UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
¨ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 20112014
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
¨ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Date of event requiring this shell company report
For the transition period from to
Commission file number: 1-14251
SAP AGSE
(Exact name of Registrant as specified in its charter)
SAP CORPORATIONEUROPEAN COMPANY
(Translation of Registrant’s name into English)
Federal Republic of Germany
(Jurisdiction of incorporation or organization)
Dietmar-Hopp-Allee 16
69190 Walldorf
Federal Republic of Germany
(Address of principal executive offices)
Wendy Boufford
c/o SAP Labs
3410 Hillview Avenue, Palo Alto, CA, 94304, United States of America
650-849-4000 (Tel)
650-849-2650650-843-2041 (Fax)
(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class | Name of each exchange on which registered | |
American Depositary Shares, each Representing
| New York Stock Exchange | |
Ordinary Shares, without nominal value | New York Stock Exchange* |
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:
Ordinary Shares, without nominal value: 1,228,083,3821,228,504,232 (as of December 31, 2011)2014)**
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes þ No ¨
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes ¨ No þ
Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)
Yes ¨ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ | Accelerated filer ¨ | Non-accelerated filer ¨ |
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ¨ International Financial Reporting Standards as issued by the International Accounting Standards Board þ Other ¨
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 ¨ Item 18 ¨
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No þ
* | Listed not for trading or quotation purposes, but only in connection with the registration of American Depositary Shares representing such ordinary shares pursuant to the requirements of the Securities and Exchange Commission. |
** | Including |
1 | ||||
1 | ||||
2 | ||||
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS | ||||
28 | ||||
30 | ||||
32 | ||||
49 | ||||
51 | ||||
69 | ||||
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Consolidated Financial Statements and Financial Statement Schedule | ||||
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ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | ||||
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES | ||||
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | ||||
Management’s Annual Report on Internal Control Over Financial Reporting | ||||
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ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES | ||||
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS | ||||
115 | ||||
116 | ||||
116 | ||||
116 | ||||
116 | ||||
117 | ||||
118 | ||||
118 | ||||
118 | ||||
118 | ||||
118 | ||||
| F-1 | |||
Report | F-2 | |||
F-3 |
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SAP AGSE is a German stock corporation (Aktiengesellschaft)European Company (Societas Europaea, or “SE”) and is referred to in this report, together with its subsidiaries, as SAP, or as “Company,” “Group,” “we,” “our,” or “us.” Our Consolidated Financial Statements included in “Item 18. Financial Statements” in this report have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, referred to as IFRS throughout this report.
In this report: (i) references to “US$,” “$,” or “dollars” are to U.S. dollars; (ii) references to “€” or “euro” are to the euro. Our financial statements are denominated in euros, which is the currency of our home country, Germany. Certain amounts that appear in this report may not add up because of differences due to rounding.
Unless otherwise specified herein, euro financial data have been converted into dollars at the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York (the “Noon Buying Rate”) on December 30, 2011,31, 2014, which was US$1.29731.2101 per €1.00. No representation is made that such euro amounts actually represent such dollar amounts or that such euro amounts could have been or can be converted into dollars at that or any other exchange rate on such date or on any other date. The rate used for the convenience translations also differs from the currency exchange rates used for the preparation of the Consolidated Financial Statements. This convenience translation is not a requirement under IFRS and, accordingly, our independent registered public accounting firm has not audited these US$ amounts. For information regarding recent rates of exchange between euro and dollars, see “Item 3. Key Information —– Exchange Rates.” On March 8, 2012,6, 2015, the Noon Buying Rate for converting euro to dollars was US$1.32561.0855 per €1.00.
Unless the context otherwise requires, references in this report to ordinary shares are to
SAP AG’sSE’s ordinary shares, without nominal value. References in this report to “ADRs” are to SAP AG’sSE’s American Depositary Receipts, each representing one SAP ordinary share. References in this report to “ADSs” are to SAP SE’s American Depositary Shares, which are the deposited securities evidenced by the ADRs.
SAP, ABAP, Adaptive Server, Advantage Database Server, Afaria, Ariba, Business ByDesign,
BusinessObjects, ByDesign, Concur, Crystal Reports, ExpenseIt, Fieldglass, GDSX, hybris, PartnerEdge, PowerBuilder, PowerDesigner, Quadrem, R/3, SAP NetWeaver, Duet, PartnerEdge, ByDesign,Replication Server, SAP BusinessObjects Explorer, StreamWork,SAP Business Workflow, SAP EarlyWatch, SAP Fiori, SAP HANA, SAP Jam, SAP Lumira, SAP NetWeaver, SAP S/4HANA, SAPPHIRE, SAPPHIRE NOW, Smart Expense, SQL Anywhere, Sybase, SuccessFactors, The Best-Run Businesses Run SAP, TravelTrax, TripIt, TripLink, TwoGo, Web Intelligence and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP AGSE (or an SAP affiliate company) in Germany and other countries. Business Objects and the Business Objects logo, BusinessObjects, Crystal Reports, Crystal Decisions, Web Intelligence, Xcelsius, and other Business Objects products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of Business Objects Software Ltd. Business Objects is an SAP company. Sybase and Adaptive Server, iAnywhere, Sybase 365, SQL Anywhere, and other Sybase products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of Sybase Inc. Sybase is an SAP company. Crossgate, m@gic EDDY, B2B 360°, and B2B 360° Services are registered trademarks of Crossgate AG in Germany and other countries. Crossgate is an SAP company. All other product and service names mentioned are the trademarks of their respective companies. Data contained in this document serves informational purposes only. National product specifications may vary.
Throughout this report, whenever a reference is made to our website, such reference does not incorporate by reference into this report the information contained on our website.
We intend to make this report and other periodic reports publicly available on our Webweb site (www.sap.com) without charge immediately following our filing with the U.S. Securities and Exchange Commission (SEC). We assume no obligation to update or revise any part of this report, whether as a result of new information, future events or otherwise, unless we are required to do so by law.
This report contains forward-looking statements and information based on the beliefs of, and assumptions made by, our management using information currently available to them. Any statements contained in this report that are not historical facts are forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements on our current expectations, assumptions, and projections about future conditions and events. As a result, our forward-looking statements and information are subject to uncertainties and risks. A broad range of uncertainties and risks, many of which are beyond our control, could cause our actual results and performance to differ materially from any projections expressed in or implied by our forward-looking statements. The uncertainties and risks include, but are not limited to:
Uncertainty in the global economy, financial markets and inor political conditions could have materiala negative impact on our business, financial position, profit, and cash flows.flows and put pressure on our operating profit.
Third parties have claimed, and might claim in the future, that we infringe their intellectual property rights, which could lead to damages being awarded against us and limit our ability to utilizeuse certain technologies in the future and could have a material negative impact on our business, financial position, profit, or cash flows.future.
Undetected security flaws inClaims and lawsuits against us could have an adverse effect on our software or our proprietary systems or those of our third-party service and software providers may be exploited by other persons, which could damage SAP or our customers and significantly impact ourbusiness, financial position, profit, cash flows and reputation.
IfWe may not be able to protect our established customers do not buy additional software products, renew maintenance agreements,critical information and assets or purchase additional professional services, this could have a material adverse impact onto safeguard our business operations against disruption.
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We describe these and other risks and uncertainties in the Risk Factors section.
If one or more of these uncertainties or risks materializes, or if management’s underlying assumptions prove incorrect, our actual results could differ materially from those described in or inferred from our forward-looking statements and information.
The words “aim,” “anticipate,” “assume,” “believe,” “continue,” “could,” “counting on,” “is confident,” “development,” “estimate,” “expect,” “forecast,” “future trends,” “guidance,” “intend,” “may,” “might,” “outlook,” “plan,” “project,” “predict,” “seek,” “should,” “strategy,” “want,” “will,” “would,” and similar expressions as they relate to us are intended to identify such forward-looking statements. Such statements include, for example, those made in the Operating Results (IFRS) section, our quantitative and qualitative disclosures about market risk pursuant to the International Financial Reporting Standards (IFRS), namely IFRS 7 and related statements in our Notes to the Consolidated Financial Statements, the Expected Developments section, the Risk Factors section, our outlook guidance, and other forward-looking information appearing in other parts of this report. To fully consider the factors that could affect our future financial results, both this report and our Annual Report and Annual Report on Form 20-F should be considered, as well as all of our other filings with the Securities and Exchange Commission (SEC). Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date specified or the date of this report. Except where legally required, weWe undertake no obligation to publicly update or revise any forward-looking statements as a result of new information that we receive about conditions that existed upon issuance of this report, future events, or otherwise unless we are required to do so by law.
This report includes statistical data about the IT industry and global economic trends that comes from information published by sources including
International Data Corporation (IDC), a provider of market information and advisory
services for the information technology, telecommunications, and consumer technology markets; investment bank Goldman Sachs; the European Central Bank (ECB); and the International Monetary Fund (IMF); and the Organisation for Economic Co-operation and Development (OECD). This type of data represents only the estimates of IDC, Goldman Sachs, the ECB, the IMF, the OECD and other sources of industry data. SAP does not adopt or endorse any of the statistical information provided by sources such as IDC, Goldman Sachs, the ECB, the IMF, the OECD or other similar sources that is contained in this report. In addition, although we believe that data from these companiessources is generally reliable, this type of data is inherently imprecise. We caution readers not to place undue reliance on this data.
FINANCIAL MEASURES CITED IN THIS REPORTPERFORMANCE MANAGEMENT SYSTEM
Measures we Use to Manage Operating Performance
We use various performance measures to help promotemanage our performance with regard to our primary goal of sustainedfinancial goals, which are growth in corporate valueand profitability, and our ancillary goal of profitable revenue growth. Theprimary non-financial goals, which are customer loyalty and employee engagement. We view growth and profitability as indicators for our current performance, while customer loyalty and employee engagement are indicators for our future performance.
Measures We Use to Manage Our Financial Performance
Measures We Use to Manage Our Operating Financial Performance
In 2014, we used the following are the key measures we used in 2011:to manage our operating financial performance:
Non-IFRS SSRS revenue:Cloud subscriptions and support revenue (non-IFRS): OurThis revenue driver comprises the main revenues of our fast-growing cloud business. We generate cloud subscriptions and support revenue (non-IFRS) when we provide software and the respective support for delivery in the cloud. We use the measure cloud subscriptions and support revenue both at actual currency and at constant currency.
Software and software-related service (SSRS) revenue (non-IFRS): We use SSRS revenue (non-IFRS) and constant currency SSRS revenue (non-IFRS) to measure our revenue growth. Our SSRS revenue includes softwarecloud subscriptions and support revenue plus subscriptionsoftware and other software-related servicerelated support revenue. The principal source ofCloud subscriptions and support revenue and software revenue is the fees customers pay for software licenses. Software revenue isare our key revenue driverdrivers because it tendsthey tend to affect our
other revenue streams. Generally, customers whothat buy software licenses also enter into maintenance contracts, and these generate recurring software-related service revenue in the form of support revenue after the software sale. Maintenance contracts cover support services and software updates and enhancements. We generate subscription and software-related service revenue when we provide software on subscription or in a cloud mode, that is, with obligatory hosting terms. Software revenue as well as cloud subscriptions and support revenue also tendstend to stimulate service revenue from consulting and training sales.
Non-IFRS operating profit/non-IFRS operating margin:New and upsell bookings: In 2011,For our cloud activities, we used non-IFRS operating profit/non-IFRS also look at new and upsell bookings. This measure reflects the committed order entry of a given period from new customers and from incremental purchases by existing customers for offerings that generate cloud subscription revenue. Thus, it is an indicator for cloud-related sales success in a period and for secured future cloud subscription revenue. We focus primarily on the average contract value variant of the new and upsell bookings measure that considers annualized amounts for multiyear contracts. Additionally, we monitor the total contract value variant of the new and upsell bookings measure that considers the total committed order entry amounts regardless of the contract durations. There are no comparable IFRS measures for these bookings metrics.
Operating profit (non-IFRS)/operating margin (non-IFRS): We use operating profit (non-IFRS)/operating margin (non-IFRS) and constant currency non-IFRS operating profit/non-IFRS profit (non-IFRS)/operating margin (non-IFRS) to measure our overall operational process efficiency and overall business performance. Non-IFRS operatingOperating margin (non-IFRS) is the ratio of our non-IFRS operating profit (non-IFRS) to total non-IFRS revenue (non-IFRS), expressed as a percentage. See below for a discussion ofmore information on the IFRS and non-IFRS measures we use.
Measures weWe Use to Manage Our Non-Operating Financial Performance
We use the following performance measures to manage our non-operating items:financial performance:
FinanceFinancial income, net: This measure provides insight especially into the return on liquid assets and capital investments and the cost of borrowed funds. To manage our financial income, net, we focus on cash flow, the composition of our liquid asset and capital investment portfolio, and the average rate of interest at which assets are invested. We also monitor average outstanding borrowings and the associated finance costs.
DSODays’ Sales Outstanding (DSO) and DPO:Days’ Payables Outstanding (DPO): We manage working capital by controlling the days’ sales outstanding for operating receivables, or DSO (defined as average number of days from the raised invoice to cash receipt from the customer), and the days’ payables outstanding for operating liabilities, or DPO (defined as average number of days from the received invoice to cash payment to the vendor).
Measures weWe Use to Manage Overall Financial Performance
For managing our overall performance weWe use the following measures:measures to manage our overall financial performance:
Earnings per share (EPS): EPS measures our overall performance because it captures all operating and non-operating elements of profit as well as income tax expense. It represents the portion of profit after tax allocable to each SAP share outstanding (using the weighted average number of shares
outstanding over the reporting period). EPS is influenced not only by our operating and non-operating business, and income taxes but also by the weighted average number of shares outstanding. We are authorized by our shareholders to repurchase shares and believe that stocksuch repurchases, andadditional to dividend distributions, are a good means to return value to shareholders in accordance with the authorizations granted by them.our shareholders.
Effective tax rate: We define our effective tax rate as the ratio of income tax expense to profit before tax, expressed as a percentage.
Operating, investing, and financing cash flows:flows and free cash flow: Our consolidated statement of cash flows provides insight as to how we generated and used cash and cash equivalents. When used in conjunction with the other primary financial statements, it provides information that helps us evaluate the changes of our net assets, our financial structure (including our liquidity and solvency), and our ability to affect the amounts and timing of cash flows in order to adapt to changing circumstances and opportunities. We use our free cash flow measure to estimate the cash flow remaining after all expenditures required to maintain or expand our organic business have been paid off. This measure provides management with supplemental information to assess our liquidity needs. We calculate free cash flow as net cash from operating activities minus purchases (other than purchases made in connection with business combinations) of intangible assets and property, plant, and equipment.
Measures We Use to Manage Our Non-Financial Performance
In 2014, we used the following key measures to manage our non-financial performance in the areas of employee engagement and customer loyalty:
Employee Engagement Index: We use the employee engagement index to measure the motivation and loyalty of our employees, how proud they are of our company, and how strongly they identify with SAP. The index is derived from surveys conducted among our employees. With this measure, we recognize that we can achieve our growth strategy with engaged employees only.
Customer Net Promoter Score (NPS): This score measures the willingness of our customers to recommend or promote SAP to others. It is derived from our customer survey. Conducted each year, this survey identifies, on a scale of 0–10, whether a customer is loyal and likely to recommend SAP to friends or colleagues, is neutral, or is unhappy. We introduced this measure in 2012, as we are convinced that we can achieve our financial goals only when our customers are loyal to, and satisfied with, SAP and our solutions. To derive the Customer NPS, we start with the percentage of “promoters” of SAP – those who give us a score of 9 or 10 on a scale of 0 to 10. We then subtract the percentage of “detractors” – those who give us a score of 0 to 6. The method ignores “passives,” who give us a score of 7 or 8. In addition to our on-premise customers, in 2014 for the first time we included Ariba, SuccessFactors and Sybase customers in the survey. Therefore, the 2014 Customer NPS score is not fully comparable to the prior year’s score.
Value-Based Management
Our holistic view of the performance measures described above, together with our associated
analyses, comprisecomprises the information we use for value-based management. We use planning and control processes to manage the compilation of these key measures and their availability to our decision makers across various management levels.
SAP’s long-term strategic plans are the point of reference for our other planning and controlling processes, including creating a multi-yearmultiyear plan until 2015.through 2020. We identify future growth and profitability drivers at a highly aggregated level. This process is intended to identify the best areas in which to target sustained investment. Next, we evaluate our multi-year
multiyear plans for our support and development functions and break down the customer-facing plans by sales region. Based on our detailed annual plans, we determine the budget for the respective year. We also have processes in place to forecast revenue and profit on a quarterly basis, to quantify whether we expect to realize our strategic goals, and to identify any deviations from plan. We continuously monitor the concerned units in the Group to analyze these developments and define any appropriate actions.
Our entire network of planning, control, and reporting processes is implemented in integrated planning and information systems, based on SAP software, across all organizational units so that we can conduct the evaluations and analyses needed to make informed decisions.
Non-IFRS Financial Measures UsedCited in thisThis Report
LikeAs in priorprevious years, we provided our 20112014 financial outlook on the basis of certain non-IFRS measures as described above.measures. Therefore, this report contains a non-IFRS based comparison of our actual performance in 20112014 against that outlook.our outlook in the Performance Against Outlook for 2014 (Non-IFRS) section.
This introductory section provides:
A reconciliationReconciliations of IFRS to Non-IFRS Financial Measures for 2014 and 2013
The following table reconciles our IFRS financial measures to the respective and most comparable non-IFRS financial measures
An explanation of the non-IFRS measures we disclose in this report including an explanation of changes we made effective from January 1, 2012
The reasons why management believes these non-IFRS measures are useful to investors and the limitations of these measures
An explanation of our constant currency information
Reconciliations of IFRS to Non-IFRS Numbers for 2011 and 2010
The following tables reconcile our IFRS numbers to the respective and most comparable non-IFRS numbers for each of 20112014 and 2010. Our 2010 non-IFRS comparative amounts have been adjusted to conform to the amended non-IFRS definitions introduced in 2011 that also exclude expenses for share-based compensation and restructuring.2013. Due to rounding, the sum of the numbers presented in these tablesthis table might not precisely equal the totals we provide.
Reconciliations of IFRS to Non-IFRS NumbersFinancial Measures for 2011 and 2010the Years Ended December 31
€ millions, unless otherwise stated | for the years ended December 31, |
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IFRS | Adj. | Non-IFRS | Currency Impact | Non-IFRS Constant Currency | IFRS | Adj. | Non-IFRS | IFRS | Adj. | Non-IFRS | Currency Impact | Non-IFRS Constant Currency | IFRS | Adj. | Non- IFRS | |||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Software revenue | 3,971 | 0 | 3,971 | 96 | 4,067 | 3,265 | 0 | 3,265 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Support revenue | 6,967 | 27 | 6,994 | 58 | 7,052 | 6,133 | 74 | 6,207 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Subscription and other software-related service revenue | 381 | 0 | 381 | –1 | 380 | 396 | 0 | 396 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue measures | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cloud subscriptions and support | 1,087 | 14 | 1,101 | –3 | 1,098 | 696 | 61 | 757 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Software | 4,399 | 0 | 4,399 | 0 | 4,399 | 4,516 | 2 | 4,518 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Support | 9,368 | 5 | 9,373 | 114 | 9,487 | 8,738 | 19 | 8,756 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Software and support | 13,767 | 5 | 13,773 | 113 | 13,886 | 13,254 | 21 | 13,275 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Software and software-related service revenue | 11,319 | 27 | 11,346 | 153 | 11,499 | 9,794 | 74 | 9,868 | 14,855 | 19 | 14,874 | 110 | 14,984 | 13,950 | 82 | 14,032 | ||||||||||||||||||||||||||||||||||||||||||||||||
Consulting revenue | 2,341 | 0 | 2,341 | 35 | 2,376 | 2,197 | 0 | 2,197 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other service revenue | 573 | 0 | 573 | 8 | 581 | 473 | 0 | 473 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Professional services and other service revenue | 2,914 | 0 | 2,914 | 43 | 2,957 | 2,670 | 0 | 2,670 | 2,706 | 0 | 2,706 | 32 | 2,738 | 2,865 | 0 | 2,865 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Total revenue | 14,233 | 27 | 14,260 | 196 | 14,456 | 12,464 | 74 | 12,538 | 17,560 | 19 | 17,580 | 142 | 17,722 | 16,815 | 82 | 16,897 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Total operating expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating expense measures | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cost of software and software-related services | –2,107 | 285 | –1,822 | –1,823 | 202 | –1,621 | –2,894 | 350 | –2,543 | –2,629 | 364 | –2,265 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Cost of professional services and other services | –2,248 | 32 | –2,216 | –2,071 | 18 | –2,053 | –2,379 | 121 | –2,258 | –2,402 | 123 | –2,278 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Total cost of revenue | –5,272 | 471 | –4,801 | –5,031 | 487 | –4,543 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gross profit | 12,288 | 490 | 12,778 | 11,784 | 570 | 12,354 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Research and development | –1,939 | 41 | –1,898 | –1,729 | 23 | –1,706 | –2,331 | 127 | –2,204 | –2,282 | 120 | –2,162 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Sales and marketing | –3,081 | 127 | –2,954 | –2,645 | 95 | –2,550 | –4,304 | 170 | –4,134 | –4,131 | 205 | –3,926 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
General and administration | –715 | 30 | –685 | –636 | 26 | –610 | –892 | 86 | –806 | –866 | 70 | –796 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring | –4 | 4 | 0 | 3 | –3 | 0 | –126 | 126 | 0 | –70 | 70 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
TomorrowNow litigation | 717 | –717 | 0 | –981 | 981 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
TomorrowNow and Versata litigation | –309 | 309 | 0 | 31 | –31 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other operating income/expense, net | 25 | 0 | 25 | 9 | 0 | 9 | 4 | 0 | 4 | 12 | 0 | 12 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total operating expenses | –9,352 | –198 | –9,550 | –127 | –9,677 | –9,873 | 1,342 | –8,531 | –13,230 | 1,288 | –11,942 | –152 | –12,093 | –12,336 | 921 | –11,415 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Operating profit and margin | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating profit measures | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating profit | 4,881 | –171 | 4,710 | 69 | 4,779 | 2,591 | 1,416 | 4,007 | 4,331 | 1,307 | 5,638 | –9 | 5,628 | 4,479 | 1,003 | 5,482 | ||||||||||||||||||||||||||||||||||||||||||||||||
Operating margin in % | 34.3 | 33.0 | 33.1 | 20.8 | 32.0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating margin (in %) | 24.7 | 32.1 | 31.8 | 26.6 | 32.4 |
Explanation of Non-IFRS Measures
We disclose certain financial measures, such as non-IFRS revenue non-IFRS(non-IFRS), operating expenses non-IFRS(non-IFRS), operating profit non-IFRS(non-IFRS), operating margin non-IFRS(non-IFRS), earnings per share
(non-IFRS), deferred revenue (non-IFRS), and calculated cloud billings measures (non-IFRS), as well as constant currency revenue, expense, profit, deferred revenue, and operating profitcalculated cloud billings measures that are not prepared in accordance with IFRS and are therefore considered non-IFRS financial measures. Our non-IFRS financial measures may
not correspond to
non-IFRS financial measures that other companies report. The non-IFRS financial measures that we report should only be considered in addition to, and not as substitutes for or superior to, revenue, operating expenses, operating profit, operating margin, earnings per share or other measures ofour IFRS financial performance prepared in accordance with IFRS.measures.
We believe that the disclosed supplemental historical and prospective non-IFRS financial information provides useful information to investors because management uses this information, in addition to financial data prepared in accordance with IFRS, to attain a more transparent understanding of our past
performance and our anticipated future results. In 2011, we used these non-IFRSresults or – in the case of calculated cloud billings (non-IFRS) – management uses the measures to anticipate metrics that investors use. We use the revenue (non-IFRS) and profit (non-IFRS) measures consistently in our internal planning and forecasting, reporting and compensation, as well as in our external communications, as follows:
Our management primarily uses these non-IFRS measures rather than IFRS measures as the basis for making financial, strategic, and operating decisions.
The variable remuneration components of our Executive Board membersmembers’ and employeesemployees’ remuneration are based on non-IFRS revenue (non-IFRS) and non-IFRS operating profit (non-IFRS) measures rather than the respective IFRS measures.
The annual budgeting process for all management units is based on non-IFRS revenue (non-IFRS) and non-IFRS operating profit (non-IFRS) numbers rather than the respective IFRS numbers.financial measures.
All forecast and performance reviews with all senior managers globally are based on these non-IFRS measures, rather than the respective IFRS numbers.financial measures.
Both our internal performance targets and the guidance we provided to the capital markets are based on non-IFRS revenuesrevenue (non-IFRS) and non-IFRS profit (non-IFRS) measures rather than the respective IFRS numbers.financial measures.
Our non-IFRS financial measures reflect adjustments based on the items below, as well as adjustments for the related income tax effects.
Non-IFRS Revenue (Non-IFRS)
Revenue items identified as non-IFRS revenue (non-IFRS) have been adjusted from the respective IFRS numbersfinancial measures by including the full amount of support revenue, cloud subscriptions and support revenue, and other similarly recurring revenue that would have been recorded by entities acquired by SAP had they remained stand-alone entities but which we are not permitted to record as revenue under IFRS due to fair value accounting for the support contracts in effect at the time of the respective acquisitions.
Under IFRS, we record at fair value the support contracts in effect at the time entities were acquired. Consequently, our IFRS support revenue, ourIFRS cloud subscriptions and support revenue, IFRS software and software-related service revenue, and our IFRS total revenue for periods subsequent to acquisitions do not reflect the full amount of support
revenue that would have been recorded for these support contracts absent these acquisitions by SAP.entities acquired by SAP had they remained stand-alone entities. Adjusting revenue numbers for this revenue impact provides additional insight into the comparability across periods of our ongoing performance.
In light of our continuing focus on the cloud business and considering our recent acquisition of SuccessFactors, we are widening the range of revenues for which acquisition-related deferred revenue write downs are adjusted for in determining our non-IFRS revenue and profit numbers. We continue to adjust for deferred revenue write downs, that is for revenues that would have been recognized had the acquired entities remained stand-alone entities but that we are not permitted to recognize as revenue under IFRS as a result of business combination accounting rules. However, in the definitions of our non-IFRS measures used through 2011, such adjustments for deferred revenue write downs were limited to support revenue. From 2012 onwards, we will also make such deferred revenue write down adjustments for cloud subscription revenue and other similarly recurring revenues. All other
non-IFRS measures will remain unchanged. As the deferred revenue write-down adjustments for recurring revenues other than support revenue from acquisitions that were executed through 2011 were immaterial, we do not restate prior period non-IFRS measures to align with the new definition.performance across periods.
Non-IFRS Operating Expense (Non-IFRS)
Operating expense figuresnumbers that are identified as non-IFRS operating expenses (non-IFRS) have been adjusted by excluding the following expenses:
Acquisition-related charges
Amortization expense/impairment charges of intangibles acquired in business combinations and certain stand-alone acquisitions of intellectual property (including purchased in-process research and development)
Settlements of pre-existing business relationships in connection with a business combination
Acquisition-related third-party expenses
Discontinued activities: Results of discontinued operations that qualify as such under IFRS in all respects except that they do not represent a major line of business. Under U.S. GAAP, which we reported under until 2009, we presented the results of operations ofExpenses from the TomorrowNow entitieslitigation (formerly labeled as discontinued operations. Under IFRS, results of discontinued operations may only be presented as discontinued operations if a separate major line of business or geographical area of operations is discontinued. Our TomorrowNow operations were separate, but were not a major line of businessactivities) and thus did not qualify for separate presentation under IFRS.the Versata litigation cases
Expenses from our share-based compensation plansShare-based payment expenses
Restructuring expenses
Non-IFRS Operating Profit, Non-IFRS Operating Margin, and Non-IFRS Earnings Per Share
Operating profit, operating margin, and earnings per share identified as non-IFRS operating profit, non-IFRS operating margin, and non-IFRS earnings per share have been adjusted from the respective IFRS measures by adjusting for the above-mentioned non-IFRS revenue and non-IFRS operating expenses.
