve our upper end of the range we provided for the margin, it's close to 29% in 2008. We have to deliver and accelerate margin expansion quarter-over-quarter now.

Okay. Thank you.

Thank you. And I think we have time for one final question.

Thank you, sir. And the next question comes from Jochen Klusmann. Please go ahead with your question.

Hi. I have two questions. One is for Léo. It's just a follow-up on what you said about the U.S. I am just trying to figure out when you said that the trend that we have seen in the recent quarter, that's kind of like what we should also see going forward. Is it something you referred to the strong growth we had in the second quarter or would you more refer to the first half because we had some distortion from what I understood from Q1 into Q2? And then the second question is for Henning. You are cited this morning, reported on CNBC by seeing that as the backlog is good, now I remember in the past every time you mentioned backlog of pipeline usually, I mean you were more upbeat. I mean, you said stuff like very robust or very strong backlog. I mean, good doesn't seem very exciting. Is it just a misquote or is it an over-interpretation? Can you just comment on that?

Well, let me first answer your last question first. I was trying to illustrate the behavior of the buyers. I wasn't trying to make the prediction of this or the other growth rate for the U.S. I do hope that the behavior and we actually feel reasonably concerned about that, the behavior of our prospective customers and customers in the U.S. market will still believe as [ph] they exit in Q2. And therefore we believe that our pipeline, our forward-looking calculations for the U.S. market has historic base [ph] and also --

I would says, I think people who know me for long time know that I am not the guy who is making a lot of enthusiastic announcements. So I think in such an environment with such good results and refining the guidance at the end, I think good pipeline is really a good pipeline.

Okay, great, thanks.

Thank you very much. This concludes today's earnings call of SAP. Thank you all for joining us and good bye. Léo Apotheker: Okay, good bye.

Bye bye.