SAP Forward forecast and restructuring cost

Within SAPs reporting of  results was included as expected no detailed forecast of the trading environment going forward and also details of actions taking place within the business to keep things on an even keel.  Within the forward picture reference was made to a provision of up to 300m euros for restructuring although it wasn’t clear whether this relates to just the Business Objects acquisition or the planned reduction in staff, although naturally reducing staff numbers wouldn’t generally generate that degree of cost.

Business Environment and Cost Containment Measures for 2009
The Company expects the 2009 operating environment to remain challenging. In addition, 2009 will no longer include the positive effects from the acquisition of Business Objects, and the 2009 first-half results will be a difficult comparison to the strong results reported in the first half of 2008, which was prior to the economic crisis that disrupted the global markets in the third quarter of 2008.
SAP will continue with its cost saving measures initiated in October 2008 and will take further steps to reduce expenses. SAP will continue to maintain tight cost controls on all variable expenses, including third-party related costs, as well as capital expenditures. Additionally, to enable the Company to adapt its size to today’s market conditions and the broader impact of the global recession, SAP intends to reduce its workforce globally to 48,500 positions by year-end 2009, taking full advantage of attrition as a factor in reaching this goal (SAP will provide further information on its website at www.sap.com). The Company expects the reduction of positions to provide euro 300 million to euro 350 million in annual cost savings beginning in 2010.
“We believe the cost containment measures will allow us to adapt to the tough market conditions and ensure the long term competitiveness of the Company. Moreover, we expect 2009 to be a year of limited visibility, making it increasingly difficult to project sales in this environment,” said Leo Apotheker, co-CEO of SAP. “In 2009, we will continue to deliver to customers products targeted at specific business processes to alleviate pain points caused by the challenging environment since customers need flexibility, agility and visibility into their businesses now more than ever. These products are designed for fast implementations and quick returns on investment.”
Mr. Apotheker concluded, “This is not the first time we have experienced tough economic times and we believe we are well-prepared to endure it. With competitive products, a solid business model, a high percentage of recurring revenues and flexibility in the cost base, we expect to emerge from this challenging environment a stronger and more competitive company, while maintaining a firm hold on our industry leading position.”
Business Outlook
The Company provided the following outlook for the full-year 2009.
Due to the continued uncertainty surrounding the economic and business environment, the Company will not provide a specific outlook for software and software-related service revenues for the full-year 2009. The Company expects its full-year 2009 Non-GAAP operating margin, which excludes a non-recurring deferred support revenue write-down from the acquisition of Business Objects of approximately euro 9 million and acquisition-related charges, to be in the range of 24.5% – 25.5% at constant currencies. This includes one-time restructuring charges between euro 200 million to euro 300 million expected to result from the reduction of the workforce, which negatively impacts the Non-GAAP operating margin outlook by approximately 2 – 3 percentage points. The 2009 Non-GAAP operating margin outlook is based on the assumption that 2009 Non-GAAP software and software-related service revenues, which exclude a non-recurring deferred support revenue write-down from the acquisition of Business Objects, will be flat to a decline of 1% at constant currencies (2008: euro 8.623 billion).
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