We exclude certain acquisition-related expenses for the purpose of calculating non-IFRS operating profit non-IFRS(non-IFRS), operating margin (non-IFRS), and non-IFRS earnings per share (non-IFRS) when evaluating SAP’s continuing operational performance because these expenses generally cannot be changed or influenced by management after the relevant acquisition other than by disposing of the acquired assets. Since management at levels below the Executive Board has nodoes not influence on these expenses, we generally do not consider these expenses for the purpose of evaluating the performance of management units. Additionally, these non-IFRS measures have been adjusted from the respective IFRS measures for the results of the discontinued activities, share-based compensationpayment expenses and restructuring expenses, as well as the TomorrowNow and Versata litigation expenses.
The adjustment for expenses and income from the Versata litigation was introduced in 2014 (for details regarding this litigation refer to our Notes to the Consolidated Financial Statements section, Note (24)). Prior-year amounts have been adjusted to comply with the modified set of
non-IFRS adjustments. We exclude expenses and income from the Versata litigation to provide additional insight into the comparability of our ongoing operating performance across periods and to continue the alignment of our non-IFRS measures with our internal performance measures.
Operating Profit (Non-IFRS), Operating Margin (Non-IFRS), and Earnings per Share (Non-IFRS)
Operating profit, operating margin, and earnings per share identified as operating profit (non-IFRS), operating margin (non-IFRS), and earnings per share (non-IFRS) have been adjusted from the respective IFRS measures by adjusting for the above-mentioned revenue (non-IFRS) and operating expenses (non-IFRS).
Deferred Cloud Subscriptions and Support Revenue (Non-IFRS) and Calculated Cloud Billings (Non-IFRS)
It is common in capital markets to use metrics based on billings to help evaluate the performance of cloud subscription offerings. A common metric of this kind is calculated cloud billings that can be calculated as the total of a period’s cloud subscriptions and support revenue and the respective period’s change in the deferred cloud subscriptions and support revenue balance. To ease the effort of determining this metric, we report the metric’s components as well as a calculation of the metric itself. To allow an alignment of this calculated cloud billings metric with our revenue reporting, we present the calculated cloud billings metric on an IFRS basis (that is, derived from IFRS numbers) as well as on a non-IFRS basis and a non-IFRS at constant currency basis. The calculated cloud billings (non-IFRS) are derived from both:
Our cloud subscriptions and support revenue (non-IFRS), which is adjusted from the respective IFRS number for the effect of fair value accounting for the contracts in effect at the time of the respective acquisitions as outlined above
Our deferred cloud subscriptions and support revenue (non-IFRS), which is adjusted from the respective IFRS number accordingly
Constant Currency Information
We believe it is important for investors to have information that provides insight into our sales.
Revenue measures determined under IFRS provide information that is useful in this regard. However, both sales volume and currency effects impact period-over-period changes in sales revenue. We do not sell standardized units of products and services, so we cannot provide relevant information on sales volume by providing data on the changes in product and service units sold. To provide additional information that may be useful to investors in breaking down and evaluating changes in sales volume, we present information about our revenue and various values and components relating to operating profit that are adjusted for foreign currency effects.
We calculate constant currency revenue and operating profit measures by translating foreign currencies using the average exchange rates from the comparative period instead of the current period. Constant currency deferred revenue balances are calculated by translating the current period’s opening and closing deferred revenues balances as well as the comparative period’s closing deferred revenue balance using the opening exchange rates of the comparative period.
Free Cash Flow
The following table shows our free cash flow measure. We use this measure among others to manage our overall financial performance.
Free Cash Flow
€ millions | 2014 | 2013 | Change (in %) | |||||||||
Net cash flows from operating activities | 3,499 | 3,832 | –9 | |||||||||
Purchase of intangible assets and property, plant, and equipment (without acquisitions) | –737 | –566 | 30 | |||||||||
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Free cash flow | 2,762 | 3,266 | –15 |
Usefulness of Non-IFRS Measures
We believe that our non-IFRS measures are useful to investors for the following reasons:
The non-IFRSOur revenue (non-IFRS), expense (non-IFRS), and profit (non-IFRS) measures provide investors with insight into management’s decision-making, sincedecision making because management uses these non-IFRS measures to run our business and make financial, strategic, and operating decisions.
decisions. We include the revenue adjustments outlined above and exclude the expense adjustments outlined above when making decisions to allocate resources. In addition, we use these non-IFRS measures to gain a better understanding of SAP’s operating performance from period to period. |
The non-IFRS measures provide investors with additional information that enables a comparison of year-over-year operating performance by eliminating certain direct effects of acquisitions, share based compensation plans, restructuring plans, and discontinued activities.the TomorrowNow and Versata litigation cases.
Non-IFRS and non-GAAP measures are widely used in the software industry. In
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Additionally, we believe that our adjustments to our IFRS numbers for the results many cases, inclusion of our discontinued TomorrowNow activities are useful to investors for the following reasons:non-IFRS measures may facilitate comparison with our competitors’ corresponding non-IFRS and non-GAAP measures.
Despite the migration from U.S. GAAP to IFRS, we will continue to internally treat the ceased TomorrowNow activities as discontinued operationsOur deferred cloud subscriptions and thus will continue to exclude potential future TomorrowNow results, whichsupport revenue (non-IFRS) and calculated cloud billings (non-IFRS) metrics provide additional insight into amounts that are contracted for and invoiced and that are expected to mainly comprise expensesbe recognized in connection withcloud subscriptions and support revenue in the Oracle lawsuit, from our internal management reporting, planning, forecasting, and compensation plans. Therefore, adjusting our non-IFRS measures for the resultsfuture.
Limitations of the discontinued TomorrowNow activities provides insight into the financial measures that SAP uses internally.
By adjusting the non-IFRS numbers for the results from our discontinued TomorrowNow activities, the non-IFRS numbers are more comparable to the non-GAAP measures that SAP used through the end of 2009. That enhances the comparability of SAP’s performance measures before and after the full IFRS migration.
We include the revenue adjustments outlined above and exclude the expense adjustments outlined above when making decisions to allocate resources, both on a company level and at lower levels of the organization. In addition, we use these non-IFRS measures to gain a better understanding of SAP’s operating performance from period to period.Non-IFRS Measures
We believe that our non-IFRS financial measures described above have limitations, including but not limited to, the following:
The eliminated amounts maycould be material to us.
Without being analyzed in conjunction with the corresponding IFRS measures, the non-IFRS measures are not indicative of our present and future performance, foremost for the following reasons:
While our non-IFRS profit (non-IFRS) numbers reflect the elimination of certain acquisition-related expenses, no eliminations are made for the additional revenue and other revenue that result from the acquisitions.
While we adjust for the fair value accounting of the acquired entities’ recurring revenue contracts, we do not adjust for the fair value accounting of deferred compensation items that result from commissions paid to the acquired company’s sales force and third parties for closing the respective customer contracts.
The acquisition-related charges that we eliminate in deriving our non-IFRS profit (non-IFRS) numbers are likely to recur should SAP enter into material business combinations in the future. Similarly, the restructuring expenses that we eliminate in deriving our profit(non-IFRS) numbers are likely to recur should SAP perform restructurings in the future.
The acquisition-related amortization expense that we eliminate in deriving our non-IFRS profit(non-IFRS) numbers is a recurring expense that will impact our financial performance in future years.
The revenue adjustment for the fair value accounting of the acquired entities’ support contracts and the expense adjustment for acquisition-related charges do not arise from a common conceptual basis. This is because the revenue adjustment aims to improve the comparability of the initial post-acquisition period with future post-acquisition periods, while the expense adjustment aims to improve the comparability between post-acquisition periods andpre-acquisition periods. This should particularly be considered when evaluating our operating profit (non-IFRS) and operating margin(non-IFRS) numbers as these combine our revenue (non-IFRS) and expenses (non-IFRS) despite the absence of a common conceptual basis.
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Our discontinued activities and restructuring charges could result in significant cash outflows. The same applies to our share-based compensationpayment expense because most of our share-based compensation planspayments are to be settled in cash rather than shares.
The valuation of our cash-settled share-based payment planspayments could vary significantly from period to period due to the fluctuation of our share price and other parameters used in the valuation of these plans.
We have inIn the past, we have issued share-based compensationpayment awards to our employees every year and we intend to continue doing so in the future. Thus, our share-based compensationpayment expenses are recurring although the amounts usually change from period to period.
Despite these limitations,
The deferred cloud subscriptions and support revenue (non-IFRS) and calculated cloud billings (non-IFRS) metrics that we believe that the presentation of the non-IFRS measures and the corresponding IFRS measures, together with the relevant reconciliations, provides useful information to management and investors regarding present and future business trends relating to our financial condition and results of operations. We do not evaluate our growth and performance without considering both non-IFRS measures and the relevant IFRS measures. We caution the readers of our financial reports to follow a similar approach by considering our
non-IFRS measures only in addition to, and not as a substitute for or superior to, revenue or other measures of our financial performance prepared in accordance with IFRS.
Constant Currency Information
We believe it is important for investors to have information that provides insight into our sales. Revenue measures determined under IFRS provide information that is useful in this regard. However, both sales volume and currency effects impact period-over-period changes in sales revenue. We do not sell standardized units of products and services, so we cannot provide relevant information on sales volume by providing data on the changes in product and service units sold. To provide additional information thatdisclose may be useful to investors in breaking down and evaluating changes in sales volume, we present information aboutimpacted significantly by our revenue and various values andrecognition policies, for example, when fees from components relating to operating profit that are adjusted for foreign currency effects. We calculate constant currency revenue and operating profit measures by translating foreign currencies using the average exchange rates from the previous year instead of the current year.other than cloud subscriptions sold in multiple element
arrangements with cloud subscriptions are reallocated to cloud subscriptions and vice versa. Thus, our calculated cloud billings (non-IFRS) metrics for a given period may not be indicative of the amounts that we have actually billed to customers in the respective period. |
We believe that constant currency measures have limitations, particularly as the currency effects that are eliminated constitute a significant element of our revenue and expenses and could materially impact our performance. We thereforeTherefore, we limit our use of constant currency measures to the analysis of changes in volume as one element of the full change in a financial measure. Additionally, we use different prior period exchange rates for deferred revenue versus revenue items to adjust for currencies. We do not evaluate our results and performance without considering both constant currency measures in non-IFRS revenue (non-IFRS) and non-IFRS operating profit(non-IFRS) measures on the one hand, and changes in revenue, operating expenses, operating profit, or other measures of financial
performance prepared in accordance with IFRS on the other. We caution the readers of our financial reports to follow a similar approach by considering constant currency measures only in addition to, and not as a substitute for or superior to, changes in revenue, operating expenses, operating profit, or other measures of financial performance prepared in accordance with IFRS.
Free Cash Flow
We use our free cash flow measure to estimateDespite these limitations, we believe that the cash flow remaining after all expenditures required to maintain or expand our organic business have been paid off. This measure provides managementpresentation of the non-IFRS measures and the corresponding IFRS measures, together with supplementalthe relevant reconciliations, provide useful information to assessmanagement and investors regarding present and future business trends relating to our liquidity needs.financial condition and results of operations. We calculate free cash flowdo not evaluate our growth and performance without considering both non-IFRS measures and the comparable IFRS measures. We caution the readers of our financial reports to follow a similar approach by considering ournon-IFRS measures only in addition to, and not as net cash from operating activities minus purchases,a substitute for or superior to, revenue or other than purchases mademeasures of our financial performance prepared in connectionaccordance with business combinations, of intangible assets and property, plant, and equipment.
Free Cash FlowIFRS.
€ millions | 2011 | 2010 | Change | |||||||||
Net cash flows from operating activities | 3,775 | 2,922 | 29 | % | ||||||||
Purchase of intangible assets and property, plant, and equipment | –445 | –334 | 33 | % | ||||||||
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Free cash flow | 3,330 | 2,588 | 29 | % |
Part I
Item 1, 2, 3
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
The following table sets forth our selected consolidated financial data as of and for each of
the years in the five-year period ended December 31, 2011.2014. The consolidated financial data has been derived from, and should be read in conjunction with, our Consolidated Financial Statements prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS), presented in “Item 18. Financial Statements” of this report.
Our selected financial data and our Consolidated Financial Statements are presented in euros. Financial data as of and for the year ended December 31, 20112014 has been translated into U.S. dollars for the convenience of the reader.
Part I
Item 3
SELECTED FINANCIAL DATA: IFRS
millions, unless otherwise stated | 2011(1) | 2011 | 2010 | 2009 | 2008 | 2007 | 2014(1) | 2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||||||||||||||||||||||
US$ | € | € | € | € | € | US$ | € | € | € | € | € | |||||||||||||||||||||||||||||||||||||
Income Statement Data: Years ended December 31, | Income Statement Data: Years ended December 31, |
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Software and software-related service revenue | 14,684 | 11,319 | 9,794 | 8,198 | 8,457 | 7,427 | 17,975 | 14,855 | 13,950 | 13,165 | 11,319 | 9,794 | ||||||||||||||||||||||||||||||||||||
Total revenue | 18,464 | 14,233 | 12,464 | 10,672 | 11,575 | 10,256 | 21,250 | 17,560 | 16,815 | 16,223 | 14,233 | 12,464 | ||||||||||||||||||||||||||||||||||||
Operating profit | 6,332 | 4,881 | 2,591 | 2,588 | 2,701 | 2,698 | 5,240 | 4,331 | 4,479 | 4,041 | 4,884 | 2,591 | ||||||||||||||||||||||||||||||||||||
Operating margin in %(2) | 34.3 | 34.3 | 20.8 | 24.3 | 23.3 | 26.3 | 24.7 | 24.7 | 26.6 | 24.9 | 34.3 | 20.8 | ||||||||||||||||||||||||||||||||||||
Profit after tax | 4,461 | 3,439 | 1,813 | 1,750 | 1,848 | 1,908 | 3,969 | 3,280 | 3,325 | 2,803 | 3,437 | 1,813 | ||||||||||||||||||||||||||||||||||||
Profit attributable to owners of parent | 4,460 | 3,438 | 1,811 | 1,748 | 1,847 | 1,906 | 3,969 | 3,280 | 3,326 | 2,803 | 3,435 | 1,811 | ||||||||||||||||||||||||||||||||||||
Earnings per share(2) | ||||||||||||||||||||||||||||||||||||||||||||||||
Basic in € | 3.75 | 2.89 | 1.52 | 1.47 | 1.55 | 1.58 | 3.32 | 2.75 | 2.79 | 2.35 | 2.89 | 1.52 | ||||||||||||||||||||||||||||||||||||
Diluted in € | 3.75 | 2.89 | 1.52 | 1.47 | 1.55 | 1.58 | 3.32 | 2.74 | 2.78 | 2.35 | 2.89 | 1.52 | ||||||||||||||||||||||||||||||||||||
Other Data: | ||||||||||||||||||||||||||||||||||||||||||||||||
Weighted-average number of shares outstanding | ||||||||||||||||||||||||||||||||||||||||||||||||
Basic | 1,189 | 1,189 | 1,188 | 1,188 | 1,190 | 1,207 | 1,195 | 1,195 | 1,193 | 1,192 | 1,189 | 1,188 | ||||||||||||||||||||||||||||||||||||
Diluted | 1,190 | 1,190 | 1,189 | 1,189 | 1,191 | 1,210 | 1,197 | 1,197 | 1,195 | 1,193 | 1,190 | 1,189 | ||||||||||||||||||||||||||||||||||||
Statement of Financial Position Data: At December 31, | Statement of Financial Position Data: At December 31, |
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Cash and cash equivalents | 6,441 | 4,965 | 3,518 | 1,884 | 1,280 | 1,608 | 4,027 | 3,328 | 2,748 | 2,477 | 4,965 | 3,518 | ||||||||||||||||||||||||||||||||||||
Total assets(3) | 30,130 | 23,225 | 20,839 | 13,374 | 13,900 | 10,161 | 46,597 | 38,507 | 27,091 | 26,306 | 23,227 | 20,839 | ||||||||||||||||||||||||||||||||||||
Current financial liabilities(4) | 1,727 | 1,331 | 142 | 146 | 2,563 | 82 | 3,099 | 2,561 | 748 | 802 | 1,331 | 142 | ||||||||||||||||||||||||||||||||||||
Non-current financial liabilities(4) | 3,795 | 2,925 | 4,449 | 729 | 40 | 6 | 10,867 | 8,980 | 3,758 | 4,446 | 2,925 | 4,449 | ||||||||||||||||||||||||||||||||||||
Issued capital | 1,593 | 1,228 | 1,227 | 1,226 | 1,226 | 1,246 | 1,487 | 1,229 | 1,229 | 1,229 | 1,228 | 1,227 | ||||||||||||||||||||||||||||||||||||
Total equity | 16,485 | 12,707 | 9,824 | 8,491 | 7,171 | 6,478 | 23,715 | 19,598 | 16,048 | 14,133 | 12,689 | 9,824 |
(1) | Amounts presented in US$ have been translated for the convenience of the reader at €1.00 to US$ |
(2) | Operating profit is the numerator and total revenue is the denominator in the calculation of operating margin. Profit attributable to owners of parent is the numerator and weighted average number of shares outstanding is the denominator in the calculation of earnings per share. See Note (12) to our Consolidated Financial Statements for more information on earnings per share. |
(3) | The large increase in total assets from |
(4) | The balances include primarily bonds, private placements and bank loans. Current is defined as |
having a remaining life of one year or less; non-current is defined as having a remaining term exceeding one year. The significant increase in |
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Part I
Item 3
The sales prices for our ordinary shares traded on German stock exchanges are denominated in euro. Fluctuations in the exchange rate between the euro and the U.S. dollar affect the dollar equivalent of the euro price of the ordinary shares traded on the German stock exchanges and, as a result, may affect the price of the ADRs traded on the NYSE in the United States. See “Item 9. The Offer and Listing” for a description of the ADRs. In addition, SAP AGSE pays cash dividends, if any, in euro. As a result, any exchange rate fluctuations will also affect the dollar amounts received by the holders of ADRs on the conversion into dollars of cash dividends paid in euro on the ordinary shares represented by the ADRs. Deutsche Bank Trust Company Americas is the depositary (the Depositary) for SAP AG’sSE’s ADR program. The deposit agreement with respect to the ADRs requires the Depositary to convert any dividend payments from euro into dollars as promptly as practicable upon receipt. For additional information on the Depositary and the fees associated with SAP’s ADR program see “Item 12 Description of Securities Other Than Equity Securities —– American Depositary Shares.”
A significant portion of our revenue and expense is denominated in currencies other than the euro. Therefore, fluctuations in the exchange rate between the euro and the respective currencies in which we conduct business could materially affect our business, financial position, income or cash flows. See “Item 5. Operating and Financial Review and Prospects —– Foreign Currency Exchange Rate Exposure” for details on the impact of these exchange rate fluctuations.
The following table sets forth (i) the average, high and low Noon Buying Rates for the euro expressed as U.S. dollars per €1.00 for the past five years on an annual basis and (ii) the high and low Noon Buying Rates on a monthly basis from July 20112014 through and including March 8, 2012.6, 2015.
Year | Average(1) | High | Low | |||||||||
2007 | 1.3797 | 1.4862 | 1.2904 | |||||||||
2008 | 1.4695 | 1.6010 | 1.2446 | |||||||||
2009 | 1.3955 | 1.5100 | 1.2547 | |||||||||
2010 | 1.3216 | 1.4536 | 1.1959 | |||||||||
2011 | 1.4002 | 1.4875 | 1.2926 |
Month | High | Low | ||||||
2011 | ||||||||
July | 1.4508 | 1.4014 | ||||||
August | 1.4510 | 1.4158 | ||||||
September | 1.4283 | 1.3446 | ||||||
October | 1.4172 | 1.3281 | ||||||
November | 1.3803 | 1.3244 | ||||||
December | 1.3487 | 1.2926 | ||||||
2012 | ||||||||
January | 1.3192 | 1.2682 | ||||||
February | 1.3463 | 1.3087 | ||||||
March (through March 8, 2012) | 1.3320 | 1.3114 |
Year | Average(1) | High | Low | |||||||||
2010 | 1.3216 | 1.4536 | 1.1959 | |||||||||
2011 | 1.4002 | 1.4875 | 1.2926 | |||||||||
2012 | 1.2909 | 1.3463 | 1.2062 | |||||||||
2013 | 1.3303 | 1.3816 | 1.2774 | |||||||||
2014 | 1.3210 | 1.3927 | 1.2101 |
Month | High | Low | ||||||
2014 | ||||||||
July | 1.3681 | 1.3378 | ||||||
August | 1.3436 | 1.3150 | ||||||
September | 1.3136 | 1.2628 | ||||||
October | 1.2812 | 1.2517 | ||||||
November | 1.2554 | 1.2394 | ||||||
December | 1.2504 | 1.2101 | ||||||
2015 | ||||||||
January | 1.2015 | 1.1279 | ||||||
February | 1.1462 | 1.1197 | ||||||
March (through March 6, 2015) | 1.1212 | 1.0855 |
(1) | The average of the applicable Noon Buying Rates on the last day of each month during the relevant period. |
The Noon Buying Rate on March 8, 20126, 2015 was US$1.32561.0855 per €1.00.
Dividend Distribution Policy
Dividends are jointly proposed by SAP AG’sSE’s Supervisory Board (Aufsichtsrat) and Executive Board (Vorstand) based on SAP AG’sSE’s year-end stand-alone statutory financial statements, subject to approval by the shareholders.Annual General Meeting of Shareholders. Dividends are officially declared for the prior year at SAP AG’sSE’s Annual General Meeting of Shareholders. SAP AG’sSE’s Annual General Meeting of Shareholders usually
Part I
Item 3
convenes during the second quarter of each year. Dividends are usually remitted to the custodian bank on behalf of the shareholder within one business day following the Annual General Meeting of Shareholders. Record holders of the ADRs on the dividend record date will be entitled to receive payment of the dividend declared in respect of the year for which it is declared. Cash dividends payable to such holders will be paid to the Depositary in euro and, subject to certain exceptions, will be converted by the Depositary into U.S. dollars.
Dividends paid to holders of the ADRs may be subject to German withholding tax. See “Item 8. Financial Information —– Other Financial Information —– Dividend Policy” and “Item 10. Additional Information —– Taxation,” for further information.
Part I
Item 3
Annual Dividends Paid and Proposed
The following table sets forth in euro the annual dividends paid or proposed to be paid per ordinary share in respect of each of the years indicated. One SAP ADR currently represents one SAP AGSE ordinary share. Accordingly, the final dividend per ADR is equal to the dividend for one SAP AGSE ordinary share and is dependent on the euro/U.S. dollar exchange rate. The table does not reflect tax credits that may be available to German taxpayers who receive dividend payments. If you own our ordinary shares or ADRs and if you are a U.S. resident, refer to “Item 10. Additional Information —– Taxation,” for further information.
Dividend Paid per Ordinary Share | ||||||||
Year Ended December 31, | € | US$ | ||||||
2007 | 0.50 | 0.77 | (1) | |||||
2008 | 0.50 | 0.68 | (1) | |||||
2009 | 0.50 | 0.60 | (1) | |||||
2010 | 0.60 | 0.85 | (1) | |||||
2011 (proposed) | 1.10 | (2),(4) | 1.46 | (2),(3) |
Dividend Paid per Ordinary Share | ||||||||
Year Ended December 31, | € | US$ | ||||||
2010 | 0.60 | 0.85 | (1) | |||||
2011 | 1.10 | (2) | 1.38 | (1) | ||||
2012 | 0.85 | 1.11 | (1) | |||||
2013 | 1.00 | 1.37 | (1) | |||||
2014(proposed) | 1.10 | (3) | 1.19 | (3),(4) |
(1) | Translated for the convenience of the reader from euro into U.S. dollars at the Noon Buying Rate for converting euro into U.S. dollars on the |
dividend payment date. The Depositary is required to convert any dividend payments received from SAP as promptly as practicable upon receipt. |
(2) | Thereof a special dividend of €0.35 per share to celebrate our 40th anniversary. |
(3) | Subject to approval at the Annual General Meeting of Shareholders of SAP |
Translated for the convenience of the reader from euro into U.S. dollars at the Noon Buying Rate for converting euro into U.S. dollars on March |
|
The amount of dividends paid on the ordinary shares depends on the amount of profits to be distributed by SAP AG,SE, which depends in part upon our performance. In addition, the amount of dividends received by holders of ADRs may be affected by fluctuations in exchange rates (see “Item 3. Key Information —– Exchange Rates”). The timing and amount of future dividend payments will depend upon our future earnings, capital needs and other relevant factors, in each case as proposed by the Executive Board and the Supervisory Board of SAP AGSE and approved atby the Annual General Meeting of Shareholders.
Economic, Political, Social, and Regulatory Risk
Uncertainty in the global economy, financial markets, and inor political conditions could have materiala negative impact on our business, financial position, profit, and cash flows.flows, and put pressure on our operating profit.
Our customers’business is influenced by multiple risk factors that are both difficult to predict and beyond our influence and control. These factors include global economic and business conditions and fluctuations in national currencies. Other examples are political developments and general regulations, as well as budgetary constraints or shifts in spending priorities of national governments.
Macroeconomic developments, such as a global economic crisis, chronic fiscal imbalances and slowing economic conditions in emerging markets, might decrease the ability and willingness of our customers to invest in acquiringour solutions or might lead to delays in purchasing. In addition, changes in the euro rates for particular currencies might have an adverse effect on business activities with local customers and implementing our products generally varies withpartners. Furthermore, political instabilities in regions such as the Middle East and Africa, crisis situations (such as in Ukraine), natural disasters, and pandemic diseases (such as Ebola) contribute to economic and political conditions as well as any periods of disruption or volatility in global financial markets. A global economic crisis, a U.S. or euro area recession, oruncertainty.
These events could reduce the current euro area debt crisis could have a negative impact on SAP. In the regions in which we do businessdemand for SAP software and the industries in which our customers operate, economic uncertainty or
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volatilityDelays in financial markets could have negative effects, including:
General reluctance to invest in ITpurchases, decreased deal size, or cancelations of proposed investments
Decreased customer demand for our software and services, including delayed, canceled, and smaller ordersPotential lawsuits from customers due to denied provision of service as a result of sanctioned party lists or export control issues
Customers’ inability to obtainHigher credit on acceptable terms, or at all,barriers for customers, reducing their ability to finance purchases of our software and servicespurchases
Increased incidencenumber of default and insolvency ofbankruptcies among customers, business partners, and key suppliers
Increased default risk, which may lead to significant write-downsimpairment charges in the future
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Market disruption from aggressive competitive behavior, acquisitions, or business practices
Greater pressure on the prices of ourIncreased price competition and demand for cheaper products and services
Pressure onAny one or more of these might reduce our operating margin
Economic, financial market, or political instabilityability to sell and deliver our software and services which could have a material negative impactan adverse effect on our business, financial position, profit, and cash flows, and could also exacerbate the other risks we describe in this report.flows.
Our international business activities subjectexpose us to numerous and potentiallysometimes even conflicting regulatory requirements, and the associatedto risks that could harm our business, financial position, profit, and cash flows.
We are a global company and currently market our products and services in more than 120180 countries and territories in the Americas APJ,(including Latin America and EMEANorth America); Asia Pacific Japan (APJ); China, Hong Kong, Taiwan and Macau (Greater China); Europe, Middle East, and Africa (EMEA); and Middle and Eastern Europe (MEE) regions. SalesOur business in these countries areis subject to numerous risks inherent in international business operations. Among others, these risks include:
Conflict and overlap among different tax regimes
Possible tax constraints impeding business operations in certain countries
Expenses associated with the customizationlocalization of our products on a local level and transacting business in compliance with local regulatory requirements
Discriminatory or conflicting fiscal policies
Operational difficulties in countries with a high corruption perceptionperceptions index
Protectionist trade policies and regulations for import and export
Demands of worksWorks councils, and labor unions, and immigration law requirements,laws in different countries
Data protection and privacy andin regard to access by foreigngovernment authorities to customer, partner, or employee data
Difficulties enforcing intellectual property and contractual rights in certain jurisdictions
Country-specific software certification requirements
As we expand further into new regionscountries and markets, these risks could intensify. The
application of these laws and regulations to our business is sometimes unclear, subject to change over time, and sometimes may conflict between different jurisdictions. Additionally these laws and governments’ approach to enforcement, as well as our products and services, are continuing to change and evolve. Compliance with these types of regulation may involve significant costs or require changes in products or business practices. Non-compliance could result in penalties being imposed on us or orders that we stop the alleged noncompliant activity. One or more of these factors could negatively impacthave an adverse effect on our operations globally or in one or more countries or regions. Thisregions, which could result in significant negative impact to our reputation andhave an adverse effect on our business, financial position, profit, and cash flows.
Social and political instability caused for example, by state-based conflicts, terrorist attacks, civil unrest, war, or international hostilities, as well as pandemic disease outbreaks or natural disasters, could have a significant negative impact on our business.may disrupt SAP’s business operations.
Terrorist attacks and other acts of violence or war, civil and political unrest (such as that in the Middle East, in Ukraine, Israel, Syria, Libya, and Northin other parts of Africa), pandemic disease outbreaks, or natural disasters (such as the earthquakes in Japan)hurricanes, flooding, or similar events) or pandemic diseases (such as Ebola) could have a significant negative impactadverse effect on the related economy or beyond. AnSuch an event that results,could lead, for example, into the loss of a significant numbersnumber of our employees, or into the disruption or disablement of operations at our headquarters or other key locations, and could affect our ability to provide normal business services and to generate the expected income. Thatmaintain effective business operations. Furthermore, this could lead tohave a significant negative impactadverse effect on our partners as well as our customers and their investment decisions. Thisdecisions, which could in turn lead to a significant negative impacthave an adverse effect on our reputation, and on our business, financial position, profit, and cash flows.
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Market Risks
If ourOur established customers domight not buy additional software products,solutions, subscribe to our cloud offerings, renew maintenance agreements, or purchase additional professional services, this could have a material adverse impact on our business, financial position, profit, and cash flows.or they might switch to other products or service offerings (including competitive products).
In 2011,2014, we continued to offeroffered a wide range of support services.services including SAP MaxAttention, SAP Enterprise Support, and SAP Product Support for
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Large Enterprises. We continue to depend materially on the success of our support portfolio and on our ability to deliver high-quality services. Traditionally, our large installed customer base generates additional new software, maintenance, consulting, and training revenue. If existingDespite the high quality and service level of our transformed and expanded service offering in the area of premium engagements, we may be unable to meet customer expectations. Existing customers might cancel or do not renew their maintenance contracts, accept alternative offerings from other vendors, or decide not to buy additional products and services, this wouldnot subscribe to our cloud offerings, or accept alternative offerings from other vendors. In addition, the increasing volume in our cloud business as well as the conversion of traditional on-premise licenses to cloud subscription licenses could have a materialpotential negative impact on our software and maintenance revenue streams. This could have an adverse effect on our on-premise software and maintenance business, financial position, profit, and cash flows.
The success of our cloud computing strategy depends on market perception and an increasing market adoption of our cloud solutions and managed cloud services. Insufficient adoption of our solutions and services could lead to a loss of SAP’s position as a leading cloud company.
The market for cloud computing is increasing and shows strong growth relative to the market for our on-premise solutions. To offer a broad cloud service portfolio and generate the associated business value for our customers, we have acquired cloud computing companies such as SuccessFactors, Ariba, Fieldglass and Concur. Due to ongoing contracts and previous substantial investments to integrate traditional on-premise enterprise software into their businesses, customers and partners might be reluctant or unwilling to migrate to the cloud.
Other factors that could affect the market acceptance of cloud solutions include:
Concerns with entrusting a third party to store and manage critical employee or company confidential data
Customer concerns about security capabilities and reliability
Customer concerns about the ability to scale operations for large enterprise customers
The level of configurability or customizability of the software
Missing integration scenarios betweenon-premise products and cloud-to-cloud solutions
Failure in secure and successful delivery of cloud services by any cloud service provider could have a negative impact on customer trust in cloud solutions
Strategic alliances amongst our competitors in the cloud area could lead to significantly increased competition in the market
If organizations do not perceive the benefits of cloud computing, the market for cloud business might not develop further, or it may develop more slowly than we expect, either of which could have an adverse effect on our business, financial position, profit, reputation and cash flows.
Our market share and profit maycould decline due to intenseincreased competition, market consolidation and technological innovation, and new business models in the software industry.
The software industry continues to evolve rapidly and is currently undergoing a significant shift due to competition, consolidation, and technological innovation. As a result,innovations in the market for our products and services is intensely competitive. Overareas of mobile, Big Data, connectivity, the last decade, we have diversified from our large enterprise resource planning (ERP) offerings to new products and services, like on-device, cloud, and in-memory computing, which exposes us to competitors varying in size, geographic location, and specialty. New development models and new delivery and licensing models, such as software as a service (SaaS), platform as a service (PaaS), business process outsourcing (BPO), andInternet of Things, digital, cloud computing, enable competitorsand social media. While smaller innovative companies tend to offer integrated packaged solutions that compete with ours. SaaS providers and other participantscreate new markets continuously, large traditional IT vendors tend to enter such markets mostly through acquisitions. SAP faces increased competition in the growing SaaS ecosystem for applications also compete with SAP for segment share. Cloud
computing is driving fast adoption of Web-basedits business models. As a result, it is easier forenvironment from traditional as well as new entrants to orchestrate or own end-to-end value chains and to impact our key growth markets. Aggressive tactics by mobile device platform providers and database providers could impact the market potential for our mobile apps and in-memory computing and could cut us off from potential revenue sources. In addition, competitors may gain market share because of acquisitions. Current and potential competitors are establishing or may in the future establish or extend cooperative relationships among themselves or with third parties to better address their customers’ needs.competitors. This increased competition could result in increased price pressure, cost increases, and loss of market share, and thereforewhich could have a significant negative impactan adverse effect on our business, financial position, profit, and cash flows.
Business Strategy Risks
Demand for our new products may not develop as planned and our strategy for new markets, new business models, and new consumption models may not be successful.
Our strategy centers on innovatingAdditionally, customers could change their buying behavior by accelerating their acceptance of cloud solutions to reduce their investments which might have a temporary adverse effect on our stable core products and services, and developingoperating results. Furthermore, the trend in the market to invest more in cloud solutions might lead to an increased risk of the potential loss of existing on-premise cloud, and mobile solutions. We focus on continuous innovation through new business and consumption models, by enhancing our technology, by expanding our partner ecosystem, and by creating the infrastructure for volume business. The demand for, and customers’ acceptance of, new products, technologies, and services we introduce are subject to uncertainty. Despite our efforts, demand for our products, technologies, and servicescustomers. It may fail to develop as planned, and this couldalso have a material negative impacttemporary adverse effect on our business, financial position, profit, or cash flows. In addition, entering new market segments exposes usrevenue due to the risks associated with developing and launching new products and services. For more information, see the Product Risks section.an increased number of conversions from on-premise licenses to cloud subscriptions from existing SAP customers in our installed base.
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If we failBusiness Strategy Risks
Demand for our new solutions may not develop as planned and our strategy on new business models and flexible consumption models may not be successful.
Our software business consists of new software licenses, software license updates, and support and maintenance fees, as well as of cloud subscriptions. Our customers are looking to developtake advantage of technological breakthroughs from SAP without compromising their previous IT investments. However, the introduction of new relationshipsSAP solutions, technologies, and enhance existing relationships with channel partners, software suppliers, system integrators, value-added resellers,business models as well as delivery and independent software vendors (ISVs)consumption models is subject to uncertainties as to whether customers will be able to perceive the additional value and realize the expected benefits. There is an increased risk that contributesuch uncertainties may lead customers to the successwait for reference customers first, which might result in a lower level of adoption of our productsnew solutions, technologies, business models and services,flexible consumption models, or no adoption at all. This could have an adverse effect on our business, financial position, profit, and cash flowsflows.
We recognize cloud subscription and support revenue over the term of the respective service periods, and our business depends substantially on customers renewing their agreements and purchasing additional modules or user licenses from us. Although any downturns or upturns in cloud sales may not be adversely impacted.immediately reflected in our operating results, any decline in our customer renewals would harm the future operating results of the cloud business.
AWe recognize cloud subscription and support revenue over the respective service provision, which typically range from one to three years with some up to five years. As a result, most of the respective revenue recognized in a given period originates from agreements entered into in earlier periods. Consequently, a shortfall in demand for our cloud portfolio in any period may not significantly impact our cloud subscription and support revenue for that quarter, but could have an adverse effect on targeted cloud subscription and support revenue in future periods.
To maintain or improve our operating results in the cloud business, it is important that our
customers renew their agreements with us when the initial contract term expires and purchase additional modules or additional users. Our customers have no obligation to renew their subscriptions after the initial subscription period, and we cannot assure that customers will renew subscriptions at the same or at a higher level of service, or at all.
Our customers’ renewal rates may decline or fluctuate as a result of a number of factors, including their satisfaction or dissatisfaction with our cloud solution and services portfolio, the integration capabilities of our cloud solutions into their existing solution environment (including hybrid solutions combining both cloud andon-premise solutions), our customer support, concerns on stable, efficient and secure cloud operations and in compliance with legal and regulatory requirements, our pricing, the prices of competing products or services, mergers and acquisitions affecting our customer base, the effects of global economic conditions, or reductions in our customers’ spending levels.
If our customers do not renew their subscriptions, renew on less favorable terms, or fail to purchase additional modules or users, our revenue and billings may decline, and we may not realize significantly improved operating results from our customer base. This could have an adverse effect on our business, financial position, profit, and cash flows.
If we are unable to scale and enhance an effective partner ecosystem, increased revenue already included in our forecast might be endangered.
An open and vibrant partner ecosystem is a fundamental pillar of our success is a solid partner ecosystem.and growth strategy. We have entered into cooperationpartnership agreements with channelthat drive co-innovation on our platforms, profitably expand all our routes-to-market to optimize market coverage, and provide high-quality services capacity in all market segments. Partners play a key role in driving market adoption of our entire solutions portfolio, by co-innovating on our platforms, embedding our technology, and reselling and/or implementing our software.
If partners and leading software and hardware vendors. Most of these agreements are of relatively short duration and are nonexclusive. The parties concerned typically maintain similar arrangements withconsider our competitors, and some areproducts or services model less strategic and/or financially less attractive compared to our competitors. Additionally, we maintaincompetition or if SAP fails to establish a network of ISVsqualified partners that develop their own business applications formeet our quality requirements and the SAP NetWeaver technology platform. We are still exposed to risks related to
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requirements of our third-party relationships, such as that the relevant counterpartiescustomers, then, among other things, partners might not:
DevoteDevelop a sufficient number of new solutions and content on our platforms
Provide high-quality products and services to our customers
Drive growth of references by creating customer use cases and demo systems
Sufficiently embed our solutions to profitably drive product adoption, especially with new innovations such as SAP HANA
Enable and train sufficient resources to promote sell and support and integrate their products within our portfolioto scale into targeted markets
Comply with applicable laws and regulations, resulting in delayed, disrupted, or terminated sales and services
Transform their business model in accordance with the transformation of SAP’s business model in a timely manner
Renew their existing agreements with us at all or enter into new agreements on terms acceptable to us
Provide high-quality products and services or at all
If one or more of these risks materialize, this may have an adverse effect on the marketing of and demand for our products and services may be adversely impacted, andservices. As a result we may not be able to scale our business to compete successfully with other software vendors. Thisvendors, which could harmhave an adverse effect on our reputation, or adversely impact our business, financial position, profit, and cash flows.
Human Capital Risks
If we do not effectively manage our geographically dispersed workforce, we may not be able to run our business may not operate efficiently and this could have a negative impact on our business, financial position, profit, and cash flows.successfully.
Our success is dependent on appropriate alignment of our internal and external workforce planning processprocesses and our location strategy with our general strategy. Changes in headcount and infrastructure needs could result in a mismatch between our expenses and revenue. It is critical that we manage our internationally dispersed workforce effectively, taking short and long termlong-term workforce and skill requirements into consideration. Our failureThis applies to do sothe management of our internal as well as our external workforce. Changes in headcount and infrastructure needs could result in a mismatch
between our expenses and revenue. Failure to manage our geographically dispersed workforce effectively could hinder our ability to operaterun our business efficiently whichand successfully and could have a negative impactan adverse effect on our business, financial position, profit, and cash flows.
If we are unable to attract, develop, and retain managersleaders and employees with specialized knowledge and technology skills, or are unable to achieve internal diversity and inclusion objectives, we might not be able to manage our operations effectively and successfully, or develop successful new productssolutions and services.
Our highly qualified employees and managers provideworkforce is the foundation for our continued success. CompetitionIn certain regions and specific technology and solution areas, we continue to set very high growth targets, specifically in our industry forcountries and regions such as Africa, China, and Latin America. In the execution of SAP’s strategic priorities, we depend on highly skilled and specialized personnel and leaders, both male and female. Successful maintenance and expansion of our highly skilled and specialized workforce in the area of cloud is intense. In certain regionsa key success factor for our transition to become the leading cloud company. The availability of such personnel is limited and specific technologyas a result competition in our industry is intense and product areas, we have set ambitious growth targets (for example, in China).could expose us to claims by other companies seeking to prevent their employees from working for a competitor. If we are unable to identify, attract, develop, motivate, adequately compensate, and retain well-qualified and engaged personnel, or if ourexisting highly skilled and specialized personnel leave SAP and goodready successors or adequate replacements are not available, we may not be able to manage our operations effectively, which could have an adverse effect on our reputation, business, financial position, profit, and cash flows. Furthermore, we may not be able to develop, sell, or developimplement successful new productssolutions and services as planned. This is particularly true as we continue to introduce new and innovative technology offerings and expand our business in emerging markets. Hiring such personnel may also expose usThe lack of appropriate or inadequately executed benefit and compensation programs could limit SAP’s ability to claimsattract or retain qualified employees and lead to financial losses. In addition, we might not be able to achieve our internal gender diversity objectives to increase the number of women in management from 18% in 2010 to 25% by other companies seeking to prevent their employees from working for a competitor.2017.
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Organizational and Governance-Related Risks
Corporate governance lawsLaws and regulatory requirements in Germany, the United States, and elsewhere have become much more stringent.
As a stock corporationEuropean company domiciled in Germany with securities listed in Germany and the United States, we are subject to European, German, U.S., and other governance-related regulatory requirements. The regulatoryChanges in laws and regulations and related interpretations, including changes in accounting standards and taxation requirements, and increased enforcement actions and penalties may alter the business environment in which we operate. Regulatory requirements have become significantly more stringent in recent years, and some legislation, such as the anticorruption legislation in Germany, the U.S. Foreign Corrupt Practices Act, the UK Bribery Act, and other local laws prohibiting corrupt payments by employees, vendors, distributors, or agents, is being applied more rigorously. Emerging markets are a significant focus of our international growth strategy. The rules are highly complex, and there can be no assurance that we will not be held in breachnature of regulatory requirements if, for example, one or more employees behave fraudulently or negligently, or if we failthese markets presents a number of inherent risks. A failure by us to comply with certain formal documentation requirements. Anyapplicable laws and regulations, or any related allegations of wrongdoing against us, whether merited or not, could have a material negative impactan adverse effect on our reputationbusiness, financial position, profit, cash flows and reputation.
Non-compliance with applicable data protection and privacy laws or failure to adequately meet the requirements of SAP’s customers with respect to our products and services could lead to civil liabilities and fines, as well as loss of customers and damage to SAP’s reputation.
As a global software and service provider, SAP is required to comply with the laws in the locations where SAP does business. SAP and its subsidiaries are facing a surge of data protection and privacy laws and regulations around the world, with further changes to be expected in the future, for example, by the European Data Protection Regulation proposed by the European Commission. These laws and regulations amend and supplement existing requirements regarding the processing of personal data that SAP and SAP customers must fulfill and which we must consequently address with our products and
services, including cloud delivery. Failure to comply with applicable laws or to adequately address privacy concerns of customers, even if unfounded, could lead to investigations by supervisory authorities, civil liability, fines, (in the future, potentially calculated based on the trading priceCompany’s annual revenue), loss of customers, damage to our ordinary sharesreputation, and American depositary receipts (ADRs).could have an adverse effect on our business, financial position, profit, and cash flows.
Failure on our part to implement our sustainability strategy in a way that meetsrespond to meet customer, partner, or other stakeholder expectations or generally accepted sustainability standards on climate change, energy constraints, and our social investment strategy could harm our reputation and have a negativenegatively impact on ourSAP’s business, results of operations, and our business.reputation.
For SAP, sustainability means theEnergy and emissions management are an integral component of our holistic management of social, environmental, social, and economic risks and opportunities. We have identified sustainability risks in threethese major areas:
Functionality of our software
Sustainability in ourOur solutions and green IT
Accessibility and security of our products
Privacy and data protection in connection with the use of SAP
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SAP’sOur own sustainable operations
Energy – energy management and other environmental issues likesuch as carbon management, water use, and waste
Business conduct
Human capital management, including health, safety, diversity, employee satisfaction, and talent attraction and retention (For more information, see the Human Capital Risks section.)
The ethical behavior of suppliers and partners
Customer satisfaction
Social investment
Education
Role models
Economic opportunity
If our sustainability strategy and operations, which are described in our Sustainability Report at www.sapsustainabilityreport.com, are not sufficient to meet the expectations ofBecause our customers, employees, and investors expect a reliable energy and partners, or generally accepted sustainability standards, thiscarbon strategy, we have reemphasized our previously communicated targets, especially our 2020 target for greenhouse gas emissions. In addition, our customers might no longer recognize SAP for its environmental leadership and might buy other vendors’ products and services. Consequently, we could harmfail to achieve our reputation andrevenue target. If we do not meet stakeholder expectations in the areas identified, our rating in sustainable investment indices might decrease, which could have an adverse impacteffect on our reputation, business, financial position, profit, and cash flows.
Unethical behavior and non-compliance with our integrity standards due to intentional and fraudulent behavior of employees could seriously harm our business, financial position, profit, and reputation.
SAP’s leadership position in the global market is founded on the long-term and sustainable trust of
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our stakeholders worldwide. Our heritage is one of corporate transparency, open communication with financial markets, and adherence to recognized standards of business integrity. The SAP Code of Business Conduct, adopted by the Executive Board on January 29, 2003, put into words the already existing guidelines and expectations for the business behavior practiced at SAP.
However, we may encounter unethical behavior and non-compliance with our integrity standards due to intentional and fraudulent behavior of individual employees, possibly in collusion with external third parties. In addition to intentional behavior, problems could also arise due to negligence in the adherence to rules and regulations. Unethical behavior and misconduct attributable to SAP could not only lead to criminal charges, fines, and claims by injured parties, but also to financial loss, and severe reputational damage. This could have an adverse effect on our business, financial position, profit, and cash flows.
Principal shareholders may be able to exert control over our future direction and operations.
If SAP AG’sSE’s principal shareholders and the holdings of entities controlled by them vote in the same manner, this could delay, prevent or facilitate a change in control of SAP or other significant changes to SAP AGSE or its capital structure. See “Item 7. Major Shareholders and Related-Party Transactions —– Major Shareholders” for further information.
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U.S. judgments may be difficult or impossible to enforce against us or our Board members.
Currently, except for Bill McDermott and Vishal Sikka,Robert Enslin, all members of SAP AG’sSE’s Executive Board and all members of the Supervisory Board are non-residents of the United States. A substantial portion of the assets of SAP and our Board members are located outside the United States. As a result, it may not be possible to effect service of process within the United States upon non-U.S. resident persons or SAP or to enforce against non-U.S. resident persons judgments obtained in U.S. courts predicated upon the civil liability provisions of the securities laws of the United States. In addition, awards of punitive damages in actions brought in the United States or elsewhere maymight be unenforceable in Germany.
Communication and Information Risks
We may not be ableOur controls and efforts to prevent the unauthorized disclosure of confidential information might not always be effective.
Confidential or strictly confidential information and internal information that is subjectrelated to regulatory requirements, or are trade secrets, and such disclosure may harm our business and reputation.
Confidential communications and information about sensitive subjects,topics such as our future strategies,strategy, new technologies, and products; mergers and acquisitions;acquisitions, unpublished financial results;results, or customer, employee, or other personal data, could be prematurely or inadvertently or prematurely disclosed. Such disclosure maydisclosed and subsequently lead to misperception in the market. This could require notification ofus to notify multiple regulatory agencies and, where appropriate, the data owner, where appropriate, which may damagecould result in a loss of reputation for SAP. For example, leaked information during a merger or acquisition deal could cause the loss of our deal target, or our share price could decline in case of prematurely published financial results. This could have an adverse effect on our market position reduce future revenue, orand lead to fines and penalties, any of whichpenalties. In addition, this could have a significant negative impactan adverse effect on our business, reputation, financial position, profit, and cash flows.
Financial Risks
Our sales are subject to quarterly fluctuations and our sales forecasts may not be accurate, which could negatively impact our profit margin.accurate.
Our revenue and operating results can vary and have varied in the past, sometimes
substantially, from quarter to quarter. Our revenue in general, and in particular our software revenue, is difficult to forecast for a number of reasons, including:
The relatively long sales cycles for our products
The large size, complexity, and extended timing of individual license transactions
The introduction of new licensing and deployment models such as on-demand andcloud subscription models
The timing of the introduction of new products or product enhancements by usSAP or our competitors
Changes in customer budgets
Decreased software sales that could have a significant negative impactan adverse effect on related maintenance and services revenue
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The timing, size, and length of customers’ services projects
LicensingDeployment models that require the recognition of revenue over an extended period of time
Adoption of and conversion to new business models leading to changed or delayed payment terms
Seasonality of a customer’s technology purchases
Limited visibility intoduring the abilityongoing integration of acquired companies into their ability to accurately predict their sales pipelines and the likelihood that the projected pipeline will convert favorably into sales
Other general economic, social, environmental, and market conditions, such as the global economic crisis and the current difficulties for countries with large debt
BecauseSince many of our customers make their IT purchasing decisions near the end of calendar quarters, and with a significant percentage of those decisions being made during theour fourth quarter, even a small delay in purchasing decisions for our on-premise software could have a significant negative impactan adverse effect on our revenue results for a given year. Our dependence on large transactions has decreased in recent years with a trend towards an increased number of transactions coupled with a decrease in deal size. However, the loss or delay of one or a few large sales,opportunities, which are still characteristic of
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the large enterprise segment, could have a significant negative impactan adverse effect on our results.
We use a “pipeline” system to forecast sales and trends in our business. Pipeline analysis informs and guides our business, planning, budgeting, and forecasting, but pipeline estimates do not necessarily consistently correlate to revenue in a particular quarter. The reliability of our plans, budgets, and forecasts may therefore be compromised. Because our operating expenses are based upon anticipated revenue levels and a high percentage of our expenses are relatively fixed in the near term, any shortfall in anticipated revenue or delay in revenue recognition could result in significant variations in our results of operations from quarter to quarter or year to year. Continued deterioration in global economic conditions would make it increasingly difficult for us to accurately forecast demand for our products and services, and could cause our revenue, results of operationsfinancial position, profit, and cash flows to fall short of our expectations and public forecasts. That could have a significant negative impact on our stock price. To the extent any future expenditure fails to generate the anticipated increase in revenue, our quarterly or annual operating results may be subject to a significant negative impact and may vary significantly from preceding or subsequent periods.flows.
External factors maycould impact our liquidity and increase the default risk associated with, and the valuation of, our financial assets and trade receivables.assets.
AnMacroeconomic factors such as an economic downturn could have a significant negative impactan adverse effect on our future liquidity. We use globala globally centralized financial management to control liquid assets,financial risk, such as liquidity, exchange rate, interest rate, counterparty, and currencies.equity price risks. The primary aim is to maintain liquidity in the SAP Group at a level that is adequate to meet our obligations.obligations at any time. Our total groupGroup liquidity was €5.6 billion on December 31, 2011. This position is supported by our strong operating cash flows, of which a large
part is recurring, and by credit facilities on which we can draw if necessary.
However, an economic downturnadverse macroeconomic factors could increase the default risk associated with the investment of our total group liquidity. ThatGroup liquidity including possible liquidity shortages limiting SAP’s ability to repay financial debt. This could have a significant negativean impact on the valuationvalue of our financial assets. SAP’s investment policy with regard to total Group liquidity is set out in our internal treasury guideline document,assets, which is a collection of uniform rules that apply globally to all companies in the Group. Among its stipulations, it requires that with limited exceptions we invest only in assets and funds rated A- or better. The weighted average rating of our total group liquidity is in the range A to A-. We continue to pursue a policy of cautious investment characterized by wide portfolio diversification with a variety of counterparties, predominantly short-term investments, and standard investment instruments.
There can be no assurance that the prescribed measures will be successful or that uncertainty in global economic conditions will notcould have a significant negative impactan adverse effect on our business, financial position, profit, and profit.cash flows.
Management’s use of estimates could negatively affect our business, financial position, profit, and cash flows.
To comply with IFRS, management is required to make manynumerous judgments, estimates, and assumptions.assumptions (among others for our major patent disputes) that affect the reported financial figures. The facts and circumstances, as well as assumptions on which management bases these estimates and judgments and management’s judgment regarding the facts and circumstances, may change from time to time and this could result in significant changes in the estimates with a significant negative impactand judgments and consequently in the reported financials. Such changes could have an adverse effect on our business, financial position, profit orand cash flows. For more information, see the Notes to the Consolidated Financial Statements section, Note (3c).
Current and future accounting pronouncements and other financial reporting standards, especially but not only concerning revenue recognition, may have a significant negativenegatively impact on the financial results we present.
We regularly monitor our compliance with all of theapplicable financial reporting standards that are
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applicable to us and anyreview new pronouncements and drafts thereof that are relevant to us. As a result of new standards, changes to existing standards (including the new IFRS 15 on revenue from contracts with customers that we will likely need to adopt in 2017), and changes in their interpretation, we might be required to change our accounting policies, particularly concerning revenue recognition, to alter our business modelsoperational policies so that it reflectsthey reflect new or amended financial reporting standards, or to restate our published financial statements. We cannot exclude the possibility that thisSuch changes may have a significant negative impactan adverse effect on our reputation, business, financial position, and profit, or cause an adverse deviation from our revenue and cash flows. For a summary of significant accounting policies, see the Notes to the Consolidated Financial Statements section, Note (3).operating profit target.
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Because we conduct operations throughout the world, our business, financial position, profit, and cash flows may be affected by currency and interest rate fluctuations.
Our SAP Group-wide management reporting and our external financial reporting are both in euros. Nevertheless, a significant portion of our business is conducted in currencies other than the euro. Approximately 69%71% of our revenue in 20112014 was attributable to operations outside the euro area and was translated into euros. Consequently, period-over-period changes in the euro rates for particular currencies can significantly affect our reported revenue and income. In general, appreciation of the euro relative to another currency has a negativean adverse effect while depreciation of the euro relative to another currency has a positive effect. Variable-interestVariable interest balance-sheet items are also subject to changes in interest rates, so there is a risk that these balance-sheet itemsrates. Such changes may result inhave an adverse impacteffect on our business, financial position, profit and cash flows. For more information aboutflows or cause an adverse deviation from our currencyrevenue and interest-rate risks and our related hedging activity, see the Notes to the Consolidated Financial Statements section, Notes (25) and (26).operating profit target.
The cost of using derivative instruments to hedge share-based payment planspayments may exceed the benefits of hedging them.
We use derivative instruments to reduce the impact of our share-based payment planspayments on our income statement and to limit future expense
associated with those plans. We decide case by caseon a case-by-case basis whether and to what extent we should hedge this risk. The expense of hedging the share-based payment planspayments could exceed the benefit achieved by hedging them or thatthem. On the other hand, a decision to leave the plans materially unhedged mightcould prove disadvantageous. This could have an adverse effect on our business, financial position, profit and cash flows or cause an adverse deviation from our revenue and operating profit target.
The market price for our ADRs and ordinary shares may be volatile.
The tradingmarket prices of our ADRs and ordinary shares have experienced and may continue to experience significant volatility in response to various factors including, but not limited to:
unauthorized or inadvertent premature disclosure of confidential information, including information concerning pending acquisition negotiations or acquisition rumors;
the announcement of new products or product enhancements by us or our competitors;
technological innovation by us or our competitors;
quarterly variations in our results or our competitors’ results of operations or results that fail to meet our or our financial analysts’market expectations;
the announcement of new products or product enhancements by us or our competitors;
changes in revenue and revenue growth rates on a consolidated basis or for specific geographic areas, business units, products or product categories;
changes in our externally communicated outlook or credit rating;outlook;
changes in our capital structure, for example due to the potential future issuance of additionadditional debt instruments;
general market conditions specific to particular industries;
litigation to which we are a party;
general and country specific economic or political conditions (particularly wars, terrorist attacks, etc.);
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proposed and completed acquisitions or other significant transactions by us or our competitors; and
general market conditions.
Many of these factors are beyond our control. In the past, companies that have experienced volatility in the market price of their stock have been subject to shareholder lawsuits, including securities class action litigation. Any such lawsuits against us, with or without merit, could result in substantial costs and the diversion of management’s attention and resources, resulting in a decline in our results of operations and our stock price.
Project Risks
Implementation of SAP software often involves a significant commitment of resources by our customers and is subject to a number of significant risks over which we often have no control.
A core element of our business is the successful implementation of software solutions to enable
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our customers to make their business a best-run business. The implementation of SAP software is led by SAP, by partners, by customers, or by a combination thereof. Depending on various factors, such as the complexity of solutions, the customer’s implementation, integration and migration needs, or the resources required, SAP faces a number of different risks. For example, trainedfunctional requirement changes, delays in timeline, or deviation from recommended best practices may occur during the course of a project. These scenarios have a direct impact on the project resource model and on securing adequate internal personnel or consultants might not be immediately available to assist customers in the implementation of our products, the features of the implemented software might not meet customers’ expectations or the software might not fit the business model of the customer, customer-specific factors may destabilize the implementation of the software, or customersa timely manner and partners might not implement the measures offered by SAP to safeguard against functional and technical risks.could therefore prove challenging.
As a result of these and other risks, SAP and/or some of our customers have incurred significant implementation costs in connection with the purchase and installation of SAP software products. Also, someSome customers’ implementations have taken longer than planned. We cannot guarantee that we can reduce or eliminate protracted installation or significant third-party consulting costs, that shortages of trained consultants will not occur, orbe readily available, that our costs will not exceed the agreed-upon fees onagreed in fixed-price contracts.contracts, or that customers will be satisfied with the implementation of our software and solutions. Unsuccessful, lengthy, or costly customer implementation and integration projects could result in claims from customers, harm SAP’s reputation, and cause a loss of future revenues.could have an adverse effect on our business, financial position, profit, and cash flows.
Product and Technology Risks
We use technologies under license from third parties. The loss of the rightUndetected security vulnerabilities shipped and deployed within our software products might cause damage to use technologiesSAP and our customers, and partners.
Customer systems or systems operated by SAP itself to provide services could delay implementation of our products or force us to pay higher license fees.
We have taken numerous third-party technologies under license and incorporated them into our products and we depend on those technologies in the aggregate. There canpotentially be no assurance that the licenses for these third-party technologies will not be terminated, that the licenses will be available in the future on terms acceptable to us, or that we will be able to obtain third-party software licenses for future products. Changes to or the loss of third-party licensescompromised by vulnerabilities if they are exploited by hackers. This could lead to a material increasetheft, destruction, or abuse of data, or systems could be rendered unusable (for example, due to distributed denial of service attacks). The detection of security vulnerabilities in our software, our customers’ systems, or SAP systems used in the costprovision of licensing, or that SAP software products may become unusable or materially reducedservices, especially in their functional scope. As a result, wecase of exploitation, could incur additional development or license costsprevent us from meeting our contractual obligations and subsequently might lead to ensure the continued functionality of our products. The risks increase where we acquire a company or a company’s intellectual property assets thatcustomer claims and
reputational damage, which might have been subject to third-party technology licensing and product standards less rigorous than our own.
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If we are unable to keep up with rapid technological innovations and the expectations of our customers, we may not be able to compete as effectively as our competitors.
Our future success continues to dependan adverse effect on our ability to enhancebusiness, financial position, profit, and expand our existing products, technology, and services and keep pace with technological developments (including evolving cybersecurity threats). It also depends on our ability to introduce new products, technologies, and services that are accepted in the market and that satisfy changing customer requirements.
We might not be successful in bringing new solutions, solution enhancements, and services to market before our competitors, and we might not be able to generate enough revenue to offset the significant research and development costs we incur. Moreover, we might not anticipate and develop technological improvements or succeed in adapting our products to technological change, changing regulatory requirements, emerging industry standards, and changing customer requirements. Finally, we might not succeed in producing high-quality products, enhancements, and releases in a timely and cost-effective manner to compete with applications and other technologies offered by our competitors.cash flows.
Undetected defects or delays in the introduction of new products and product enhancements may result in increasedcould increase our costs, to us and reduced demand for our products.reduce customer demand.
To achieve market acceptance and high customer acceptance,satisfaction, our new products and product enhancements often require long development and testing periods. Development work isand market introduction are subject to various risks. For example, scheduled market launches could be delayed, or products might not completely satisfymeet our stringent qualityhigh-quality standards, meetincluding security standards, might not fulfill market needs or thecustomer expectations, of customers, or might not comply with local standards and requirements. NewFurthermore, this risk also exists with respect to acquired companies’ technologies and products maywhere we might not be able to manage these as quickly and successfully as expected. Therefore, market launches, entering new markets, or the introduction of new innovations could be delayed or not be successful.
In addition, new products, including third-party technologies we have licensed and open source software components we use in those products, could contain undetected defects or they maymight not be mature enough from the customer’s point of view for business-critical solutions. The detection and correction of any defects especially after shipment could be expensive andtime-consuming and we might not be able to process large volumesmeet the expectations of data.customers regarding time and quality in the defect resolution process. In
some circumstances, we might not be in a position to rectify such defects or entirely meet the expectations of customers.customers, specifically as we are expanding our product portfolio into additional markets. As a result, we might be faced with customer claims for cash refunds, damages, replacement software, or other concessions. The risk of defects and their adverse consequences could increase as we seek to introduce a variety of new software products simultaneously.simultaneously at a higher innovation rate. Significant undetected defects or delays in introducing new products or product enhancements could affect market acceptance of SAP software products and adversely impactcould have an adverse effect on our reputation, business, financial position, profit, and cash flows.
The use of existing SAP software products by customers in business-critical applicationssolutions and
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processes and the relative complexity and technical interdependency of our software products create a risk that customers or third parties may pursue warranty, performance, or other claims against us for actual or alleged defects in SAP software products, in our provision of services, or in our application hosting services. We have in the past been, and may in the future be, subject to warranty, performance, or other similar claims.
Although our contracts generally contain provisions designed to limit our exposure due to actual or alleged defects in SAP software products or in our provision of services, these provisions may not cover every eventuality or be effective under the applicable law. Regardless of its merits, any claim could entail substantial expense and require the devotion of significant time and attention by key management personnel. Publicity surrounding such claims could affect our reputation and the demand for our software.
Changes in our rights to use software and technologies we license from third parties, which are an integral part of SAP’s products, could slow down time to market and influence our license pricing and therefore the competitiveness with other software vendors. Furthermore, it could diminish our software’s functional capabilities and therefore could jeopardize the stability of our solution portfolio offering.
The numerous third-party technologies we have licensed and certain open source software components we use have become an integral part of our product portfolio. We depend on those technologies for the functionality of our software or cloud services. Changes to, or the loss of, third-party licenses as well as open source licenses being construed could significantly increase the cost of these licenses and significantly reduce software functionality and/or usability of SAP’s software products. As a result, we might incur additional development or license costs to ensure the continued functionality of our products, which could have an adverse effect on our business, financial position, profit, and cash flows. This risk increases with each acquisition of a company or a company’s intellectual property assets that had been subject to third-party technology licensing, open source software, and product standards less rigorous than our own.
If we are unable to keep up with rapid technological innovations, new business models, and changing market expectations, we might not be able to compete effectively.
Our future success depends upon our ability to keep pace with technological and process innovations and new business models, as well as our ability to develop new products and services, enhance and expand our existing products and services portfolio, and integrate products and services we obtain through acquisitions. To be successful, we are required to shift our products and our go-to-market approach to a cloud-based delivery model to satisfy changing customer demand.
We might not be successful in bringing new business models, solutions, solution enhancements, and/or services to market before our competitors. We may also face increasing competition from open source software initiatives in which competitors may provide software and intellectual property free and/or under terms and conditions unfavorable for SAP. In addition, we might not be able to generate enough revenue to offset the significant research and development costs we incur to deliver technological innovations or to offset the required infrastructure costs to deliver our solutions and services as part of our new business models. Moreover, we might not anticipate and develop technological improvements or succeed in adapting our products, services, processes, and business models to technological change, changing regulatory requirements, emerging industry standards, and changing requirements of our customers and partners. Finally, we might not succeed in producing high-quality products, enhancements, and releases in a timely andcost-effective manner to compete with products, solutions, and other technologies offered by our competitors, which could have an adverse effect on our reputation, business, financial position, profit, and cash flows.
Our technology and/or product strategy may not succeedbe successful or our customers mayand partners might not adopt our technology platform offering.platforms and other innovations accordingly.
We offer customers a broad portfolio of products, solutions, and services. Our technology strategy centers on the SAP NetWeaver technology platform, the Sybase Unwired Platform, and our on-demand platform. Its success depends on the convergence of our platforms and their
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integrationcenters on SAP HANA as a real-time in-memory computing platform for analytics and applications. The success of our technology strategy depends on the convergence of SAP HANA with our in-memory database technology.mobile, cloud, and SAP NetWeaver platform. It also depends on the delivery of SAP solutions based on the SAP HANA platform as well as the success of our new framework to meet changing customer expectations regarding end-to-end user experience. Our technology strategy also relies on our ability to maintain a dynamic network of ISVspartner organizations developing their own business applications using our technology platforms.
We might not be successful in integrating our platforms, enabling the complete product portfolio, harmonizing our user interface design and technology, integrating acquired technologies, or bringing new solutions based on the SAP HANA platform technology.to the market as fast as expected. In addition, we may not be able to compete effectively in the area of managed cloud services. As with any opena result, our partner organizations and customers might not adopt the SAP HANA platform design, the greater flexibility provided to customers to use data generated by non-SAP softwareor our managed cloud services quickly enough or they might reduce customer demand to select and use certain SAP software products. If our technology platform strategy is not well received by customers, if competitors develop superior technology, or if our solutions have significant defects, thisconsider competitive solutions. This could have an adverse impacteffect on our reputation, business, financial position, profit, and cash flows.
Cybersecurity RisksOur cloud offerings might be subject to a security attack, become unavailable, or fail to perform properly.
Undetected security flawsThe software used in our cloud portfolio is inherently complex and any defects in product functionality, system stability, or data center operations that cause interruptions in the availability of our application portfolio could result in the following:
Lost or delayed market acceptance and sales
Breach of warranty or other contract breach or misrepresentation claims
Sales credits or refunds to our customers or partners
Loss of customers and/or partners
Diversion of development and customer service resources
Breach of data protection and privacy laws and regulations
Customers considering competitive cloud offerings
The costs incurred in correcting any defects or errors might be substantial and could have an adverse effect on our reputation, business, financial position, profit, and cash flows. Because of the large amount of data that we collect and manage, it is possible that hardware failures, defects in our software, or errors in our proprietary systems could result in data loss or thosecorruption, or cause the information that we collect to be incomplete or contain inaccuracies that our customers regard as significant. Furthermore, the availability of our third-party service and software providers maycloud applications could be exploitedinterrupted by other persons, which could damage SAP or our customers and significantly impact our financial position, profit, cash flows, and reputation.
Our core processes, such as software development, sales and marketing, customer service, financial transactions, and cloud services rely on our IT infrastructure and applications. Malicious software, sabotage, cyber incidents, natural disasters, ora number of factors, including customers’ inability to access the Internet, the failure of an underlying technology (such as the Internet) could cause an outage of our infrastructure, which could leadnetwork or software systems due to a substantial denial of service and ultimately to production downtime, recovery costs, and customer claims. This could have a significant negative impact on our business, financial position, profit,human or cash flows.
We are to a substantial extent dependent on the exchange of a wide range of information over our publicly available infrastructure. Specifically, our products and services, includingother error, security breaches, or variability in user traffic for our cloud offerings, rely on this infrastructure and our applications. We have implemented a number of measures designed to ensure the security of our information, IT
resources, and other assets. Nonetheless, unauthorized users could gain access to our systems through cyber-attacks and steal, use without authorization, and sabotage our intellectual property and confidential data. Any breach of our IT security, misuse, or theft could lead toAdditionally, any loss of production,the right to recovery costs,use hardware purchased or to litigation brought by customers or business partners, whichleased from third parties could have a significant negative impact on our business, financial position, profit, cash flows, and reputation.
There is a danger of industrial espionage, cyber-attacks, misuse, or theft of information or assets, or damage to assets by trespassersresult in delays in our facilitiesability to provide our cloud applications until equivalent technology is either developed by us or, by people who have gained authorized accessif available, identified. Furthermore, our cooperation with partners in the area of cloud includes the co-location of data centers that might expose SAP to our facilities, systems, or information. Such cybersecurity breaches, misuse, or other disruptions could jeopardizeadditional risks in the area of security of information stored in and transmitted through our computer systemsdata protection, as well as the computer systemspotential for breached service-level agreements by partners.
We have administrative, technical, and physical security measures in place as well as contracts that require third-party data centers to have appropriate security and data protection and privacy measures in place. In this context, customers might demand to only use specific and/or local data centers. However, if these security measures are breached as a result of third-party action, employee error or malfeasance, or otherwise, and if, as a result, someone obtains unauthorized access to our customers’ data, which may include personally identifiable information regarding users, our reputation could be damaged, our business may suffer, local data protection and privacy laws or regulations might be breached, and we could incur significant liability.
In addition, our insurance coverage might not cover claims against us for loss or security breach of data or other indirect or consequential damages. Moreover, defending a suit, regardless of its merit, could be costly and time-consuming. In addition to potential liability, if we experience interruptions in the availability of our customers, service providers, or business partners. Such misuse could potentially lead to the leakage of confidential information, improper use of our systems and networks, manipulation and destruction of data, defective products, production downtimes, and supply shortages. This could lead to significant claims for damages against us. Additionally, despite testing prior to their release, our products may contain security flaws, particularly when first introduced or when new versions are released. Because technologies used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Actual or alleged defects could expose us to product liability claims and warranty claims, and harmcloud applications, our reputation could be harmed and thatwe could impact our future sales of products and services.
Our products include security features that are intended to protect the privacy and integrity of our customers’ data. We devote significant resources to training our personnel and addressing security vulnerabilities throughlose customers.
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engineering more secure products, continuously enhancing security and reliability features in our products and systems, deploying security updates to address security vulnerabilities, and improving our incident response time. In addition, we have implemented a variety of defense mechanisms intended to safeguard our infrastructure. Examples are firewalls, antivirus software, intrusion detection systems, and high-availability landscapes — including our development and quality infrastructures. We adhere to several best practices, many of which are regularly certified. However, we cannot guarantee that these measures will be adequate to prevent serious impairment of our business operations.
A data security breach could have a significant negative impact on SAP and our customers.
SAP products and services, including those used by our customers on the Internet, rely on our IT infrastructure and applications. Unauthorized users could gain access to our systems through cyber-attacks and introduce backdoors or steal, use without authorization, and sabotage our intellectual property and confidential data. A breach of our IT security could lead to loss of production, to recovery costs, or to litigation brought by customers or business partners, which could have a significant negative impact on our business, financial position, reputation, profit, and cash flows.
We continuously employ IT security programs to manage identified risks and monitor whether these measures, including firewalls, intrusion detection and anti-virus applications are adequate to prevent serious impairment of our business operations as the method and variety of cyber-attacks are rapidly escalating and changing. Additionally, as noted in the description of the previous risk, we adhere to several certified best practices.
Other Operational Risks
Third parties have claimed, and might claim in the future, that we infringe their intellectual property rights, which could lead to damages being awarded against us and limit our ability to utilizeuse certain technologies in the future.
We continue to believe that we will increasingly be subject to intellectual property infringement claims as the number of products in our industry segment grows, as we acquire companies with increased use of third partythird-party code including open source code, and as we expand into new industry segments with our products, resulting in greater overlap in the functional scope of products.products, and as non-practicing entities that do not design, manufacture, or distribute products increasingly assert intellectual property infringement claims.
Any claims, with or without merit, and negotiations or litigation relating to such claims, could preclude us from utilizing certain technologies in our products, be time-consuming, result in costly litigation, and require us to pay damages to third parties, stop selling or reconfigure our products and, under certain circumstances, pay fines and indemnify our customers.customers, which could have an adverse effect on our business, financial profile, profit, cash flows, and reputation. They could also require us to enter into royalty and licensing arrangements on terms that are not favorable to us, cause product shipment delays, subject our products to injunctions, require a complete or partial redesign of products, result in delays to our customers’ investment decisions, and damage our reputation.
Software includes many components or modules that provide different features and perform different functions. Some of these features or functions may be subject to third-party intellectual property rights. The rights of another party could encompass technical aspects that are similar to one or more technologies in one or more of our products. Intellectual property rights of third parties could preclude us from using certain technologies in our products or require us to enter into royalty and licensing arrangements on unfavorable or expensive terms.
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The software industry is making increasing use of open source software in its development work on solutions. We also integrate certain open source software components from third parties into our software. Open source licenses may require that
the software code in those components or the software into which they are integrated be freely accessible under open source terms. Third-party claims may require us to make freely accessible under open source terms a productone of oursour products or non-SAP software upon which we depend.
In addition to open source, SAP continues to expand its participation in standards organizations and increase the use of standards in its products. Participation in standards organizations may require licensing of SAP’s intellectual property to contributors to the standard or to all standards implementers, including competitors, on a nondiscriminatory basis in accordance with licensing terms defined by standards organizations. Within the software-related standards field, there is a trend toward expanding the scope of licensing obligations and narrowing an intellectual property owner’s right to revoke a license if sued by a licensee. This could further reduce our ability to use intellectual property related to standards. Use of patents inadvertently licensed through standards could expose SAP to third-party claims. Consequently, compliance with open source or certain standards could have a material negative impact on our business, financial position, profit, and cash flows.
Claims and lawsuits against us could have a material negative impactan adverse effect on our business, financial position, profit, cash flows, and reputation.
Claims and lawsuits are brought against us, including claims and lawsuits involving businesses we have acquired. Adverse outcomes to some or all of the claims and lawsuits pending against us might result in the award of significant damages or injunctive relief against us that could negatively impacthinder our ability to conduct our business.business and could have an adverse effect on our reputation, business, financial position, profit, and cash flows.
The outcome of litigation and other claims or lawsuits is intrinsically uncertain. Management’s view of the litigation may also change in the future. Actual outcomes of litigation and other claims or lawsuits could differ from the assessments made by management in prior periods which could result in a material negative impact on our business, financial position, profit, cash flows, and reputation.
For more information, seeare the discussion of our legal liability risks inbasis for the Noteslawsuit-related provisions we set up according to the Consolidated Financial Statements section, Note (24).IFRS.
We might not acquire and integrate companies effectively or successfully and our strategic alliances might not be successful.
To expand our business, we have in the past made acquisitions of businesses, products, and technologies. WeSuch acquisitions have increased in size and in strategic importance for SAP, and we expect to continue to make such acquisitions in the future. Management’s negotiation of potential acquisitions and alliances and integration of acquired businesses, products, or technologies demands time, focus, and resources of management and of the workforce. Acquisitions carry many additionalof companies, businesses, and technology expose us to unpredictable operational difficulties, expenditures, and increased risks. These risks include, among others:
The selection of the wrong integration model for the acquired company
The failure to integrate the acquired business and its different business and licensing models
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Failure to successfully integrate acquired technologies or solutions into SAP’s solution portfolio and strategy in a timely and profitable manner
The failure to integrate the acquired technologies or products with our current productscompany’s operations across SAP’s different cultures, languages, and technologieslocal protocols, all within the constraints of applicable local laws
The failure to meet the needs of the acquired company’s customers and partners in the combined company
The diversion of management’s time and attention from daily operations
The loss of key personnel of the acquired business
Material unknown liabilities and contingent liabilities of acquired companies, including legal, tax, accounting intellectual property, or other significant liabilities that may not be detected bythrough the due diligence process
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Debt incurrence or significant cash expendituresLegal and regulatory constraints (such as contract obligations, privacy frameworks and agreements)
Difficulties in implementing, restoring, or maintaining internal controls, procedures, and policies
Negative impactPractices or policies of the acquired company that may be incompatible with our compliance requirements
An adverse effect on relationships with existing customers, partners, or third-party providers of technology or products
Difficulties in integrating the acquired company’s accounting, human resource,HR, and other administrative systems and coordination of the acquired company’s research and development (R&D), sales, and marketing functions
Legal and regulatory constraintsDebt incurrence or significant cash expenditures
Practices or policies ofConstraints in enforcing acquired companies’ compliance with existing SAP security standards in a timely manner
Difficulties in customer implementation projects combining technologies and solutions from both SAP and the acquired company that may be incompatible with our compliance requirements
In addition, acquired businesses might not perform as anticipated, resulting in charges for the impairment of goodwill and other intangible assets on our statements of financial position. Such charges may have a significant negative impactan adverse effect on operating marginsour business, financial position, profit, and profit.cash flows. We have entered into, and expect to continue to enter into, alliance arrangements for a variety of purposes, including the development of new products and services. There can be no assurance that any such products or services will be successfully developed or that we will not incur significant unanticipated liabilities in connection with such arrangements. We may not be successful in overcoming these risks and we may therefore not benefit as anticipated from acquisitions or alliances.
We may not be able to obtain adequate title to, or licenses in, or to enforce, intellectual property.
Protecting and defending our intellectual property is keycrucial to our success. We use a variety of means to identify and monitor potential risks and to protect our intellectual property. These include applying for patents, registering trademarks and other marks and copyrights, and rights of authorship, taking certain actionimplementing measures to stop copyright and trademark infringement, entering into licensing, confidentiality, and nondisclosure
non-disclosure agreements, and deploying protection technology. Despite our efforts, there canwe might not be no assurance that we canable to prevent third parties from obtaining, using, or selling without authorization what we regard as our proprietary technology and information. All of these measures afford only limited protection, and our proprietary rights could be challenged, invalidated, held unenforceable, or otherwise affected. Some intellectual property maymight be vulnerable to disclosure or misappropriation by employees, partners, or other third parties. There can also be no assurance that thirdThird parties will notmight independently develop technologies that are substantially equivalent or superior to our technology. Also, it may be possible forFinally, third parties tomight reverse-engineer or otherwise obtain and use technology and information that we regard as proprietary. Accordingly, we might not be able to protect our proprietary rights against unauthorized third-party copying or utilization, which could have a significant negative impactan adverse effect on our competitive position and our financial position,positions, and result in reduced sales. Any legal action we bring to enforce our proprietary rights could be costly, distract management from day-to-day operations, and lead to claims against us, which could have a significant negative impact on our business, financial position, profit, and cash flows. Such actions by us could also involve enforcement against a partner or other third party, which may have a significant negativean adverse effect on our ability, and our customers’ ability, to
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use that partner’s or other third parties’ products. In addition, the laws and courts of certain countries may not offer effective means to enforce our intellectual property rights. This could have an adverse effect on our reputation, business, financial position, profit, and cash flows.
SAP’s business strategy focuses on certain business models that are highly dependent on a working cyberspace. A cybersecurity breach could have an adverse effect on our customers, our reputation, and our business.
The key cybersecurity risks currently applicable to SAP include state-driven economic espionage as well as competitor-driven industrial espionage, and criminal activities including, but not limited to, cyber-attacks and “ mega breaches” against on-premise software, hosted, and cloud services. This might result in, for example, leakage of confidential information and intellectual property, defective products, production downtimes, supply shortages, and compromised data (including personal data). A failure of our cybersecurity measures could expose our business operations and service delivery to the described risks, for example, virtual attack, disruption, damage, and/or unauthorized access. Additionally, we could be subject to recovery costs, for example, as well as significant contractual and legal claims by customers, partners, authorities, and third-party service providers for damages against us, which could have an adverse effect on our reputation, business, financial position, profit, and cash flows.
We may not be able to protect our critical information orand assets or to safeguard our business operations against disruption.
As a global software business, we are to a substantial extentSAP is highly dependent on the exchange of a wide range of information across our global operations and on the availability of the infrastructureour infrastructure. With regard to our physical environment, we use. In 2011, we implemented a number of additional measures designed to ensure theface several key security of our
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information, IT resources,risks such as industrial and/or economic espionage, serious and organized crime, and other assets. Nonetheless, there is still a danger of industrial espionage, cyber-attacks,illegal activities, as well as violent extremism and terrorism. We might be endangered by threats including, but not limited to, social engineering, misuse, or theft of information or assets, or damage to assets by trespassers in our facilities or by people who have gained authorizedunauthorized physical access to our facilities, systems, or information. Any misuse, theft, or breach of securityThese could have an adverse effect on our business, financial profile, profit, and cash flows.
Our insurance coverage might not be sufficient and uninsured losses may occur.
We maintain insurance coverage to protect us against a significant negative impactbroad range of risks, at levels we believe are appropriate and consistent with current industry practice. Our objective is to exclude or minimize risk of financial loss at reasonable cost. However, we may incur losses that may be beyond the limits, or outside the scope, of coverage of our insurance and that may limit or prevent indemnification under our insurance policies. In addition, we might not be able to maintain adequate insurance coverage on commercially reasonable terms in the future. Further, certain categories of risks are currently not insurable at reasonable cost, which could have an adverse effect on our business, financial position, profit, and cash flows.
Our insurance coverage may not Finally, there can be sufficient to prevent claim settlements from adversely impacting our business,no assurance of the financial position, profit, and cash flows.
We continue to maintain and manage insurance coverage against a diverse portfolio of risks. Our objective is to ensure that financial effects of occurrences are excluded or minimized to the extent practicable at reasonable cost. Despite these measures, certain categories of risks are still not currently insurable at reasonable cost. Even if we obtain insurance, our coverage may be subject to exclusions that limit or prevent our indemnification under the policies. Further, we cannot guarantee the ability of the insurance companies to meet their liabilities from claims. If these risks materialize, it may have a negative impact on our business, financial position, profit, and cash flows.claim payment obligations.
We maycould incur significant losses in connection with venture capital investments.
WeThrough Sapphire Ventures (formerly SAP Ventures), our consolidated venture investment funds, we plan to continue investing in new and promising technology businesses through our subsidiary SAP Ventures.businesses. Many of these enterprises currentlysuch investments initially generate net losses and require additional capital outlayexpenditures from their investors. Changes to planned business operations have, in the past affected, and also may in the future affect, the performance of companies in which SAPSapphire Ventures holds investments, and that could negatively affecthave an adverse effect on the value of our investments. Moreover, forinvestments in Sapphire Ventures, which could have an adverse effect on our business, financial position, profit, and cash flows. Furthermore, tax purposes, the usedeductibility of capital losses and impairments ofimpairment in connection with equity securities isare often restricted which may adversely affectand could therefore have an adverse effect on our effective tax rate.
Our legal corporate name is SAP AG.SE. SAP AGSE is translated in English to SAP Corporation.European Company (Societas Europaea, or “SE”). SAP AG, formerly known as SAP Aktiengesellschaft Systeme, Anwendungen, Produkte in der Datenverarbeitung, was incorporated under the laws of the Federal Republic of Germany in 1972.SE changed its legal form from a German stock corporation (Aktiengesellschaft) to a European Company (SE), and its name from “SAP AG” to “SAP SE”, with effect from July 7, 2014. Where the context requires in the discussion below, SAP AG SE also
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refers to our predecessors,predecessor or previous legal forms and names, as the case may be, i.e. Systemanalyse und Programmentwicklung GbR(1972-1976) and, SAP Systeme, Anwendungen, Produkte in der Datenverarbeitung GmbH (1976-1988). SAP AG became a stock corporation (Aktiengesellschaft), “SAP Aktiengesellschaft Systeme, Anwendungen, Produkte in 1988.der Datenverarbeitung” (1988 – 2005) and “SAP AG” (2005 – 2014). Our principal executive offices, headquarters and registered office are located at Dietmar-Hopp-Allee 16, 69190 Walldorf, Germany. Our telephone number is +49-6227-7-47474.
As part of our activities to reduce the number of legal entities in the SAP group, in 20112014 we integrated certain subsidiaries into the following significant SAP subsidiaries: SAP (Schweiz) AG, SAP (UK) Limited, SAP France, SAP America, Inc., SuccessFactors, Inc., SAP Brasil Ltda, and SAP (Schweiz) AG.Australia Pty Ltd.
For a (i) description of our principal capital expenditures and divestitures and the amount invested (including interests in other companies) since January 1, 20092012 until the date of this report and (ii) information concerning our principal capital expenditures and divestitures currently in progress, including the distribution of these investments geographically and the method of financing, see “Item 4. Information About SAP —– Description of Property —– Capital Expenditures.”
OVERVIEW OF THE SAP GROUP OF COMPANIES
Celebrating its 40th yearFounded in business1972, SAP today is the world’s leader in 2012,application and analytics software for enterprises in terms of market share and the market leader in mobile enterprise management. Further, SAP is the world leader in enterprise applications in termscloud company with the greatest number of software and software-related service revenue,users and the world’s third-largest independent software manufacturer based on market capitalization.fastest-growing major database company. Our continued growth over more than four decades is attributable to relentless innovation, a diverse portfolio, and our ability to anticipate ever-
changing customer requirements. With more than 183,000282,000 customers in over 130180 countries, the SAP Group includes subsidiaries in everyall major countrycountries and employs more than 55,00074,400 people.
Our company’s culture puts our customers’ success at the center of everything we do. With Run Simple as our operating principle, we focus on helping our customers master complexity and run their businesses better, which is the most intractable challenge facing business today.
SAP is headquartered in Walldorf, Germany; our legal corporate name is SAP SE. The corporation is listed on the Frankfurt Stock Exchange as well as several regional stock exchanges in Germany and the New York Stock Exchange in the United States. At the end of 2014, our market capitalization was €71.6 billion. SAP is a member of Germany’s DAX, the Dow Jones EURO STOXX 50, and the Dow Jones Sustainability index.
We derive our revenue from fees charged to our customers for the use of our cloud solutions and for licensing of on-premise software products and solutions. Additional sources of revenue are support, professional services, development, training, and other services.
As of December 31, 2014, SAP SE controlled directly or indirectly a worldwide network of 287 subsidiaries in more than 180 countries to distribute our products, solutions, and services. Distributorship agreements are in place with independent resellers in many countries. For more information, see the Strategy and Business Model section.
Our subsidiaries perform tasks such as sales and marketing, consulting, research and development, cloud delivery, customer support, training, or administration. For a complete list of subsidiaries, associates, and other equity investments, see the Notes to the Consolidated Financial Statements section, Note (35).
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The following table illustrates our most significant subsidiaries based on total revenues as of December 31, 2014:
Name of Subsidiary | Ownership % | Country of Incorporation | Function | |||||
Germany | ||||||||
SAP Deutschland SE & Co. KG, Walldorf | 100 | Germany | Sales & Marketing, Consulting, Training, Customer Support, Research and Development and Administration | |||||
Rest of EMEA | ||||||||
SAP (UK) Limited, Feltham | 100 | Great Britain | Sales & Marketing, Consulting, Training, Customer Support, Research and Development and Administration | |||||
SAP (Schweiz) AG, Biel | 100 | Switzerland | Sales & Marketing, Consulting, Training, Customer Support, Research and Development and Administration | |||||
SAP France, Paris | 100 | France | Sales & Marketing, Consulting, Training, Customer Support, Research and Development and Administration | |||||
S.A.P. Nederland B.V., s-Hertogenbosch | 100 | The | Sales & Marketing, Consulting, Training, Customer Support, Research and Development and Administration | |||||
United States | ||||||||
SAP America, Inc., Newtown Square | 100 | USA | Sales & Marketing, Consulting, Training, Customer Support, Research and Development and Administration | |||||
SAP Industries, Inc., Newtown Square | 100 | USA | Sales & Marketing, Consulting, Training, Customer Support, Research and Development and Administration | |||||
SuccessFactors, Inc., San Mateo | 100 | USA | Sales & Marketing, Consulting, Training, Customer Support, Research and Development and Administration | |||||
Ariba, Inc., Sunnyvale | 100 | USA | Sales & Marketing, Consulting, Training, Customer Support, Research and Development and Administration | |||||
Concur Technologies, Inc., Bellevue1) | 100 | USA | Sales & Marketing, Consulting, Research and Development and Administration | |||||
Rest of Americas | ||||||||
SAP Brasil Ltda, São Paulo | 100 | Brazil | Sales & Marketing, Consulting, Training, Customer Support, Research and Development and Administration | |||||
Japan | ||||||||
SAP JAPAN Co., Ltd., Tokyo | 100 | Japan | Sales & Marketing, Consulting, Training, Customer Support, Research and Development and Administration | |||||
Rest of APJ | ||||||||
SAP Australia Pty Limited, Sydney | 100 | Australia | Sales & Marketing, Consulting, Training, Customer Support, Research and Development and Administration |
(1) | The inclusion of Concur Technologies, Inc. is based on annual revenues including revenues predating its acquisition by SAP on December 4, 2014. |
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Our Vision and Mission
Our vision is to help the world run better and improve people’s lives. Our mission is to help our customers run at their best. To fulfill our mission, we apply our Run Simple operating principle to help customers run their businesses simpler and master complexity, which is the most intractable challenge businesses face today. We do this by delivering technology innovations that we believe address the challenges of today and tomorrow without disrupting our customers’ business operations.
For more than 40 years, we have managed highly advanced, mission-critical business processes that enable entire industries. We continue to deliver sophisticated solutions for 25 industries and 12 lines of business in a simple manner. It is our challenge to do the most sophisticated things for our customers, yet in simple ways.
Our Goals for Sustained Business Success
We have strong ambitions for sustainable business success, both for our company and for our customers. We believe the most important indicators to measure this success comprise both financial and non-financial indicators: growth, profitability, customer loyalty, and employee engagement.
Growth: SAP uses various revenue metrics to measure growth. We expect full-year 2015 non-IFRS cloud subscriptions and support revenue to be in a range of €1.95 billion to €2.05 billion at constant currencies (2014: €1.10 billion). Further, we expect full-year 2015 non-IFRS cloud and software revenue to increase by 8% to 10% at constant currencies (2014: €14.33 billion). Looking beyond 2015, we have updated our 2017 ambition. By 2017, SAP’s rapidly growing cloud subscriptions and support revenue is expected to be close to software license revenue and is expected to exceed software license revenue in 2018. In 2017, we expect non-IFRS cloud subscriptions and support revenue to reach a range of €3.5 billion to €3.6 billion in 2017. Non-IFRS total revenue is expected to reach €21 billion to €22 billion in 2017. Further, we have also introduced high-level 2020 ambitions with 2020 non-IFRS cloud subscriptions and support revenue expected to reach €7.5 billion to
€8.0 billion and total revenue is expected to be in a range of €26 billion to €28 billion.
Profitability: SAP expects full-year 2015 non-IFRS operating profit to be in a range of €5.6 billion to €5.9 billion at constant currencies (2014: €5.64 billion). We expect non-IFRS operating profit in a range of €6.3 billion to €7.0 billion in 2017 and in a range of €8 billion to €9 billion in 2020.
Customer loyalty: SAP has used Customer Net Promoter Score (NPS) as a key performance indicator to measure customer loyalty since 2012. As we gather experience with the metric and as our business evolves, we expanded our customer base when conducting the 2014 assessment to better reflect our business completely. In addition to our on-premise customers, in 2014, for the first time we included Ariba, SuccessFactors, and Sybase customers in the survey. Therefore, the 2014 Customer NPS score is not fully comparable to the prior year’s score.
In 2014, we achieved a global Customer NPS of 19.1% (2013: 12.1%). This very positive score exceeded our 2014 target of 16%. We aim to achieve a Customer NPS score of 24% in 2015.
Employee engagement: We use the employee engagement index to measure motivation and loyalty of our employees, how proud they are of our company, and how strongly they identify with SAP. We saw a solid increase in our score in 2014 (2014: 79%) compared to 2013 (2013: 77%) and remain committed to achieving a score of 82% in 2015.
These four goals affirm our commitment to innovation and sustainability, and help us deliver on our vision and mission.
In addition to primary key performance indicators (KPIs), which directly measure our performance on our four goals, we manage a number of secondary performance indicators, which influence the primary KPIs in a variety of ways. Our integrated report seeks to clarify some of those relationships, for example, the link between our energy consumption and our profitability.
Our main goals are presented with more detail throughout the report.
For more information on our strategic goals, see the Performance Management System; Expected Developments; Customers; and Employees sections.
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Business ActivityOur Strategy: THE Cloud Company powered by SAP HANA
As described above, complexity has become a significant challenge to business. With our history and Organizational Structurefocus on software innovation, we believe SAP is uniquely positioned to tackle the challenge of complexity for our customers by enabling them to Run Simple. We are realizing the potential of Run Simple through our strategy to become “THE cloud company powered by SAP HANA.” Together, SAP HANA and SAP Cloud powered by SAP HANA equal Run Simple.
SAP HANA simplifies IT landscapes, technology, and business models. By moving most of our applications and analytics to the SAP HANA platform, we are simplifying the solutions we can offer our customers. We further simplify how customers consume our solutions by bringing them onto our cloud – SAP Cloud powered by SAP HANA. The cloud can offer a better user experience while radically simplifying business processes.
We will focus on three key initiatives to deliver on our commitment to Run Simple:
Simplify consumption: We continue to streamline and simplify consumption of our portfolio of products. Our focus will remain on solutions specific to 25 industries and 12 lines of business. We will support our customers with a mix of public cloud, managed cloud, and on-premise capabilities through a world-class platform based on SAP HANA.
Simplify business processes: At the foundation of our innovation and strategy is SAP HANA. With SAP HANA as the common platform, we help our customers dramatically accelerate the speed of their business by radically simplifying their IT stack and enabling smarter and faster business processes.
Simplify user experience: With SAP Fiori we provide a holistic and consistent consumer grade user experience based on modern design principles and across lines of business, tasks, and devices.
We see enormous potential to increase our share of our customers’ overall IT spend. Through simplification, customers can dramatically reduce their expenditures on hardware and services, shift the savings to innovation, transform their businesses, and create positive societal impact.
We aim to better innovate and grow by:
Building simple, yet sophisticated applications by lines of business and industries that deliver superior customer experience, coverage of end-to-end processes, and insights
Continuing to invest in SAP HANA as an industry-leading platform for innovation and promoting SAP HANA Cloud Platform as a world-class platform as a service (PaaS)
Continuing to be the world’s leading business network, connecting businesses, devices, and people to drive unparalleled collaboration and productivity
For example, by enhancing their efficiency, we help customers cope with resource scarcity and reduce their energy usage and emissions. By partnering with our banking customers, we help them bring banking services to the “unbanked,” thereby creating opportunity for people seeking to enter the modern economy. Through software focused on healthcare, education, and public services, we help create a positive social impact by enhancing people’s quality of life. In all of these ways, our solutions are advancing our vision to help the world run better and improve people’s lives.
Our Business ActivityModel
Our corevision and mission also unlock our ability to create positive economic, environmental, and social impact. As we help our customers tackle complexity and run at their best, they contribute to the world’s economies, create jobs, and unleash the potential of their employees. As we help them become more efficient, they can mitigate their environmental footprint. And as we help them run their businesses simpler, they free up space for innovation, creating opportunities for people and communities.
To realize our vision, SAP provides business solutions to customers throughout the world based on our deep expertise in business processes across industries. Through our customers – which represent 98% of the top 100 most valued brands in the world, according to the annual ranking from Interbrand – we can increase our ability to create value.
Playing this role for our customers requires us to deploy several key types of capital. First, we rely on financial capital provided by our investors. But
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what truly enables our success is selling licenses for softwarethe intellectual and social capital of our employees. They are the gateway to our knowledge, expertise, and business relationships. For this reason, engaged, highly skilled, and agile employees are central to our business model and success.
Our direct sales organizations drive most business development. Sales go-to-market strategies are established at the global level, and then adapted and executed by regional subsidiaries. Our customer-facing employees, in close collaboration with sales support and marketing, drive demand, build pipeline, and enhance relationships with customers within our target industries. Our marketing efforts cover large enterprises as well as small and midsize enterprises. We believe our broad portfolio of solutions and related services enables us to help companiesmeet the needs of customers of all sizes better manage industry-specific and line-of-business processes.across industries. We will amplify our efforts in the digital channel through additional e-commerce and digitally native offerings that further enable a low-touch or no-touch customer journey.
Our extensive ecosystem provides scalability to meet the demand for SAP core solutions, which cover standard business applicationsinnovation and technologies, provide customers with a stable, consistent solution suitewide selection of third-party competencies. We have developed an independent sales and support force through independent value-added resellers. We have also established partnerships with hardware and software suppliers, systems integrators, and third-party consultants. For more information, see the Partner Ecosystem section.
Historically, our sales model was focused on charging a one-time, upfront fee for a perpetual license to our software that allowswas typically installed at the customer site. In addition, the customer usually concluded a maintenance contract that covered support and software updates. As we have seen customer preferences evolve, we are increasingly delivering our solutions in the cloud, which we believe is a simple and efficient software consumption model. Our cloud solutions are offered through a subscription-based software-as-a-service (SaaS) model. Depending on the solutions offered, the customer pays either usage-based or periodic fees to use our software. This software is installed at an SAP or an SAP partner location, and the customer accesses the software over the Internet.
To help companies invest in SAP solutions and the associated services and hardware, the SAP Financing service offers customers payment plans optimized for maximum economic benefit. It can help preserve liquidity, provide an alternative to
credit from customers’ existing banking relationships, and balance their budgetary priorities – while giving them bethe flexibility to choose the best possible solution.
By executing on our strategy, SAP contributes to the creation of holistic, long-term value for society in a number of ways. SAP’s greatest strength in making environmental impact comes through the solutions we deliver. For example, our software enables our customers to have more efficient and agile, make decisionssustainable supply chains or provide greater transparency of energy consumption and emissions.
We also apply our expertise in real time,business processes across industries to direct our innovations to the world’s greatest challenges, such as the social and environmental strains posed by a rapidly expanding global middle class. Our goal is to create long-term value by providing solutions that not only address the current challenges faced by our customers, but also those of the future. In this way, we see our role moving beyond the creation of new valueand efficient solutions: We want to fundamentally help change how people use software, conduct business, and live their lives. This objective underscores how SAP can create its greatest impact through the use of our solutions by more than 282,000 customers worldwide.
At SAP and within our ecosystem, we support job creation and economic prosperity through demand for highly qualified workers to develop, sell, implement, and enhance our software for our customers. Our solutions also enable customers to provide greater learning and talent development opportunities for their ownemployees. In addition, SAP solutions, such as those for manufacturing, are designed not only to ensure health and safety during the production process, but also to increase the quality of the resulting consumer products, which impact millions of people throughout the world.
Our business has historically experienced the highest revenue in the fourth quarter of each year, due primarily to year-end capital purchases by customers. Such factors have resulted in 2014, 2013, and 2012 first quarter revenue being lower than revenue in the prior year’s fourth quarter. We believe that this trend will continue in the future and that our total revenue will continue to peak in the fourth quarter of each year and decline from that level in the first quarter of the following year.
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Unlike our on-premise software revenues, our on-premise support revenues and cloud subscription and support revenues are less subject to seasonality.
PRODUCTS, RESEARCH & DEVELOPMENT, AND SERVICES
Steering Our Customers Through Unprecedented Change
The world is operating in a time of accelerated change that has created new complexity, challenges, and opportunities for both our customers and SAP. Digitalization represents more than a trend but a paradigm shift, one that is shaping whole industries, business models, and sources of competitive advantage.
Software is at the heart of this transformation – for many organizations, it is the new differentiator. We recognize that enterprise software today must do far more than run business processes. It is an enabler for navigating complexity and unlocking innovation. Throughout our history, we have helped our customers manage other major paradigm shifts impacting their business, from the massive expansion of the Internet to globalization. Today, we are supporting their transition to a cloud-based world, as increasingly complex business problems demand simple solutions.
We help customers Run Simple by innovating with the SAP technologies — unwired byHANA platform as our foundation. This strategy combines ease of use and flexibility with sizeable computing power. Through the capabilities of SAP HANA, we can now enable a real-time enterprise; we can leverage Big Data to achieve deeper insight; and we can empower users through the ease of mobile apps, simplifiedso that people can access what they need securely and flexibly.
These developments – similar to packaged software in the 1980s and client/server architecture in the 1990s – signal a new wave of innovation at SAP. Wherever they are on their journey, we are helping our customers reinvent how they do business while making the transition seamless and providing a holistic and consistent user experience. As we aim to become “THE cloud company powered by cloud solutions,SAP HANA,” we are going far beyond incremental change to achieve radical
simplification – enabling our customers to stay ahead of trends, make better decisions faster, and fueled by in-memory computing —propel innovation.
SAP HANA
Nothing signifies the changes we are driving valuemaking at SAP – and growth for our customers partners,– more than SAP HANA. The platform holds the power to simplify both the user experience and entire markets.the overall IT landscape, creating a smaller data footprint, increased system throughput, and easier data processing and operation. For this reason, we have evolved SAP HANA from a database to a full business platform that will act as the basis for our products going forward.
The SAP HANA platform combines database, data processing, and application platform capabilitiesin-memory. By providing advanced capabilities – such as predictive text analytics, spatial processing, and data virtualization – on the same architecture, it further simplifies application development and processing across Big Data sources and structures.
To meet customers’ varietytake our capabilities to the next level, we built the open SAP HANA Cloud Platform, which is the embodiment of preferencesour SAP Cloud powered by SAP HANA strategy. The cloud platform enables ease and flexibility in building, extending, and integrating business applications – available to all SAP partners, customers, and third-party developers.
Realizing that one size does not fit all, we are providing a bridge for deliveryour customers in the transition to the cloud. We also offer to manage mission-critical software such as SAP Business Suite and adoption, SAP provides solutions from its portfolio on premise,Business Warehouse as well as custom SAP HANA applications in our cloud data centers.
Our overarching goal is to create the broadest integration offering in the industry where customers can connect SAP and third-party software across heterogeneous environments by leveraging application lifecycle management to reduce IT complexity. Our customers can enhance the power of an integrated landscape with a refreshing user experience across multiple devices and interfaces. At the same time, all core applications can be built and run in the cloud or on premise, giving developers a powerful tool to build applications with flexibility and on device deployments — all underpinned by our SAP HANA. SAP solutions enable customers to orchestrate data and business processes across all operating environments.efficiency.
Organizational Structure
Part I
Our legal corporate name is SAP AG. SAP is headquartered in Walldorf, Germany. Our company is structured along the following areas:
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As the market leader in enterprise application software, we offer end-to-end solutions specific to
25 industries grouped in six industry sectors and Innovation Platform12 lines of business, localized by country and for companies of any size.
Products and Solutions
Industries | Lines of Business | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Industry Sector | Industry Portfolio | Asset Management Commerce Finance
Human Resources Manufacturing Marketing R&D/Engineering Sales Service Sourcing and Procurement Supply Chain Sustainability | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consumer | SAP | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SAP for Life Sciences | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SAP for Retail | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SAP for Wholesale Distribution | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discrete manufacturing | SAP for Aerospace & Defense | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SAP for Automotive | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SAP for High Tech | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SAP for Industrial Machinery & Components | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Energy and | SAP for Chemicals | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SAP for Mill Products | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SAP for Mining | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SAP for Oil & Gas | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SAP for Utilities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial services | SAP
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SAP | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Public services | SAP for Defense & Security | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Services
Part I
Item 4
Research and Development From the earliest days of SAP, we have worked diligently to stay ahead of trends and develop new solutions to meet the challenges faced by our customers and those they serve. Our research and development (R&D) is a global effort that centers on bringing together the creative ideas and talents of our customers as well as valued partners from industry, technology, the public sector, and academia. Our focus on co-innovation ensures that we keep up with groundbreaking research and ultimately turn it into solutions that create a real-world impact. In 2014, we made organizational changes to enhance collaboration between our R&D teams, thereby speeding up innovation. Rather than operating independently, research and development is now embedded in our development organization, so that the exploration and execution of ideas are happening side by side, with each informing the other. Our product development organization is truly global, with the majority of our R&D teams located in 14 SAP Labs locations in 12 countries. Research teams are also based throughout the world and span a network across multiple locations. We follow a dual and complementary research and innovation approach. First, topic-focused research teams within existing development units drive innovation projects. These teams focus on improving existing products as well as delivering short-term innovation with a time horizon of up to two years. Second, we established a dedicated central unit that pursues both short-term and long-term strategic innovation. This unit supports projects with a time horizon of two to five years by providing a protected environment for business ideas and focusing on a limited number of new solutions. It also develops the future generation of high-growth opportunities in areas such as the Internet of Things or personalized medicine. With a time horizon of five to eight years, these projects focus on technologies, applications and new business models that do not fit the Part I Item 4 product portfolio but hold the potential to open up new opportunities, markets, and user groups for SAP. SAP Innovation Center locations, based in Potsdam and Walldorf, are part of this organization. They combine the creativity and agility of a startup culture with the backbone of a world market leader in enterprise applications. As the future end users of our innovations, our customers and partners are involved during the entire runtime of projects and come from industries and companies of all sizes, from longstanding SAP customers to early stage startups with no current SAP footprint. With a focus on the SAP HANA platform and our cloud and mobile solutions, these innovation centers strive to open up new application areas for SAP software, ranging from personalized cancer therapy to smart services that leverage the connectivity of things with the Internet. Regardless of the setting, SAP embeds methods such as design thinking into all projects and researches innovative approaches to generate and evaluate applications, technologies, and business ideas. R&D Investment SAP’s strong commitment to R&D is reflected in our expenditures: In 2014, we increased our R&D expense (IFRS) slightly by €49 million, to €2,331 million (2013: €2,282 million). We spent 13.3% of total revenue on R&D in 2014 (2013: 13.6%). Our non-IFRS R&D expense as a portion of total operating expenses declined slightly from 18.9% to 18.5% year-over-year. At the end of 2014, our total full-time equivalent (FTE) count in development work was 18,908 (2013: 17,804). Measured in FTEs, our R&D headcount was 25% of total headcount (2013: 27%). Total R&D expense not only includes our own personnel costs but also the external cost of works and services from the providers and cooperation partners we work with to deliver and enhance our products. We also incur external costs for translating, localizing, and testing products, for obtaining certification for them in different markets, patent attorney services and fees, strategy consulting, and the professional development of our R&D workforce. Patents As a market leader in enterprise applications, SAP actively seeks intellectual property protection for innovations and proprietary information. Our software innovations continue to strengthen our market position in enterprise solutions and services. Our investment in R&D has resulted in numerous patents. SAP holds a total of more than 6,800 validated patents worldwide. Of these, 916 were granted and validated in 2014. While our intellectual property is important to our success, we believe our business as a whole is not dependent on any particular patent. Service and Support Many of our customers are experiencing profound shifts in how they use technology and run their businesses. Our service and support professionals focus on helping them navigate these changes with greater speed, efficiency, and impact. A Part I Item 4 prime example is our recognition that customers have different needs and goals to innovate and make use of the cloud, while preserving their investment to date. Regardless of their path, we have a broad offering to chart their course. Our teams regularly partner with customers to create a road map, removing obstacles and building a business case for migration. In 2014, we began a significant transformation of our professional consulting service and support teams, bringing them together into one organization called Global Service & Support. Our goal with the SAP ONE Support program is to provide customers with an integrated support experience regardless of whether their landscape is on premise, in the cloud, or a hybrid of the two. Customers also benefit from a simplified experience with SAP with the next generation of premium support engagements. In addition, SAP ONE Support is designed to enhance SAP Enterprise Support services to simplify the customer experience. This includes a multitude of aspects, such as removing underlying complexity typically associated in managing end-to-end support across hybrid landscapes, helping customers choose how to migrate to the cloud, and driving innovation while building on existing on-premise investments. We simplify customer interactions with us through a single touch point for all services across the entire solution landscape, creating a unified experience across multiple channels as well as expanding opportunities for co-innovation. Our new SAP ONE Service approach goes far beyond the traditional consulting model. We combine strong engineering skills with experienced program management and the domain capabilities of consulting. In a cloud-based environment, this framework is critical to support our customers in building and runningend-to-end solutions for the future, mapping their technology strategy to their business strategy, and prioritizing the steps to migrate to SAP HANA and the cloud. An important element of our organization is education. Each year, more than 500,000 individuals are trained by SAP Education, making it one of the largest IT training organizations in the world. In 2014, we updated SAP Learning Hub, providing customers with an even easier-to-use, cloud-based platform that allows for flexible, individualized training. Winner of the prestigious Technology Services Industry Association (TSIA) Star Award in the fall of 2014, this platform solution further simplifies the user experience of SAP software. SAP has been a frontrunner in the adoption of Massive Open Online Courses (MOOCs) for use in an enterprise context. openSAP is SAP’s enterprise MOOC provider delivering 18 courses through the end of 2014 free of charge on topics such as SAP HANA, cloud, user experience, sustainability, and business innovation. openSAP has reached over 500,000 course enrollments with more than 170,000 individual learners. In addition, the SAP University Alliances program brings SAP to over 2,000 universities in more than 80 countries, and aims to develop highly-qualified graduates with critical skills for the21st-century workforce. In partnership with SAP’s six University Competence Centers around the world, universities gain access to an ever-expanding range of SAP software and curriculums, enabling faculty to help students better connect business and IT concepts to practice. SAP views acquisitions as strategic investments in people, technologies, and growth. In 2014, SAP focused on acquisitions that would enhance its position as a cloud and business network company and advance its mission of helping customers Run Simple. New Acquisitions In May, SAP acquired Fieldglass, a leading provider of cloud solutions for procuring and managing contingent labor and third-party services. Combined with the collaborative, network-based procurement capabilities of Ariba and the human resources expertise of SuccessFactors, the Fieldglass acquisition uniquely positions SAP to deliver a platform for businesses to manage their entire workforce – both temporary and permanent staff. In June, SAP acquired SeeWhy, a leading provider of cloud-based behavioral target marketing solutions to help businesses increase customer engagement and drive revenues. In December, SAP acquired Concur Technologies. With more than 23,000 customers and 25 million active users in over 150 countries, Concur is the leader in
Part I
Item 4
Organic growth remains the primary driver of our strategy. We will continue to invest in our own product development and technology innovation, improving the speed, number of projects, and innovations brought to market. We will also continue to acquire targeted, strategic, and “fill-in” technology and software to add to our broad solution offerings and improve coverage in key strategic markets. By doing so, we will strive to best support our customers’ needs for simplified operations.
Venture Activities
Sapphire Ventures invests in the next generation of global category leaders as well as early-stage venture capital funds in enterprise and SAP’s total commitment to Sapphire Ventures is US$1.4 billion for use over the lifetime of its respective funds. Investments through the funds are currently ongoing. For more information about our consolidated investment funds, see the Notes to the Consolidated Financial Statements section, Note (35). Helping Partners Run Simple We engage with an extensive partner ecosystem to help customers around the world overcome complexity, create value, innovate, and thrive. Our partners help expand our reach to thousands more companies and millions more users. With more than 12,800 partners at the end of 2014, our partner ecosystem remains an important element in
Part I
Item 4
To help our partner ecosystem Run Simple and achieve its business goals, we provide an extensive array of business support offerings. For example, our flagship partner program, SAP PartnerEdge, offers a tiered engagement model that provides marketing, sales, and technical enablement, as well as education, deal support, and other resources. In addition, we provide selected global partners with dedicated teams that work closely with them to proactively engage in specialized business development and technical initiatives. Many of our partners participate in SAP Community Network, an online community that facilitates networking and information sharing. In addition, many also participate in the SAP Listens program, which surveys partners for feedback and addresses partner issues.
One example of this strategy is our Customer Engagement Initiative. This program offers customers early insight into certain aspects of potential future products and product enhancements so they can provide early input and feedback in the Customer Loyalty We gauge customer loyalty through an annual survey that measures our Customer Net Promoter Score (NPS). Customer loyalty is one of our four enterprise-wide strategic goals, along with growth, profitability, and employee engagement. SAP has used Customer NPS as a key performance indicator since 2012. As we gather experience with the metric and as our business evolves, we expanded our customer base when conducting the 2014 assessment to In 2014, we achieved a global Customer NPS of 19.1%. This very positive score exceeded our 2014 target of 16%. We Our increased NPS reflects our continued commitment to listening to our customers and
Part I
Item 4
responding to their needs. Our goal is to best support both their success and the success of SAP. For example, we conducted global in-person and online focus groups with customers to gain additional insights into “business benefits” themes identified through the surveys. These sessions have enabled us to identify the underlying reasons behind issues and focus more precisely on where we need to make improvements. For more information on the Customer NPS, see the Performance Management System. Strong Customer Demand In 2014, we saw customers embrace our strategy by licensing or subscribing to the full range of the SAP portfolio – from comprehensive solutions for large enterprises to the latest mobile apps. Some examples by region include the following customers: Americas Region Antofagasta Minerals, a Chilean-based copper mining group, selected SAP solutions – including SAP HANA and SuccessFactors HR solutions – to manage its operations on a single platform and help support innovation through Big Data analytics as well as cloud and mobile solutions. Bombardier Recreational Products, a Canadian-based global leader in motorized recreational vehicles and powersports engines, selected SAP solutions, including SuccessFactors Employee Central, to optimize its HR solutions and delivery. The National Hockey League(NHL), composed of 30 member clubs in the United States and Canada, plans to use the power of SAP HANA to create new statistics that increase fan engagement. This content is expected to be served to fans through a variety of online, television, and mobile media channels. Banco Central de Costa Ricaselected SAP ERP, SuccessFactors, and other software to obtain an integrated business platform for all administrative, financial, and accounting functions. The Central Bank of Costa Rica plans to create a centralized and integrated business information warehouse for efficient reporting and decision making. Ralph Lauren, one of the world’s most successful fashion brands, has chosen solutions from hybris and Ariba, both SAP companies, to pursue its growth objectives. Ralph Lauren will use hybris solutions to improve the consumer shopping experience through better omnichannel capabilities and Ariba’s global procurement network to reduce costs and enhance service quality. Asia Pacific Japan (APJ) Region AGL Corporate Services Pty, one of Australia’s leading renewable energy companies, recently went live with SAP Fiori apps for purchase order approval and leave request approval. SAP Fiori helps AGL simplify business processes through an improved user interface and external access to workflow tasks. Infosys, a global leader in technology, consulting, outsourcing, and next-generation services has gone live with SAP Business Suite powered by SAP HANA. With SAP HANA, Infosys expects to accelerate its financial closing processes and progressively move more and more batch activities into a real-time environment. Singapore Health Services, one of the largest healthcare groups in Singapore, has selected Ariba solutions to replace its existing procurement platforms. Singapore Health Services expects to improve collaboration with vendors and standardize purchasing practices across its network. Tatung Group, a major computer and electronic home appliance company in Taiwan, has chosen SAP as its strategic partner for co-innovation and simplification of all business processes on SAP HANA. Over a five-year period, Tatung plans to implement multiple SAP solutions to transform its business, simplify operations, and become a leader in the “smart energy” industry. Mitsui Knowledge Industry(MKI), an IT services provider in Japan, selected the SAP HANA Enterprise Cloud service. In addition to its own professional data analysis service, MKI now aims to provide a market forecasting service for various commodities through a highly available and efficient enterprise cloud infrastructure. Part I Item 4 Europe, Middle East, and Africa (EMEA) Region TheDepartment of Zakat and Income Tax(DZIT), reporting to the Ministry of Finance of the Kingdom of Saudi Arabia, selected the SAP Fraud Management analytic application powered by SAP HANA with the goal of reducing fraud exposure. With the help of SAP, DZIT looks to replace manual processes and increase the revenue for the Kingdom of Saudi Arabia. The Kenya Electricity Transmission Company has selected the SAP HANA platform for innovation and the SAP Fiori user experience to simplify its user interface. With these solutions, Ketraco expects to increase its capacity to provide a premium customer experience based on real-time data and analysis. Spire Healthcare, a provider of private healthcare in the United Kingdom, selected SAP HANA with the aim of improving its patient overall experience. Telefónica, an international telecommunications company based in Spain, with more than 120,000 employees selected SuccessFactors HCM Suite as its solution to provide employees with an optimal workplace, demonstrate a commitment to talent, and ensure the best opportunities for professional development. Euromaster, a leading integrated tire service and car maintenance network in Europe, chose SAP Business Suite powered by SAP HANA to help handle its finance and supply chain processes. The company hopes to improve efficiency, optimize network coverage and make its business processes more efficient. Euromaster chose SAP software as SAP was the only company offering a concrete industry-specific solution for retail and wholesale using the power of SAP HANA. ENVIRONMENTAL PERFORMANCE: ENERGY AND EMISSIONS One of the primary ways that we can help both our customers and SAP tackle the challenge of complexity is by increasing efficiency. Simplification and efficiency go hand in hand, and we have worked to enhance both by taking responsibility for our energy usage and carbon emissions including IT-related impact of our customers consuming our cloud offerings. As we accelerate our shift to the cloud, we have tied our business strategy to our environmental strategy by creating a completely green cloud at SAP, referring to carbon neutrality by purchasing 100% renewable electricity certificates and compensation by offsets. This change – which we implemented in 2014 – does more than mitigate our own impacts. It also means that we can better serve our customers, as we simplify their IT landscape through our cloud offerings and help them increase their own efficiency. Our green cloud strategy is complemented by 100% renewable energy for facilities and electric company cars charged at SAP locations. The evolution of our green cloud reflects the critical links we see between our environmental and business performance. We bring equal rigor to addressing and measuring both of these areas. In assessing our environmental impact, we focus on energy usage throughout SAP, as well as greenhouse gas emissions across our value chain. Since the beginning of 2008, our energy efficiency measures have generated a cumulative cost avoidance of €310 million, compared to a business-as-usual scenario, with €45 million of that amount created in 2014. Total Energy Consumed Because our energy usage drives our emissions, one of the most important measures we look at is our total energy consumed. This includes all energy that SAP generates or purchases to run our facilities, data centers, company cars, and corporate jets. Our total energy consumption increased to 920 gigawatt hours (GWh) in 2014, compared to 910 GWh in 2013. This increase is due to significant growth in our business. In addition, as software usage shifts to the cloud, we are operating more of our customers’ systems in our data centers, as well as other locations where we are supplementing our servers. This additional cloud operation, along with the accompanying servers and facilities, consumes more energy. At the same time, we believe this shift has the opposite effect for our customers, who can simplify their technology and which save energy through our shared infrastructure, reducing the overall IT-related energy consumption through our highly energy-efficient cloud provisioning. As our business grows, we have maintained the efficiency gains we have made over the past several years. For example, our total corporate car Part I Item 4 fleet is not consuming more fuel despite the fact that a significant number of company cars have been added, since the average company car has become more fuel-efficient. So, while our car fleet grew by 5%, we had efficiency gains of 3% across the entire fleet. As a result, our total energy consumption decreased slightly to 13,400 kilowatt hours (kWh) per employee in 2014 (2013: 13,900 kWh). Greenhouse Gas Emissions Our goal is to reduce the net greenhouse gas emissions from our operations to levels of the year 2000 by 2020. This target includes all direct and indirect emissions from running our business (Scopes 1 and 2), as well as a selected subset of other indirect (Scope 3) emissions. We do not include all of our Scope 3 emissions in our target because we chose to focus first on those emissions over which we have control or capability to influence. However, we are increasingly addressing both our upstream and downstream emissions to support a comprehensive carbon strategy for SAP. Specifically, we are working to reduce our emissions through three primary approaches: increasing our operational efficiency combined with innovative approaches to the way we do things; purchasing high-quality renewable electricity certificates; and investing in high-quality carbon credits. In addition to our Nonetheless, we missed our annual target to reduce our emissions to 440 kilotons. The reason is that our business has continued to grow, and more of our overall emissions are caused by business travel. In other words, our shift to green energy – while critical to our long-term reduction strategy – could not fully compensate for the time, this shift did enhance our efficiency. Our greenhouse gas emissions decreased from 32.4 grams CO2 per euro of total revenue in 2013 to 28.4 grams CO2 per euro in 2014. Our carbon emissions per employee also decreased by about 12% in 2014. In addition to greater efficiency, we have achieved an overall absolute reduction of 16% since our peak year 2007, when we set our long-term carbon target. This reduction has occurred even as the average number of employees at SAP has increased by almost 32%. Environmental Innovations The ongoing tension between growth in our business and our goal to reduce our emissions has led us to pursue new approaches. To further decrease our car-related emissions, in 2014, we committed to increase the portion of electric vehicles (or alternatives) in our company car fleet from currently less than 1% to 20% by 2020. This initiative addresses a dilemma that has grown in recent years. Namely, along with our business expansion, the number of SAP employees who are eligible for a company car has increased annually. We aim to ensure that we do not undo our efficiency gains with our growing car fleet. In keeping with our existing policy for office buildings and data centers, we continue to power our electric company cars with 100% renewable sources. In Germany, for example, we are incentivizing employees to make the switch by offering a battery subsidy that offsets the cost of using an electric vehicle. We are also developing a management solution that will address “range anxiety,” helping drivers intelligently plan out their trips, their maximum range and the availability of charging stations. We believe that our electric car initiative will play a critical role in helping us achieve our 2020 carbon reduction goal. Our shift to a green cloud will also bring us closer to our carbon emission goal while extending our reach beyond SAP. In addition to reducing our own emissions, this change enables us to create a far greater impact through our customers. In 2014 alone, the emissions caused by SAP products in use at the sites of our more than 282,000 customers were at least 10 times larger than SAP’s own footprint, meaning they caused more than 6,200 kilotons of CO2. By using 100% renewable energy, we dramatically broaden our sustainability efforts and align them with our cloud strategy. We believe this move not only helps the Part I Item 4 world run better, but significantly reduces the carbon produced both inside and outside SAP. In 2014, we also began realizing the benefits of another key sustainability initiative, our investment in the Livelihoods Fund, a unique investment fund whose returns consist of high-quality carbon credits. Several years ago, we made an initial investment of €3 million covering a 20-year participation in the fund, which supports the sustainability of agricultural and rural communities worldwide. Projects of this fund focus on ecosystem restoration, agriculture, agro-forestry, and rural energy. In eastern India, for example, the fund has helped communities plant fruit trees to diversify food sources and address overcultivation of soil. As opposed to a charitable donation, we have made a long-term investment that brings benefits to society, the environment and SAP. In 2014, we received our first carbon credits from the fund, which helped us reduce our carbon footprint by another 11.2 kilotons. Another important piece of progress in 2014 was the further implementation of ISO 14001 in SAP locations throughout the world. This well accepted environmental management system is now in place in 23 of our locations worldwide, including our SAP North America headquarters in Newtown Square, Pennsylvania, in the United States, as well as in such diverse countries as Austria, Brazil, Canada (Vancouver), the Czech Republic, Germany, Israel, Italy, and Data Center Energy Data centers are at the heart of
As noted earlier, in 2014 we addressed our data center electricity consumption by shifting entirely to
Renewable Energy Our investment in renewable energy plays a critical role in mitigating our environmental impact, helping us better serve our customers and support a more sustainable energy market. We are committed to buying from renewable sources – in 2014 we focused on solar, wind, and hydro. Our shift in 2014 to 100% renewable energy in all of
INTELLECTUAL PROPERTY, PROPRIETARY RIGHTS AND LICENSES We rely on a combination of the protections provided by applicable statutory and common law rights, including trade secret, copyright, patent, and trademark laws, license and non-disclosure agreements, and technical measures to establish and protect our proprietary rights in our products. For further details on risks related to SAP’s Part I Item 4 intellectual property rights, see “Item 3 Key Information We may be dependent in the aggregate on technology that we license from third parties that is embedded into our products or that we resell to our customers. We have licensed and will continue to license numerous third-party software products that we incorporate into and/or distribute with our existing products. We endeavor to protect ourselves in the respective agreements by obtaining certain rights in case such agreements are terminated. We are a party to certain patent cross-license agreements with certain third parties. We are named as a defendant or plaintiff in various legal proceedings for alleged intellectual property infringements. See Note (24) to our Consolidated Financial Statements for a more detailed discussion relating to certain of these legal proceedings.
Our principal office is located in Walldorf, Germany, where we own and occupy approximately (India); Sao Leopoldo (Brazil) The office and datacenter space we occupy includes approximately With the acquisition of Concur in 2014, we added approximately 46,000 square meters to our real estate portfolio. This portfolio is included in the group portfolio disclosed above. The space is being utilized for various corporate functions including research and development, our data centers, customer support, sales and marketing, consulting, training, administration
and messaging. Substantially all our facilities are being fully We believe that our facilities are in good operating condition and adequate for our present usage. We do not have any significant encumbrances on our properties. We do not believe we are subject to any environmental issues that may affect our utilization of any of our material assets. We are currently undertaking construction activities in various locations to increase our capacity for future expansion of our business. Our significant construction activities are described below, under the heading “Principal Capital Expenditures and Divestitures Currently in Progress.” Capital Expenditures Principal Capital Expenditures and Divestitures Currently in Progress In In Bangalore, India, we want to add additional capacity of roughly 2,500 employees. We estimate the total cost to be approximately €49 million, of which we had paid approximately €3 million as of December 31, 2014. We expect to complete the construction of this office building in 2016. In Ra’anana, Israel, we commenced
In our research center in Potsdam, Germany, we started with a second construction phase in order to realize additional capacity for Part I Item 4, 4A, 5
In New York City, New York, United States, we started planning the leasehold improvements for our new office space. The In Paris, France, we started an office consolidation project. The project aims to consolidate three office spaces in Paris into one office space. We estimate the In Dubai, United Arab Emirates, we started an office consolidation project including For more information about planned capital expenditures, see the Principal Capital Expenditures and Divestitures for the Last Three Years Our principal capital expenditures for property, plant, and equipment amounted to purchases of computer hardware Our capital expenditures for intangible assets such as
For further information regarding the principal markets in which SAP ITEM 4A. UNRESOLVED STAFF COMMENTS Not applicable. ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Part I Item 5 Depending on the product or service provided we classify our
For more information on our See “Item 4. Information about SAP The following discussion is provided to enable a better understanding of our operating results for the periods covered, including:
the factors that we believe impacted our performance in
our outlook for
a discussion of our operating results (IFRS) for
the factors that we believe will impact our performance in
our operational targets for The preceding overview should be read in conjunction with the more detailed discussion and analysis of our financial condition and results of operations in this Item 5, “Item 3. Key Information
Global Economic Trends The On the other hand, geopolitical crises, such as those in Ukraine and the Middle East, had little impact on the global economy in Year-over-year growth
Year-over-year growth
The IT Market
Part I
Item 5
Each segment
In the Americas region, IDC estimates the U.S. IT market as relatively stable and calculated growth of 3.8% in 2014. Progress was slowest in the first quarter, similar to what was seen in the U.S. economy. IT demand grew most rapidly for cloud products, and that growth was at the expense of traditional software products. The markets in Latin America grew more slowly than previously. IDC estimates that the IT market in Latin America grew only 6.2% year-over-year (Brazil: 7.1%; Mexico: 2.8%) after double-digit growth in the previous year and despite a projection of 8% growth for 2014 made at the beginning of the year. The two largest economies in the APJ region, China and Japan, experienced some difficulty in 2014, and in both countries the
projected 13.3% growth in 2014 at the Impact on SAP Once again, growth in the overall global economy and in the IT industry was relatively slow in 2014, and it became increasingly volatile as the year progressed. This confronted SAP with considerable challenges. However, thanks to our innovation strategy, extended product portfolio, and strong diversification, we once again succeeded in significantly expanding our business and outperformed the overall global economy and IT industry in all regions in 2014 with regards to revenue growth. Our non-IFRS software and software-related services revenue increased 7% at constant currencies in 2014. Both our core business and our cloud business contributed substantially to the increase. In our core business, non-IFRS software and support revenue increased 5% at constant currencies, although software revenue growth was affected by difficult economic conditions in almost all of the most important emerging economies for us, notably in Latin America, Russia and Ukraine, and Japan. That led to a 3% year-over-year decline in our non-IFRS software revenue at constant currencies, while our constant currency non-IFRS support revenue grew 8%. Support revenue is a robust feature of our core business model because a maintenance contract generally continues for as long as the In the EMEA region, we were again highly successful, attaining 7% growth in non-IFRS software In the Americas region, we achieved 7% growth in non-IFRS software and software-related services revenue at constant currencies despite the difficulties of weak economic progress, particularly in Latin America. Non-IFRS cloud subscription and support revenue grew 39% in the full year at constant currencies. Part I Item 5 In the APJ region, the economic environment remained weak in 2014 and was also reflected in our modest revenue growth. However, our strong growth in cloud and a solid performance in India are worth highlighting. In the APJ region, our non-IFRS software and software-related services revenue grew 7% year-over-year at constant currencies, considerably supported by a 60% increase in constant currency non-IFRS cloud subscription and support revenue. In 2014, we again demonstrated that we are consistently pursuing our strategy for innovation and growth – and that globally we are able to generate growth that few other IT companies can match. In the first quarter of 2014, we took significant steps to drive forward our strategy and our ambition to become THE cloud company powered by SAP HANA. To execute this strategy, we merged certain areas of the company that performed similar tasks (for example, the on-premise sales forces with
Since this integration and in the entire year For more information about the PERFORMANCE AGAINST OUTLOOK FOR
Our Standards Board (IASB), and the numbers in that section are not explicitly identified as IFRS measures. Starting in the second quarter of 2014, we additionally adjusted our non-IFRS operating expense by excluding the expenses resulting from the Versata litigation. (For more information about this litigation, see the Notes to the Consolidated Financial Statements section, Note (24)). Prior-year amounts have been adjusted accordingly. We exclude the Versata litigation expenses to provide additional insight into the comparability of our ongoing operating performance across periods and to continue the alignment of our non-IFRS measures with our internal performance measures.
At the beginning of
currencies. We anticipated an In April, we confirmed the Based on the strong momentum in SAP’s cloud business, we raised our Part I
Item 5
To assist in understanding our
Actual Performance in 2014 Compared to Guidance (Non-IFRS) We achieved or exceeded the amended outlook guidance for revenue and operating profit we published in October. Comparison of Forecast and Results for 2014
At constant currencies, non-IFRS cloud subscription and support revenue grew from €757 million in 2013 to €1,098 million in 2014. That represents an increase of 45% at constant currencies. The increase includes effects relating to acquisitions not included, or not included in full, in the 2013 amount. These acquisition-related effects account for 13 percentage points in the increase. The increase in our cloud subscription and support revenue led to an increase in our annual cloud revenue run rate to €1,716 million (2013: €1,016 million), with Concur and Fieldglass having together contributed €0.3 billion to the 2014 run rate. In Our non-IFRS software and software-related
Part I
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Despite adverse economic conditions weighing on business in Russia and Ukraine, our performance in the Europe, Middle East, and Africa (EMEA) region was again sound. Non-IFRS software and software-related service revenue grew 6% (7% at constant currencies) and non-IFRS cloud subscription and support revenue increased 58% (57% at constant currencies) in the EMEA region. In the Americas region, non-IFRS software and software-related service revenue increased 6% (7% at constant currencies), with strong growth in the United States. The economic and political environment in Latin America remained difficult. Our non-IFRS cloud subscription and support revenue increased 39% (39% at constant currencies) in the Americas region. In the Asia Pacific Japan (APJ) region, our non-IFRS software and software-related service revenue increased 4% (7% at constant currencies). Non-IFRS cloud subscription and support revenue increased 59% (60% at constant currencies) in the APJ region. In 2014, we achieved a non-IFRS operating profit of €5,628 million at constant currencies. Thus, constant currency non-IFRS operating profit was within the range (€5.6 billion to €5.8 billion) we had expected in our updated outlook. We achieved an effective tax rate (IFRS) of 24.7% and an effective tax rate (non-IFRS) of 26.1%, which is below the outlook of 26.0% to 27.0% (IFRS) and 27.5% to 28.5% (non-IFRS). The reduction mainly results from the regional allocation of income, from tax effects on changes in foreign currency exchange rates, and from taxes for prior years. This section on operating results (IFRS) discusses results only in terms of IFRS measures, so the IFRS numbers are not expressly identified as such. We acquired Concur Technologies in December 2014, so Concur results are incorporated in our 2014 results only for December. We acquired Fieldglass in May 2014, so Fieldglass results are incorporated in our 2014 results only for May to December. Similarly, because we acquired hybris in August 2013, hybris results are incorporated in our 2013 results only for August to December. Our Revenue Revenue
Total Revenue Total revenue increased from support revenue. Consulting revenue declined €147 million and software revenue Part I Item 5 For Software and Software-Related Service Revenue Software revenue Cloud subscription and The revenue share from more predictable cloud subscription and support revenue together with support revenue increased to 60% (2013: 56%) of total revenue. A combination of a challenging macroeconomic and political environment in Russia, Ukraine, and some Latin American markets and the accelerating industry shift to the cloud resulted in a €117 million decline in software Our customer base continued to expand in 2014. Based on the number of contracts concluded, 12% of the orders we received for software in 2014 were from new customers (2013: 16%). The total value of software orders received declined 3% year-over-year. The total number of contracts signed for new software decreased 3% to 54,120 (2013: 55,909 contracts), while the average order value increased by 1%. Of all our software orders received in 2014, 22% were attributed to deals worth more than €5 million (2013: 24%), while 44% were attributed to deals worth less than €1 million (2013: 44%). Our stable customer base, continued investment in software by customers throughout 2014 and the previous year, and the continued success of our premium support offerings Software and Software and software-related service revenue
Professional Services and Other Service Revenue Professional services and other service revenue consists primarily of consulting and other service revenue. We generate most of our consulting revenue from the implementation of our software products. Other service revenue consists mainly of revenue from messaging services and of training revenue from Professional services and other service revenue
Part I
Item 5
revenue contributed 77% of the total professional services and other service revenue (2013: 78%). Consulting revenue contributed 12% of total revenue in 2014 (2013: 13%). Revenue from other services decreased €12 million, or 2%, to €611 million in 2014 (2013: €623 million). This reflects a 1% decrease from changes in volumes and prices and a 1% decrease from currency changes. Revenue by Region and Industry Revenue by Region
Revenue by Industry
Revenue by Region We break our operations down into three regions: the Europe, Middle East, and Africa (EMEA)
In year-over-year increase of Part I
Item 5
In
In increased
Revenue by Industry
We allocate our customers to In Part I Item 5 Operating Profit and Margin Total Operating Expenses
Operating Profit and Operating Margin
In 2014, SAP continued to invest in innovation and made substantial advances in the cloud business. In addition and among other influences, negative currency effects and the difficult economic situation in Latin America and Russia affected our profitability. As a result, our operating profit in 2014 was €4,331 million, a little less than in the previous year (2013: €4,479 million). In 2014, our operating expenses increased €894 million or 7% to €13,230 million (2013: €12,336 million). The increase relates primarily to an expense in connection with the TomorrowNow and Versata litigation, restructuring costs, continuing investment in our sales organization, and a rise in personnel and infrastructure costs, especially for our cloud business. The effect of acquisition-related expenses, which were €562 million (2013: €555 million), of restructuring expenses, which were €126 million (2013: €70 million), and of a €309 million expense relating to the TomorrowNow and Versata litigation weighed more heavily on operating profit than in the previous year. Continuing investment in sales activities around the world and in the cloud also affected operating profit. Our employee headcount (measured in full-time equivalents, or FTEs) increased 7,834 year-over-year. Acquisitions accounted for more than 5,500 of the added FTEs. Those negative effects on operating profit were in part offset by the reduced cost of share-based compensation programs totaling €290 million (2013: €327 million) resulting from the declining year-over-year performance of the stock and by savings in general administration costs. The overall result of these effects on operating profit was a 2.0 percentage point narrowing of our operating margin in 2014 to 24.7% (2013: 26.6%). Changes to the individual elements in our cost of revenue were as follows: Cost of Software and Software-Related Services Cost of software and software-related services consists primarily of customer support costs, cost of developing custom solutions that address customers’ specific business requirements, costs for deploying and operating cloud solutions, amortization expenses relating to intangibles, and Part I Item 5 license fees and commissions paid to third parties for databases and the other complementary third-party products sublicensed by us to our customers. In 2014, the cost of software and software-related services increased 10% to €2,894 million (2013: €2,629 million). Significant costs included an additional €180 million to extend our cloud business, especially outside the United States, with an associated increase in the expense of delivering and operating cloud applications, and a €112 million rise in the cost of providing customer support. They both represent investments that contributed to revenue growth. Our margin on cloud subscriptions and support widened 0.9 percentage points to 55.8% (2013: 54.8%). This improvement in margin was achieved primarily through strong growth in our cloud subscription and support revenue and despite the increased expense we incurred to extend our cloud infrastructure. At the same time, the license fees we pay to third parties decreased by €49 million. The gross margin on our software and software-related services, defined as software and software-related services profit as a percentage of software and software-related services revenue, remained constant year-over-year at 81% in 2014 (2013: 81%). Cost of Professional Services and Other Services Cost of professional services and other services consists primarily of the cost of consulting and training personnel and the cost of bought-in third-party consulting and training resources. This item also includes sales and marketing expenses for our professional services and other services resulting from sales and marketing efforts where those efforts cannot be clearly distinguished from providing the professional services and other services. Our consulting business is being greatly affected as we trend away from classic software licensing and consulting revenue toward more subscription revenue from cloud solutions. As a result, both our professional and other services revenue and our professional and other services expense decreased. We reduced costs for professional and other services 1% from €2,402 million in 2013 to €2,379 million in 2014. Our gross margin on professional and other services, defined as professional and other services profit as a percentage of professional and other services revenue, narrowed to 12% (2013: 16%). Research and Development Expense Our research and development (R&D) expense consists primarily of the personnel cost of our R&D employees, costs incurred for independent contractors we retain to assist in our R&D activities, and amortization of the computer hardware and software we use for our R&D activities. Although our personnel costs grew because of the 6% increase in our headcount by the end of the year, our R&D expense increased only 2% to €2,331 million in 2014 from €2,282 million in 2013. R&D expense as a percentage of total revenue was slightly less year-over-year at 13.3% (2013: 13.6%). For more information, see the Products, Research & Development, and Services section. Sales and Marketing Expense Sales and marketing expense consists mainly of personnel costs, direct sales costs, and the cost of marketing our products and services. Our sales and marketing expense rose 4% from €4,131 million in 2013 to €4,304 million in 2014. The increase was mainly the result of greater personnel costs as we expanded our global sales force and of the reallocation and re-tasking of employees to sales-related work. By increasing our sales force we accelerated our revenue growth. The ratio of sales and marketing expense to total revenue, expressed as a percentage, decreased slightly to 24.5% year-over-year (2013: 24.6%) because costs grew less rapidly than revenue. General and Administration Expense Our general and administration expense consists mainly of personnel costs to support our finance and administration functions. General and administration expense increased 3% from €866 million in 2013 to €892 million in 2014. That this increase was modest compared to the growth in our revenue is primarily the result of careful cost management. The ratio of general and administration expense to total revenue was unchanged in 2014 at 5% (2013: 5%). Part I Item 5 Financial Income, Net Financial income, net, changed to –€25 million (2013: –€66 million). Our finance income was €127 million (2013: €115 million) and our finance costs were €152 million (2013: €181 million). Finance income mainly consists of interest income from loans, financial assets (cash, cash equivalents, and current investments) and income of derivatives. This increase is attributable to a higher average liquidity and slightly higher interest rates than in 2013. Finance costs mainly consist of interest expense on financial liabilities (€93 million in 2014 compared to €131 million in 2013). The decrease year-over-year is mainly due to positive effects from interest rate derivatives and due to lower average indebtedness. For more information about these financing instruments, see the Notes to the Consolidated Financial Statements section, Note (18b). Income Tax Our effective tax rate increased slightly to 24.7% in 2014 (2013: 24.4%). For more information, see the Notes to the Consolidated Financial Statements section, Note (11). Our 2013 Results Compared to Our 2012 Results (IFRS) Revenue Revenue
Total Revenue Total revenue increased from €16,223 million in 2012 to €16,815 million in 2013, representing an increase of €592 million, or 4%. This growth reflects an 8% increase from changes in volumes and prices and a 5% decrease from currency effects. The growing revenue resulted primarily from a €426 million increase in cloud subscription and support revenue and a €501 million rise in support revenue. Consulting revenue declined by €200 million and software revenue by €142 million. Software and software-related service revenue climbed to €13,950 million in 2013, an increase of 6%. Software and software-related service revenue represented 83% of total revenue in 2013 (2012: 81%). In 2013, professional and other service revenue contributed €2,865 million to our total revenue, representing a drop of 6% compared to 2012. For more information about the breakdown of total revenue by region and industry, see the Revenue by Region and Industry section below. Software and Software-Related Service Revenue Revenue from cloud subscriptions and support refers to the income earned from contracts that permit the customer to access specific software solutions hosted by SAP during the term of its contract with SAP. Software revenue results from the fees earned from the sale or license of software to customers. Support revenue represents fees earned from providing customers with technical support services and unspecified software upgrades, updates, and enhancements. Cloud subscriptions and support revenue increased from €270 million in 2012 to Part I Item 5 €696 million in 2013. This increase is largely due to the acquisition of Ariba on October 1, 2012, and due to continuing strong growth at SuccessFactors and Ariba in 2013. A combination of a challenging macroeconomic environment in key markets and the accelerating industry shift to the cloud resulted in a 2% software revenue increase from changes in volumes and prices. There was also a 5% decrease from currency effects. Overall, software revenue declined €142 million or 3% from €4,658 million in 2012 to €4,516 million in 2013. In 2013, SAP HANA contributed €633 million to total software revenue. Software and support revenue rose from €12,895 million in 2012 to €13,254 million in 2013, representing an increase of €359 million, or 3%. This growth consists of an 7% increase from changes in volumes and prices and a 5% decrease from currency effects. In 2013, software and software-related service revenue grew from €13,165 million in 2012 to €13,950 million, representing an increase of 6%. This software and software-related service revenue growth reflects an 11% increase from changes in volumes and prices and a 5% decrease from currency effects. Our customer base continued to expand in 2013. Based on the number of contracts concluded, 16% of the orders we received for software in 2013 were from new customers (2012: 19%). The total value of software orders received fell 7% year over year. The total number of contracts signed for new software decreased 6% to 55,909 (2012: 59,289 contracts), while the average order value decreased by 1%. Our stable customer base, continued investment in software by new and existing customers throughout 2013 and the previous year, and the continued success of our premium support offerings resulted in an increase in support revenue from €8,237 million in 2012 to €8,738 million in 2013. The SAP Enterprise Support services offering was the largest contributor to our support revenue. The €501 million, or 6%, growth in support revenue reflects an 11% increase from changes in volumes and prices and a 5% decrease from currency effects. This growth is primarily attributable to SAP Product Support for Large Enterprises, SAP Enterprise Support, and our premium offerings. Accordingly, the acceptance rate for SAP Enterprise Support among new customers rose from 96% in 2012 to 98% in 2013. Professional Services and Other Service Revenue Professional services and other service revenue consists primarily of consulting and other service revenue. We generate most of our consulting revenue from the implementation of our software products. Other service revenue consists mainly of revenue from the messaging services acquired from Sybase and of training revenue from educational services supplied to customers and partners on the use of our software products and related topics. Professional services and other service revenue decreased from €3,058 million in 2012 to €2,865 million in 2013, representing a decline of €193 million, or 6%. This decline reflects a 3% decrease from changes in volumes and prices and a 4% decrease from currency effects. Customers’ cautious buying behavior toward large services projects led to a decline in consulting revenue from €2,442 million in 2012 to €2,242 million in 2013, representing a decrease of €200 million, or 8%. This decline reflects a 5% decrease from changes in volumes and prices and a 4% decrease from currency effects. Consulting revenue contributed 78% of the total professional and other service revenue (2012: 80%). Consulting revenue contributed 13% of total revenue (2012: 15%). Revenue from other services increased €7 million, or 1%, to €623 million in 2013 (2012: €616 million). This reflects a 5% increase from changes in volumes and prices and a 4% decrease from currency changes. Part I Item 5 Revenue by Region and Industry Revenue by Region
Revenue by Industry
Revenue by Region We break our operations down into three regions: the Europe, Middle East, and Africa (EMEA) region, the Americas region and the Asia Pacific Japan (APJ) region. We allocate revenue amounts to each region based on where the customer is located. For more information about revenue by geographic region, see the Notes to the Consolidated Financial Statements section, Note (29). The EMEA Region In 2013, the EMEA region generated €7,975 million in revenue, which was 47% of total revenue (2012: €7,512; 46%). This represents a year-over-year increase of 6%. Total revenue in Germany increased 5% to €2,513 million in 2013 (2012: €2,382 million). Germany contributed 32% (2012: 32%) of all EMEA region revenue. The remaining revenue in the EMEA region was primarily generated in the United Kingdom, France, Switzerland, the Netherlands, Russia, and Italy. Software and software-related service revenue generated in the EMEA region in 2013 totaled €6,616 million (2012: €6,126 million). Software and software-related service revenue represented 83% of total revenue in 2013 (2012: 82%). Software & Support revenue rose by 7% to €6,440 million in 2013 (2012: €6,043 million). This growth reflects an 8% increase from changes in volumes and prices and a 2% decrease from currency effects. Cloud subscription and support revenue grew 113% to €176 million (2012: €82 million). The Americas Region In 2013, 37% of our total revenue was generated in the Americas region (2012: 37%). Total revenue in the Americas region increased 3% to €6,233 million; revenue generated in the United States increased 2% to €4,487 million. This growth reflects an 5% increase from changes in volumes and prices and a 4% decrease from currency effects. The United States contributed 72% (2012: 73%) of all revenue generated in the Part I Item 5 Americas region. In the remaining countries of the Americas region, revenue climbed 6% to reach €1,746 million. This growth reflects a 15% increase from changes in volumes and prices and a 9% decrease from currency effects. This revenue was principally generated in Brazil, Canada, and Mexico. Software and software-related service revenue generated in the Americas region in 2013 totaled €5,097 million (2012: €4,789 million). Total software and software-related service revenue represented 82% of all revenue in the Americas region in 2013 (2012: 79%). Software and support revenue remained flat as a 5% increase in volume and prices was offset by a 5% decrease from currency effects. Cloud subscription and support revenue grew by 184% to €457 million (2012: €161 million), representing 66% of worldwide cloud subscription and support revenues. The APJ Region In 2013, 15% (2012: 16%) of our total revenue was generated in the APJ region, with the strongest revenue growth being achieved in China. Total revenue in the APJ region decreased by 2% to €2,606 million. In Japan, revenue fell by 20% to €631 million, which represents 24% (2012: 30%) of the total revenue generated in the APJ region. This drop in revenue is attributable, in full, to currency effects. In the remaining countries of the APJ region, revenue increased by 6%. Revenue in the remaining countries of the APJ region was generated primarily in Australia, China, and India. Software and software-related service revenue generated in the APJ region in 2013 totaled €2,237 million (2012: €2,250 million). That was 86% of total revenue (2012: 85%). Software and support revenue decreased by 2% to €2,173 million (2012: €2,224). This decline reflects an 9% increase from changes in volume and prices and a 11% decrease from currency effects. Cloud subscription and support revenue grew by 139% to €64 million (2012: €27 million). Revenue by Industry With effect from January 2013, we rearranged our industry sectors from nine groups into six so that we could focus better on the requirements of existing and potential customers. We merged one of our existing industry sectors, process manufacturing – which covers the chemicals and mill products industries – with the energy and natural resources industry sector. We combined our former consumer products and the retail and wholesale distribution industry sector into the consumer sector. The healthcare and life sciences (medical and pharmaceutical) industries, which were previously grouped together under the healthcare sector, now belong to the public services or consumer industry sectors, respectively. To address the changing needs of our customers, a new industry subgroup was established, sports and entertainment, which is part of the professional services sector. We allocate our customers to one of our industries at the outset of an initial arrangement. All subsequent revenue from a particular customer is recorded under that industry sector. In 2013, we achieved above-average growth in the following sectors, measured by changes in total revenue:
Part I
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Operating Profit and Operating Margin Total Operating Expenses
Operating Profit and Operating Margin
In In 2013, operating expenses increased €155 million or 1% to €12,336 million (2012: €12,181 million). The main contributors to that increase were our greater acquisition-related and restructuring expenses, continued investment in sales activities and the The effect of acquisition-related expenses, which were €555 million Those negative effects on operating profit were in part offset by a reduced expense for share-based payments, which totaled €327 million in 2013 (2012: €522 million) owing to a less steep increase in the As an overall result of these effects on operating
The sections that follow discuss our costs by line item. Cost of Software and Software-Related Services Cost of software and software-related services consists primarily of Part I
Item 5
In Cost of Professional Services and Other Services Cost of professional services and other services consists primarily of the cost of consulting and training personnel and the cost of bought-in third-party consulting and training resources. This item also includes sales and marketing expenses for our professional services and other services resulting from sales and marketing efforts where those efforts cannot be clearly distinguished from providing the professional services and other services.
Research and Development Expense Our research and development (R&D) expense consists primarily of the personnel cost of our R&D employees, costs incurred for independent contractors we retain to assist in our R&D activities, and We acquired Ariba and SuccessFactors in the course of 2012, so in 2012 our R&D expense did not include a full year’s Ariba and SuccessFactors
Sales and Marketing Expense Sales and marketing expense consists mainly of personnel costs and direct sales expense
General and Administration Expense Our general and administration expense consists mainly of
Financial Income, Net Financial income, net, changed to –€66 million (2012: –€72 million). Our finance income was €115 million (2012: €103 million) and our finance costs were €181 million (2012: €175 million). Finance income mainly consists of interest income from loans and financial assets (cash, cash equivalents, and current investments), which was Part I
Item 5
Finance costs mainly consist of interest expense on financial liabilities (€
Another factor in financial income, net, in Income Tax Our effective tax rate
FOREIGN CURRENCY EXCHANGE RATE EXPOSURE Although our reporting currency is the euro, a significant portion of our business is conducted in currencies other than the euro. Since the Group’s entities usually conduct their business in their respective functional currencies, our risk of exchange rate fluctuations from ongoing ordinary operations is not considered significant. However, occasionally we generate foreign-currency-denominated receivables, payables, and other monetary items by transacting in a currency other than the functional currency; to mitigate the extent of the associated foreign currency exchange rate risk, the majority of these transactions are hedged as described in Note (26) to our Consolidated Financial Statements. Also see Notes (3) and (25) for additional information on foreign currencies.
the euro had an unfavorable impact of €143 million on our total revenue for 2014, an unfavorable impact of The impact of foreign currency exchange rate fluctuations discussed in the preceding paragraph is calculated by translating current period figures in local currency to euros at the monthly average exchange rate for the corresponding month in the prior year. Our revenue analysis, included within the “Operating Results (IFRS)” section of LIQUIDITY AND CAPITAL RESOURCES Overview Global Financial Management We use global centralized financial management to control liquid assets and monitor exposure to interest rates and currencies. The primary aim of our financial management is to maintain liquidity in the Group at a level that is adequate to meet our obligations. Most SAP companies have their liquidity managed centrally by the Group, so that liquid assets across the Group can be consolidated, monitored, and invested in accordance with Group policy. High levels of liquid assets help keep SAP flexible, sound, and independent. In addition, various credit facilities are currently available for additional liquidity, if required. For more information about these facilities, see the Credit Facilities section. We manage credit, liquidity, interest rate, equity price, and foreign exchange rate risks on a Group-wide basis. We use selected derivatives exclusively for this purpose and not for speculation, which is defined as entering into a derivative instrument for which we do not have a corresponding underlying transaction. The rules for the use of derivatives and other rules and processes concerning the management of financial risks are collected in our treasury guideline document, which applies globally to all companies in the Group. For more information about the management of each financial risk and about our risk exposure, see the Notes to the Consolidated Financial Statements section, Notes (25) to (27). Part I
Item 5
Our primary source of cash, cash equivalents, and current investments is funds generated from our business operations. Over the past several years, our principal use of cash has been to support operations and our capital expenditure requirements resulting from our growth, to quickly repay financial debt, to acquire businesses, to pay dividends on our shares, and to buy back SAP shares on the open market. On December 31, 2014, our cash, cash equivalents, and current investments were primarily held in euros and U.S. dollars. We generally invest only in the financial assets of issuers or funds with a minimum credit rating of BBB, and pursue a policy of cautious investment characterized by wide portfolio diversification with a variety of counterparties, predominantly short-term investments, and standard investment instruments. We rarely invest in the financial assets of issuers with a credit rating lower than BBB, and such investments were not material in 2014. We believe that our liquid assets combined with our undrawn credit facilities are sufficient to meet our present operating needs and, together with expected cash flows from operations, will support debt repayments and our currently planned capital expenditure requirements over the near term and medium term. It may also be necessary to enter into financing transactions when additional funds are required that cannot be wholly sourced from free cash flow (for example, to finance large acquisitions). To expand our business, we have made acquisitions of businesses, products, and technologies. Depending on our future cash position and future market conditions, we might issue additional debt instruments to fund acquisitions, maintain financial flexibility, and limit repayment risk. Therefore, we continuously monitor funding options available in the capital markets and trends in the availability of funds, as well as the cost of such funding. In the recent years we were able to repay additional debt within a short period of time due to our persistently strong free cash flow. For more information about the financial debt, see the Cash Flows and Liquidity section. Capital Structure Management The primary objective of our capital structure management is to maintain a strong financial profile for investor, creditor, and customer confidence, and to support the growth of our business. We seek to maintain a capital structure that will allow us to cover our funding requirements through the capital markets at reasonable conditions, and in doing so, ensure a high level of independence, confidence, and financial flexibility. After undergoing an external credit rating process, on September 19, 2014, SAP SE was assigned a first-time long-term issuer credit rating of “A2” by Moody’s and “A” by Standard & Poor’s, both with the outlook “Stable.” Our general intention is to remain in a position to return excess liquidity to our shareholders by distributing annual dividends and potentially repurchasing shares. The amount of future dividends and the extent of future repurchases of shares will be balanced with our effort to continue to maintain an adequate liquidity position. Capital Structure
In 2014, we took out a two-tranche bank loan of €4,270 million in total and issued a three-tranche Eurobond of €2,750 million in total with maturities of four to 12 years to finance the acquisition of Concur. In addition a €500 million short-term bank loan was taken for the acquisition Part I Item 5 of Fieldglass and was repaid in the same year. We also repaid a €500 million Eurobond and the last tranche of the promissory notes amounting to €86 million. Thus, the ratio of total financial debt to total equity and liabilities increased by 13 percentage points to 29% at the end of 2014 (16% as at December 31, 2013). Total financial debt consists of current and non-current bank loans, bonds and private placements. For more information about our financial debt, see the Notes to the Consolidated Financial Statements section, Note (18). As part of our financing activities, in 2015, the Company intends to repay a €550 million Eurobond as well as a US$300 million U.S. private placement tranche when they mature. Furthermore, we are planning to repay a substantial portion of our outstanding bank loans. Total liabilities on December 31, 2014, mainly comprised financial liabilities of €11,542 million (of which €8,980 million are non-current). Financial liabilities on December 31, 2014, consisted largely of financial debt, which included amounts in euros (€8,799 million) and U.S. dollars (€2,276 million). On December 31, 2014, approximately 70% of financial debt was held at variable interest rates, partially swapped from fixed into variable using interest rate swaps. Total liabilities on December 31, 2014, also comprised non-financial liabilities. Most of these non-financial liabilities result from employee-related obligations. For more information about financial and non-financial liabilities, see the Notes to the Consolidated Financial Statements section, Note (18). Cash Flows and Liquidity Group liquidity on December 31, 2014, primarily comprised amounts in euros and U.S. dollars. Current investments are included in other financial assets in the statement of financial position. Financial debts are included within financial liabilities in the statement of financial position. Group Liquidity of the SAP Group
Group liquidity consists of cash and cash equivalents (for example, cash at banks, money market funds, and time deposits with original maturity of three months or less) and current investments (for example, investments with original maturities of greater than three months and remaining maturities of less than one year) as reported in our Consolidated Financial Statements. Part I Item 5 Net liquidity is Group liquidity less total financial debt as defined above. The increase in Group liquidity compared to 2013 was mainly financing activities in issuing bonds. They were partly offset by cash outflows for acquisitions (such as Concur and Fieldglass), dividend payments, and loan repayments. For information about the impact of cash, cash equivalents, current investments, and our financial liabilities on our income statements, see the analysis of our financial income, net, in the Operating Results (IFRS) section. Analysis of Consolidated Statements of Cash Flows
Analysis of Consolidated Statements of Cash Flows: 2014 compared to 2013 Net cash provided by operating activities decreased 9% year-over-year to €3,499 million in 2014 (2013: €3,832 million). Payments in connection with the TomorrowNow and Versata litigation had a €555 million negative effect on net cash provided by operating activities. A €61 million increase to €1,356 million in our income tax payments also negatively affected net cash provided by operating activities. In 2014, days’ sales outstanding (DSO) for receivables, defined as the average number of days from the raised invoice to cash receipt from the customer, increased three days to 65 days (2013: 62 days). Cash outflows from investment activities increased significantly to €7,240 million in 2014 (2013: €1,781 million). The increase resulted principally from the Concur, Fieldglass, and SeeWhy acquisitions. For more information about current and planned capital expenditures, see the Investment Goals section. Net cash inflows from financing activities were €4,298 million in 2014, compared to net cash outflows of €1,589 million in 2013. Cash inflows in 2014 were the result of issuing a €2,750 bond and drawing two tranches (of €1,270 million and €3,000 million) of a loan. Cash outflows arose chiefly from repayments of borrowings (€1,086 million) and the repayment of convertible bonds that we assumed in connection with our acquisition of Concur (US$1,160 million). The Part I Item 5 2013 cash outflows had resulted chiefly from dividends paid and the repayment of a €600 million bond. The dividend payment of €1,194 million made in 2014 was greater than that of €1,013 million in the prior year because the dividend paid per share increased from €0.85 to €1.00. Analysis of Consolidated Statements of Cash Flows: 2013 Compared to 2012 Net cash provided by operating activities remained stable in 2013 (€3,832 million) compared to the prior year (2012: €3,822 million). Increased income tax payments of €193 million to €1,295 million in 2013 burdened net cash flows from operating activities. In addition, days’ sales outstanding (DSO) for receivables, defined as average number of days from the raised invoice to cash receipt from the customer, was 62 days, a three-day increase compared to 2012 (59 days). Cash outflows from investment activities totaled €1,781 million in 2013, much decreased from the 2012 figure of €5,964 million that were attributed mainly to business combinations of SuccessFactors and Ariba. In 2013, cash outflows were mainly driven by the acquisitions of consolidated companies (especially hybris) as well, for which we paid €1,160 million in total. Cash outflows from financing activities totaled €1,589 million in 2013, compared to €194 million in 2012. In 2013, cash outflows were mainly driven by dividends paid and a repayment of an issued €600 million Eurobond. In addition, we took out a short-term bank loan in the amount of €1,000 million to finance the acquisition of hybris that was fully offset by repayments in the same amount and year. In the previous year, cash outflows from financing activities were mainly driven by repayments of a Eurobond tranche (€600 million) and several tranches (€611 million) of the promissory notes we issued in 2009 and dividends paid. This was almost fully compensated by a successfully placed Eurobond transaction totaling €1.3 billion and a U.S. private placement transaction of US$1.4 billion. The decrease of total dividends paid in 2013 to €1,013 million (2012: €1,310 million) was due to a decrease in dividend paid to €0.85 per share compared to €1.10 per share in the previous year, of which €0.35 per share was an extraordinary payout to celebrate our 40th anniversary in 2012. Credit Facilities Other sources of capital are available to us through various credit facilities, if required. We are party to a revolving €2.0 billion credit facility contract with a current tenor of five years plus one extension option for an additional year. The credit line may be used for general corporate purposes. A possible future withdrawal is not bound to any financial covenants. Borrowings under the facility bear interest at the Euro Interbank Offered Rate (EURIBOR) or London Interbank Offered Rate (LIBOR) for the respective optional currency plus a margin ranging from 0.3% to 0.525%. We pay a commitment fee of 0.079% per annum on unused amounts of the available credit facility. So far, we have not used and do not currently foresee any need to use this credit facility. As at December 31, 2014, SAP SE had additional available credit facilities totaling €471 million. Several of our foreign subsidiaries have credit facilities available that allow them to borrow funds in their local currencies at prevailing interest rates, generally to the extent SAP SE has guaranteed such amounts. As at December 31, 2014, approximately €54 million was available through such arrangements. There were immaterial borrowings outstanding under these credit facilities from our foreign subsidiaries as at December 31, 2014. OFF-BALANCE SHEET ARRANGEMENTS Several SAP entities have entered into operating leases for office space, hardware, cars and certain other equipment. These arrangements are sometimes referred to as a form of off-balance sheet financing. Rental expenses under these operating leases are set forth below under “Contractual Obligations.” We do not believe we have forms of material off-balance sheet arrangements that would require disclosure other than those already disclosed. Part I Item 5 The table below presents our on- and off-balance sheet contractual obligations as of December 31, 2014:
We expect to meet these contractual obligations with our existing cash, our cash flows from operations and our financing activities. The timing of payments for the above contractual obligations is based on payment schedules for those obligations where set payments exist. For other obligations with no set payment schedules, estimates as to the most likely timing of cash payments have been made. The ultimate timing of these future cash flows may differ from these estimates. Obligations under Indemnifications and Guarantees Our software license agreements and our cloud subscription agreements generally include certain provisions for indemnifying customers against liabilities if our software products infringe a third party’s intellectual property rights. In addition, we occasionally provide function or performance guarantees in routine consulting contracts and development arrangements. We also generally provide a six to twelve month warranty on our software. Our warranty liability is included in other provisions. For more information on other provisions see Note (19b) to our Consolidated Financial Statements. For more information on obligations and contingent liabilities refer to Note (3) and Note (23) in our Consolidated Financial Statements. For information on our R&D activities see “Item 4. Information about SAP – Products, Research & Development, and Services.” For information on our R&D costs see “Item 5. Operating and Financial Review and Prospects – Operating Results (IFRS)” and for information related to our R&D employees see “Item 6. Directors, Senior Management and Employees – Employees.” Our Consolidated Financial Statements are prepared based on the accounting policies described in Note (3) to our Consolidated Financial Statements in this report. The application of such policies requires management to make judgments, estimates and assumptions that affect the application of policies and the reported amounts of assets, liabilities, revenues and expenses in our Consolidated Financial Statements. We base our judgments, estimates and assumptions on historical and forecast information, as well as regional and industry economic conditions in which we or our customers operate, changes to which could adversely affect our estimates. Although we believe we have made reasonable estimates about the ultimate resolution of the underlying uncertainties, no assurance can be Part I Item 5 given that the final outcome of these matters will be consistent with what is reflected in our assets, liabilities, revenues and expenses. Actual results could differ from original estimates. The accounting policies that most frequently require us to make judgments, estimates, and assumptions, and therefore are critical to understanding our results of operations, include the following: revenue recognition; valuation of trade receivables; accounting for share-based payment; accounting for income tax; accounting for business combinations; subsequent accounting for other intangibles; determination of operating segments; accounting for legal contingencies; and recognition of internally generated intangible assets from development. Our management periodically discusses these critical accounting policies with the Audit Committee of the Supervisory Board. See Note (3c) to our Consolidated Financial Statements for further discussion on our critical accounting estimates and critical accounting policies. NEW ACCOUNTING STANDARDS NOT YET ADOPTED See Note (3e) to our Consolidated Financial Statements for our discussion on new accounting standards not yet adopted. Future Trends in the Global Economy The European Central Bank (ECB) strength gradually but that the
In the Europe, Middle-East, and Africa (EMEA) region, economic growth may be slower than the worldwide average in 2015. Notably, growth in the euro area may remain weak. In the euro area, the ECB now expects annual growth of a little more than 1% in 2015 and 2016, which is a downward correction of its earlier forecasts. However, the ECB believes various monetary interventions could bear fruit in 2015, encouraging company investment. The ECB projects relatively robust growth in Central and Eastern Europe, rooted in a gradual increase in domestic demand. On the other hand, it expects export trade will be hampered by the geopolitical tensions between Russia and Ukraine. Growth may also be slower than the global average in the Americas region in 2015, says the ECB. The ECB
Part I Item 5 Economic Trends – Year-Over-Year GDP Growth
e = estimate; p = projection Source: International Monetary Fund (IMF), World Economic Outlook Update January 2015, Cross Currents, as of
IT Market: The Outlook for
to IDC, IT spending in Western Europe will possibly grow 1.2% in 2015 – considerably more slowly than in 2014. The German IT market may grow only slightly more quickly than that, at 1.5%. In Central and Eastern Europe, IT spending growth could again In the Americas region, IDC Expansion of overall IT spending in the APJ region may be sustained at 4.4% in 2015, according to IDC. That could include accelerated growth of 6.2% in the software segment. IDC expects IT market growth to slow by 0.2% in Japan and 4.4% in China in 2015. Part I Item 5 Trends in the IT Market – Increased IT Spending Year-Over-Year
e = estimate, p = projection
Impact on SAP SAP expects to outperform the global economy and the IT industry again in 2015 in terms of revenue growth. The last years of growth momentum underscore our leadership in the transformation of the industry. In 2014, we delivered on our Run Simple strategy to help our customers transform their businesses. SAP’s strong growth is driven by the SAP HANA platform, the broadest cloud portfolio, and the largest business network in the world. SAP powers the clear path to growth for businesses in the 21st century: run real time, run networked, Run Simple. We will continue to push relentlessly toward a much more predictable business model, in parallel we will further expand our core business and at the same time we will continue to expand our operating profit. We are well-positioned and therefore confident we can achieve our medium-term targets for 2017 and 2020, assuming that the economic environment and IT industry develop as currently forecasted. Balanced in terms of regions as well as industries, we are well-positioned with our product offering to offset smaller individual fluctuations in the global economy and IT market. The significantly more volatile market environment challenges also SAP to reach its ambitious targets. Our market and the demands of our customers are changing rapidly. We anticipated these changes early and positioned ourselves strategically. A comparison of our business outlook with forecasts for the global economy and IT industry shows that we can be successful even in a tough economic environment and will further strengthen our position as the market leader of enterprise application software. We plan to continue to invest in countries in which we expect significant growth. Such countries include Brazil, China, India, Russia, as well as countries in the Middle East and Africa. We therefore expect to see further future growth potential not only regionally but Part I
Item 5
Operational Targets for 2015(Non-IFRS) Changes to Income Statement Structure As outlined in the Service and Support section in this
Our outlook for 2015 and beyond as
We are providing the
SAP expects full-year 2015 non-IFRS cloud subscriptions and support revenue to be in SAP expects full year 2015 non-IFRS cloud and software revenue to increase by 8% to 10% at constant currencies (2014: €14.33 billion). SAP expects full-year 2015 non-IFRS operating profit to be in a range of €5.6 billion to €5.9 billion at constant currencies (2014: €5.64 billion). While our full-year 2015 business outlook is at constant currencies, actual currency reported figures are expected to continue to be impacted by currency exchange rate fluctuations. In January 2015, we disclosed that if exchange rates remain at the December 2014 closing rates for the
We expect that
Part I
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The following table shows the estimates of the items that represent the differences between our non-IFRS financial measures and our IFRS financial measures.
In
The
Goals for Liquidity and Finance On December 31, 2014, we had a negative net liquidity. We
Investment Goals
Proposed Dividend Until now, our policy has been to distribute more than 30% of profit after tax in dividend. In practice however, the payout has been greater than 35% of profit after tax in all recent years. We are therefore amending our policy, which from now on
Premises on Which In preparing our outlook guidance, we have taken into account all events known to us at the time we prepared this report that could influence SAP’s business going forward. Among the premises on which this outlook is based are those presented concerning economic development and
Other sources of capital are available to us through various credit facilities, if required. We As at December 31, 2014, SAP SE had additional available credit facilities totaling €471 million. Several of our OFF-BALANCE SHEET ARRANGEMENTS Several SAP entities have entered into operating leases for office space, hardware, cars and certain other equipment. These arrangements are sometimes referred to as a form of off-balance sheet financing. Rental expenses under these operating leases are set forth below under “Contractual Obligations.” We do not believe we have forms of material off-balance sheet arrangements that would require disclosure other than those already disclosed. Part I Item 5 The table below presents our
We Obligations under Indemnifications and Guarantees Our software license agreements and our cloud subscription agreements generally include certain provisions for indemnifying customers against liabilities if our software products infringe a third party’s intellectual property rights. In addition, we occasionally provide function or performance guarantees in routine consulting contracts and development arrangements. We also generally provide a six to twelve month warranty on our software. Our warranty liability is included in other provisions. For more information on other provisions see Note (19b) to our Consolidated Financial Statements. For more information on obligations and contingent liabilities refer to Note (3) and Note (23) in our Consolidated Financial Statements. For information on our R&D activities see “Item 4. Information about SAP – Products, Research & Development, and Services.” For information on our R&D costs see “Item 5. Operating and Financial Review and Prospects – Operating Results (IFRS)” and for information related to our R&D employees see “Item 6. Directors, Senior Management and Employees – Employees.” Our Consolidated Financial Statements are prepared based on the accounting policies described in Note (3) to our Consolidated Financial Statements in this report. The application of such policies requires management to make judgments, estimates and assumptions that affect the application of policies and the reported amounts of assets, liabilities, revenues and expenses in our Consolidated Financial Statements. We Part I
Item 5
given that the final outcome of these matters will be consistent with what is reflected in our assets, liabilities, revenues and expenses. Actual results could differ from original estimates. The accounting policies that most frequently require us to make judgments, estimates, and assumptions, and therefore are critical to understanding our results of operations, include the following:
valuation of trade receivables; accounting for share-based payment; accounting for income tax; accounting for business combinations; subsequent accounting for other intangibles; determination of operating segments; accounting for legal contingencies; and recognition of internally generated intangible assets from development. Our management periodically discusses these critical accounting policies with the Audit Committee of the Supervisory Board. See Note (3c) to NEW ACCOUNTING STANDARDS NOT YET ADOPTED See Note (3e) to our Consolidated Financial Statements for our discussion on new accounting standards not yet adopted. Future Trends in the Global Economy The European Central Bank (ECB) forecasts that global economic activity will continue to regain strength gradually but that the recovery will remain modest. Economic prospects for the various countries and regions are becoming increasingly mixed: The ECB believes key advanced economies should do well in the years to come; while structural problems will grow more severe and credit will become tighter in the emerging economies. Developments in current geopolitical flashpoints, for example in the Middle East and Ukraine, could also be a crucial factor, the ECB says. In the Europe, Middle-East, and Africa (EMEA) region, economic growth may be slower than the worldwide average in 2015. Notably, growth in the euro area may remain weak. In the euro area, the ECB now expects annual growth of a little more than 1% in 2015 and 2016, which is a downward correction of its earlier forecasts. However, the ECB believes various monetary interventions could bear fruit in 2015, encouraging company investment. The ECB projects relatively robust growth in Central and Eastern Europe, rooted in a gradual increase in domestic demand. On the other hand, it expects export trade will be hampered by the geopolitical tensions between Russia and Ukraine. Growth may also be slower than the global average in the Americas region in 2015, says the ECB. The ECB predicts strong economic growth in the United States in the future. Better conditions on the labor and housing markets and continuing easier finance should have a positive influence. However, the ECB believes that in Latin America growth will stay on a low level as commodity prices continue to fall and production costs increase. Clear differences in countries’ performance may remain. The ECB observes constraining factors in Brazil in particular, whereas it notes that in Mexico growth may accelerate in years to come as a result of that country’s far-reaching structural reforms. Growth prospects remain mixed in the Asia Pacific Japan (APJ) region for the coming years, according to the ECB. In light of encouraging signs from housing and industrial output, the ECB expects positive numbers from Japan in 2015. It estimates that in 2015, the Chinese economy will grow slightly slower than in 2014. Consumer spending and trade are expected to make the largest contributions to growth in China. Part I Item 5 Economic Trends – Year-Over-Year GDP Growth
e = estimate; p = projection Source: International Monetary Fund (IMF), World Economic Outlook Update January 2015, Cross Currents, as of January 20, 2015, p.3 IT Market: The Outlook for 2015 Expansion of the worldwide IT market year-over-year will slow slightly to 3.7% (software: 6.5%) in 2015, according to International Data Corporation (IDC), a market research firm based in the United States. It believes that across the advanced, emerging, and developing economies, there will be stable demand for IT in the coming years. However, it expects prices to come under increasing pressure as competing segments, such as cloud offerings and classic software products, react to one another. In IDC’s view, moreover, the future expansion of the IT market depends on the resilience of the global economy in the face of many risk factors, for example the Ebola epidemic, the activities of Islamic State in the Middle East, the troubles in Ukraine, and the political tension in Southeast Asia. In the EMEA region, IDC expects overall IT market growth to decelerate to 3.0% in 2015. Nonetheless, it predicts growth in the software and services segments of 5.3% and 3.3% respectively; both higher than in 2014. According to IDC, IT spending in Western Europe will possibly grow 1.2% in 2015 – considerably more slowly than in 2014. The German IT market may grow only slightly more quickly than that, at 1.5%. In Central and Eastern Europe, IT spending growth could again increase, to 7.1% (Russia: 5.9%) in 2015, but in the Middle East and Africa it might slow to single-digit growth of 8.6%, IDC says. In the Americas region, IDC projects that in 2015 the IT market will continue to expand at 3.9% – a similar rate to that in 2014. It forecasts 7.3% growth in the software segment, as in 2014, and 2.7% growth in the services segment, somewhat slower than in 2014. IDC forecasts that IT spending may grow 3.5% in the United States and 5.7% in Latin America (Brazil: 3.2%; Mexico 6.3%) in 2015. Expansion of overall IT spending in the APJ region may be sustained at 4.4% in 2015, according to IDC. That could include accelerated growth of 6.2% in the software segment. IDC expects IT market growth to slow by 0.2% in Japan and 4.4% in China in 2015. Part I Item 5 Trends in the IT Market – Increased IT Spending Year-Over-Year
e = estimate, p = projection
Impact on SAP SAP expects to outperform the global economy and the IT industry again in 2015 in terms of revenue growth. The last years of growth momentum underscore our leadership in
We are well-positioned and environment and IT industry develop as currently forecasted. Balanced in terms of regions as well as industries, we are well-positioned with our product offering to offset smaller individual fluctuations in the global economy and IT market. The significantly more volatile market environment challenges also SAP to reach its ambitious targets. Our market and the demands of our customers are changing rapidly. We anticipated these changes early and positioned ourselves strategically. A comparison of our business outlook with forecasts for the global economy and IT industry shows that we can be successful even in a tough economic environment and will further strengthen our position as the market leader of enterprise application software. We plan to continue to invest in countries in which we expect significant growth. Such countries include Brazil, China, India, Russia, as well as countries in the
Africa. We
Part I
Item 5
broad product offering helping us reach our ambitious 2015 outlook targets and medium-term aspirations for 2017 and 2020. Operational Targets for 2015(Non-IFRS) Changes to Income Statement Structure As outlined in the Service and Support section in this report, we have started to combine several of our services under our SAP ONE Service approach. In aligning our financial reporting with this change, starting in 2015, we are combining the revenue from premium support services with the revenue from professional services and other services in a new services revenue line item in our income statement. Until 2014, revenues from premium support services were classified as support revenues. Simultaneously with this change, we are simplifying and clarifying the labeling of several line items in our income statement. This includes renaming the previous revenue subtotal labeled software and support (which included premium support revenues) to software licenses and support (which no longer includes premium support revenues). The previous revenue subtotal labeled software and software-related service revenue is renamed cloud and software and accordingly no longer includes premium support revenue, which is now reclassified under the new services revenue line item. The two revenue line items, cloud subscriptions and support and total revenue are not affected by any of these changes and remain unaltered. Our outlook for 2015 and beyond as outlined below is based on this modified income statement. Revenue and Operating Profit Outlook We are providing the following outlook for the full year 2015: SAP expects full-year 2015 non-IFRS cloud subscriptions and support revenue to be in a range of €1.95 billion to €2.05 billion at constant currencies (2014: €1.10 billion). The upper end of this range represents a growth rate of 86% at constant currencies. Concur and Fieldglass are expected to SAP expects full year 2015 non-IFRS cloud and software revenue to increase by 8% to 10% at constant currencies (2014: €14.33 billion). SAP expects full-year 2015 non-IFRS operating profit to be in a range of €5.6 billion to €5.9 billion at constant currencies (2014: €5.64 billion). While our We expect that non-IFRS total revenue will continue to depend largely on the Part I Item 5 The following table shows the estimates of the items that represent the differences between our non-IFRS financial measures and our IFRS financial measures. Non-IFRS Measures
In 2014, we incurred an expense of €309 million in connection with the TomorrowNow und Versata lawsuits. Versata and SAP have entered into a patent license and settlement agreement in Q3 2014. The company expects a full-year 2015 effective tax rate (IFRS) of 25.0% to 26.0% (2014: 24.7%) and an effective tax rate (non-IFRS) of 26.5% to 27.5% (2014: 26.1%). Goals for Liquidity and Finance On December 31, negative net liquidity. We believe that our liquid assets combined with our undrawn credit facilities are sufficient to meet our present operating financing needs also in 2015 and, together with expected cash flows from operations, will support debt repayments and our currently planned capital expenditure requirements over the near term and medium term.
Investment Goals Our planned capital expenditures for 2015 and 2016, other than from business combinations, mainly comprise the construction activities described in Item 4. Information About SAP – Description of Property – Capital Expenditures. We expect
Until now, our policy has been to Premises on Which Our Outlook Is Based In preparing our outlook guidance, we have taken into account all events known to us at the time we prepared this report that Among the
Credit Facilities Other sources of capital are available to us through various credit facilities, if required. We are party to a revolving
As at December 31, OFF-BALANCE SHEET ARRANGEMENTS Several SAP entities have entered into operating leases for office space, hardware, cars and certain other equipment. These arrangements are sometimes referred to as a form of off-balance sheet financing. Rental expenses under these operating leases are set forth below under “Contractual Obligations.” We do not believe we Part I
Item 5
The table below presents our on- and off-balance sheet contractual obligations as of December 31,
We expect to meet these contractual obligations with our existing cash, our cash flows from operations and our financing activities. The timing of payments for the above contractual obligations is based on payment schedules for those obligations where set payments exist. For other obligations with no set payment schedules, estimates as to the most likely timing of cash payments have been made. The ultimate timing of these future cash flows may differ from these estimates. Obligations under Indemnifications and Guarantees Our software license agreements and our cloud subscription agreements generally include certain provisions for indemnifying customers against liabilities if our software products infringe a third party’s intellectual property rights. In addition, we occasionally provide function or performance guarantees in routine consulting contracts and development arrangements. We also generally provide a six to twelve month warranty on our software. Our warranty liability is included in other provisions. For more information on other provisions see Note (19b) to our Consolidated Financial Statements. For more information on obligations and contingent liabilities refer to Note (3) and Note (23) in our Consolidated Financial Statements. For information on our R&D activities see “Item 4. Information about SAP
Our Consolidated Financial Statements are prepared based on the accounting policies described in Note (3) to our Consolidated Financial Statements in this report. The application of such policies requires management to make judgments, estimates and assumptions that affect the application of policies and the reported amounts of assets, liabilities, revenues and expenses in our Consolidated Financial Statements. We base our judgments, estimates and assumptions on historical and forecast information, as well as regional and industry economic conditions in which we or our customers operate, changes to which could adversely affect our estimates. Although we believe we have made reasonable estimates about the ultimate resolution of the underlying uncertainties, no assurance can be Part I Item 5 given that the final outcome of these matters will be consistent with what is reflected in our assets, liabilities, revenues and expenses. Actual results could differ from original estimates. The accounting policies that most frequently require us to make judgments, estimates, and assumptions, and therefore are critical to understanding our results of operations, revenue recognition;
valuation of trade receivables;
accounting for share-based
accounting for income tax;
accounting for business combinations;
subsequent accounting for determination of operating segments;
accounting for legal contingencies; and
recognition of internally generated intangible assets from development. Our management periodically discusses these critical accounting policies with the Audit Committee of the Supervisory Board. See Note (3c) to our Consolidated Financial Statements for further discussion on our critical accounting estimates and critical accounting policies. NEW ACCOUNTING STANDARDS NOT YET ADOPTED See Note (3e) to our Consolidated Financial Statements for our discussion on new accounting standards not yet adopted. Future Trends in the Global Economy The European Central Bank (ECB) forecasts that global economic activity will continue to regain strength gradually but that the recovery will remain modest. Economic prospects for the various countries and regions are becoming increasingly mixed: The ECB believes key advanced economies should do well in the years to come; while structural problems will grow more severe and credit will become tighter in the emerging economies. Developments in current geopolitical flashpoints, for example in the Middle East and Ukraine, could also be a crucial factor, the ECB says. In the Europe, Middle-East, and Africa (EMEA) region, economic growth may be slower than the worldwide average in 2015. Notably, growth in the euro area may remain weak. In the euro area, the ECB now expects annual growth of a little more than 1% in 2015 and 2016, which is a downward correction of its earlier forecasts. However, the ECB believes various monetary interventions could bear fruit in 2015, encouraging company investment. The ECB projects relatively robust growth in Central and Eastern Europe, rooted in a gradual increase in domestic demand. On the other hand, it expects export trade will be hampered by the geopolitical tensions between Russia and Ukraine. Growth may also be slower than the global average in the Americas region in 2015, says the ECB. The ECB predicts strong economic growth in the United States in the future. Better conditions on the labor and housing markets and continuing easier finance should have a positive influence. However, the ECB believes that in Latin America growth will stay on a low level as commodity prices continue to fall and production costs increase. Clear differences in countries’ performance may remain. The ECB observes constraining factors in Brazil in particular, whereas it notes that in Mexico growth may accelerate in years to come as a result of that country’s far-reaching structural reforms. Growth prospects remain mixed in the Asia Pacific Japan (APJ) region for the coming years, according to the ECB. In light of encouraging signs from housing and industrial output, the ECB expects positive numbers from Japan in 2015. It estimates that in 2015, the Chinese economy will grow slightly slower than in 2014. Consumer spending and trade are expected to make the largest contributions to growth in China. Part I Item 5 Economic Trends – Year-Over-Year GDP Growth
e = estimate; p = projection Source: International Monetary Fund (IMF), World Economic Outlook Update January 2015, Cross Currents, as of January 20, 2015, p.3 IT Market: The Outlook for 2015 Expansion of the worldwide IT market year-over-year will slow slightly to 3.7% (software: 6.5%) in 2015, according to International Data Corporation (IDC), a market research firm based in the United States. It believes that across the advanced, emerging, and developing economies, there will be stable demand for IT in the coming years. However, it expects prices to come under increasing pressure as competing segments, such as cloud offerings and classic software products, react to one another. In IDC’s view, moreover, the future expansion of the IT market depends on the resilience of the global economy in the face of many risk factors, for example the Ebola epidemic, the activities of Islamic State in the Middle East, the troubles in Ukraine, and the political tension in Southeast Asia. In the EMEA region, IDC expects overall IT market growth to decelerate to 3.0% in 2015. Nonetheless, it predicts growth in the software and services segments of 5.3% and 3.3% respectively; both higher than in 2014. According to IDC, IT spending in Western Europe will possibly grow 1.2% in 2015 – considerably more slowly than in 2014. The German IT market may grow only slightly more quickly than that, at 1.5%. In Central and Eastern Europe, IT spending growth could again increase, to 7.1% (Russia: 5.9%) in 2015, but in the Middle East and Africa it might slow to single-digit growth of 8.6%, IDC says. In the Americas region, IDC projects that in 2015 the IT market will continue to expand at 3.9% – a similar rate to that in 2014. It forecasts 7.3% growth in the software segment, as in 2014, and 2.7% growth in the services segment, somewhat slower than in 2014. IDC forecasts that IT spending may grow 3.5% in the United States and 5.7% in Latin America (Brazil: 3.2%; Mexico 6.3%) in 2015. Expansion of overall IT spending in the APJ region may be sustained at 4.4% in 2015, according to IDC. That could include accelerated growth of 6.2% in the software segment. IDC expects IT market growth to slow by 0.2% in Japan and 4.4% in China in 2015. Part I Item 5 Trends in the IT Market – Increased IT Spending Year-Over-Year
e = estimate, p = projection
Impact on SAP SAP expects to outperform the global economy and the IT industry again in 2015 in terms of revenue growth. The last years of growth momentum underscore our leadership in the transformation of the industry. In 2014, we delivered on our Run Simple strategy to help our customers transform their businesses. SAP’s strong growth is driven by the SAP HANA platform, the broadest cloud portfolio, and the largest business network in the world. SAP powers the clear path to growth for businesses in the 21st century: run real time, run networked, Run Simple. We will continue to push relentlessly toward a much more predictable business model, in parallel we will further expand our core business and at the same time we will continue to expand our operating profit. We are well-positioned and therefore confident we can achieve our medium-term targets for 2017 and 2020, assuming that the economic environment and IT industry develop as currently forecasted. Balanced in terms of regions as well as industries, we are well-positioned with our product offering to offset smaller individual fluctuations in the global economy and IT market. The significantly more volatile market environment challenges also SAP to reach its ambitious targets. Our market and the demands of our customers are changing rapidly. We anticipated these changes early and positioned ourselves strategically. A comparison of our business outlook with forecasts for the global economy and IT industry shows that we can be successful even in a tough economic environment and will further strengthen our position as the market leader of enterprise application software. We plan to continue to invest in countries in which we expect significant growth. Such countries include Brazil, China, India, Russia, as well as countries in the Middle East and Africa. We therefore expect to see further future growth potential not only regionally but also with our Part I Item 5 broad product offering helping us reach our ambitious 2015 outlook targets and medium-term aspirations for 2017 and 2020. Operational Targets for 2015(Non-IFRS) Changes to Income Statement Structure As outlined in the Service and Support section in this report, we have started to combine several of our services under our SAP ONE Service approach. In aligning our financial reporting with this change, starting in 2015, we are combining the revenue from premium support services with the revenue from professional services and other services in a new services revenue line item in our income statement. Until 2014, revenues from premium support services were classified as support revenues. Simultaneously with this change, we are simplifying and clarifying the labeling of several line items in our income statement. This includes renaming the previous revenue subtotal labeled software and support (which included premium support revenues) to software licenses and support (which no longer includes premium support revenues). The previous revenue subtotal labeled software and software-related service revenue is renamed cloud and software and accordingly no longer includes premium support revenue, which is now reclassified under the new services revenue line item. The two revenue line items, cloud subscriptions and support and total revenue are not affected by any of these changes and remain unaltered. Our outlook for 2015 and beyond as outlined below is based on this modified income statement. Revenue and Operating Profit Outlook We are providing the following outlook for the full year 2015: SAP expects full-year 2015 non-IFRS cloud subscriptions and support revenue to be in a range of €1.95 billion to €2.05 billion at constant currencies (2014: €1.10 billion). The upper end of this range represents a growth rate of 86% at constant currencies. Concur and Fieldglass are expected to contribute approximately 50 percentage points to this growth. SAP expects full year 2015 non-IFRS cloud and software revenue to increase by 8% to 10% at constant currencies (2014: €14.33 billion). SAP expects full-year 2015 non-IFRS operating profit to be in a range of €5.6 billion to €5.9 billion at constant currencies (2014: €5.64 billion). While our full-year 2015 business outlook is at constant currencies, actual currency reported figures are expected to continue to be impacted by currency exchange rate fluctuations. In January 2015, we disclosed that if exchange rates remain at the December 2014 closing rates for the rest of the year 2015, the Company expects thenon-IFRS cloud and software revenue growth rate to experience a currency benefit of approximately two percentage points and thenon-IFRS operating profit growth rate at actual currencies to experience a currency benefit of approximately one percentage point for thefull-year 2015. In March 2015, we updated this estimate by disclosing if exchange rates remain at the closing rates of March 6, 2015, the Company expects non-IFRS cloud and software revenue and non-IFRS operating profit growth rates at actual currency to experience a positive currency impact of approximately 12 percentage points and 17 percentage points respectively for the first quarter of 2015 and a positive currency effect of approximately 11 percentage points and 14 percentage points respectively for the full year 2015. We expect that non-IFRS total revenue will continue to depend largely on the revenue from cloud and software. However, the revenue growth we expect from this is below the outlook provided for non-IFRS cloud subscriptions and support revenue. Part I Item 5 The following table shows the estimates of the items that represent the differences between our non-IFRS financial measures and our IFRS financial measures. Non-IFRS Measures
In 2014, we incurred an expense of €309 million in connection with the TomorrowNow und Versata lawsuits. Versata and SAP have entered into a patent license and settlement agreement in Q3 2014. The company expects a full-year 2015 effective tax rate (IFRS) of 25.0% to 26.0% (2014: 24.7%) and an effective tax rate (non-IFRS) of 26.5% to 27.5% (2014: 26.1%). Goals for Liquidity and Finance On December 31, 2014, we had a negative net liquidity. We believe that our liquid assets combined with our undrawn credit facilities are sufficient to meet our present operating financing needs also in 2015 and, together with expected cash flows from operations, will support debt repayments and our currently planned capital expenditure requirements over the near term and medium term. We intend to repay a US$300 million U.S. private placement and a €550 million Eurobond when they mature in October and November 2015, respectively. Furthermore, we are planning to repay a substantial amount of our outstanding bank loans and refinance another part through the debt capital markets. By the time of this report, we have no concrete plans for future share buybacks. Investment Goals Our planned capital expenditures for 2015 and 2016, other than from business combinations, mainly comprise the construction activities described in Item 4. Information About SAP – Description of Property – Capital Expenditures. We expect investments from these activities of approximately €170 million during the next two years. These investments can be covered in full by operating cash flow. Proposed Dividend Until now, our policy has been to distribute more than 30% of profit after tax in dividend. In practice however, the payout has been greater than 35% of profit after tax in all recent years. We are therefore amending our policy, which from now on will be to pay a dividend totaling more than 35% of profit after tax. Premises on Which Our Outlook Is Based In preparing our outlook guidance, we have taken into account all events known to us at the time we prepared this report that could influence SAP’s business going forward. Among the premises on which this outlook is based are those presented concerning economic development and the assumption that there will be no effects from a major acquisition. Medium-Term Prospects In this section, all discussion of the medium-term prospects is based exclusively on non-IFRS measures. SAP expects to grow its more predictable revenue business while steadily increasing operating profit. Our strategic objectives are focused primarily on the following financial and non-financial objectives: growth, profitability, customer loyalty, and employee engagement. Looking beyond 2015, SAP updated its ambition for 2017. We continue to expect fast growth in our cloud business, with cloud subscriptions and support revenue reaching a range between €3.5 billion to €3.6 billion in 2017. Total revenue is expected to reach €21 billion to €22 billion and operating profit is expected to be between €6.3 billion and €7.0 billion in 2017. Part I Item 5 The changes to the 2017 goals reflect the impact of the Concur acquisition and anticipated faster customer adoption of SAP’s managed cloud offering. SAP also anticipates that its fast-growing cloud business along with growth in support revenue will drive a higher share of more predictable revenue, with the total of cloud subscriptions and support revenue and software support revenue reaching 65% to 70% of total revenue in 2017 (2014: 57%). By 2017, SAP’s rapidly growing cloud subscriptions and support revenue is expected to be close to software license revenue – and is expected to exceed software licenses revenue in 2018. At that time, SAP expects to reach a scale in its cloud business that will clear the way for accelerated operating profit expansion. SAP also has high-level ambitions for 2020, with 2020 cloud subscriptions and support revenue expected to reach €7.5 billion to €8.0 billion. Total revenue is expected to be between €26 billion and €28 billion and operating profit is expected to be in a range of €8 billion to €9 billion in 2020. We expect the share of more predictable revenue to grow further, with the total of cloud subscriptions and support revenue and software support revenue reaching between 70% and 75% of total revenue in 2020. To realize the expected increase in operating profit, until 2020 SAP aims to grow gross profit from cloud subscriptions and support (defined as the difference between cloud subscription and support revenue and the respective cost of revenue) by a compound annual growth rate of approximately 40% on the 2014 figure. This growth is expected to result in a cloud subscription and support gross margin; in other words, the gross margin derived from the cloud subscription and support gross profit that is approximately 9 percentage points higher in 2020 than in 2014 (2014: 64%). In the same period, our target is to grow gross profit from software licenses and support by a compound annual growth rate of approximately 3%, leading to an improvement in the software licenses and support gross margin of approximately 2 percentage points (2014: 86%). SAP anticipates that the gross margins of the various cloud business models will continue to differ significantly in the long term. While the gross margin from public cloud subscriptions and from the business network are both expected to reach approximately 80% long term, we anticipate that in the long-term, gross margin on managed cloud offerings will be about 40%. In addition, based on subscription bookings, we expect, once our cloud business has achieved a mature state, approximately 80% of the cloud subscription business will be generated from existing contracts and their renewals (2014: approximately 60%) and approximately 20% from new business (2014: approximately 40%). Non-Financial Goals 2015 In addition to our financial goals, we also focus on two non-financial targets: customer loyalty and employee engagement. We believe it is essential that our employees are engaged, drive our success, and support our strategy. Therefore, we remain committed to increasing our employee engagement index score to 82% by 2015 (2014: 79%). Further, our customers’ satisfaction with the solutions we offer is very important to us. We want our customers to not only be satisfied, but also see us as a trusted partner for innovation. We measure this customer loyalty metric using the Customer Net Promoter Score (NPS). For 2015, we aim to achieve a combined (on-premise and cloud) NPS score of 24%. Our financial and non-financial goals affirm our commitment to innovation and sustainability, and will help us deliver on our vision to help the world run better and improve people’s lives. Our mission is to help our customers run at their best. To fulfill our mission, we apply our Run Simple operating principle to help our customers run their businesses better and master complexity, which is the most intractable challenge businesses face today. We do this by delivering technology innovations that we believe address the challenges of today and tomorrow without disrupting our customers’ business operations. Part I
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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES The current members of the Supervisory Board of SAP
Part I
For detailed information on the Supervisory Board committees and their tasks, including the Audit Committee and the General and Compensation Committee, please refer to “Item 10 Additional Information Pursuant to the Certain current members of the Supervisory Board of SAP The current members of the Executive Board, the year in which each member was first appointed and the year in which the term of each expires, respectively, are as follows:
The following changes occurred in the Executive Board in
On May 4, 2014, Vishal Sikka stepped down from the Executive Board. On May 21, 2014, Jim Hagemann Snabe stepped down from the Executive Board. On July 1, 2014, Luka Mucic succeeded Werner Brandt A description of the management responsibilities and backgrounds of the current members of the Executive Board are as follows: Bill McDermott, CEO Robert Enslin, 52 years old, holds diplomas in data science as well as computer science and data management. He joined SAP in 1992 and became a member of the Executive Board in May, 2014. He is president of Global Customer Operations and is responsible for global go-to-market efforts, cloud and line of business sales, regional sales and operations, specialized industry sales, ecosystem and channels as well as end-to-end customer experience. Before joining SAP, Robert Enslin spent 11 years in various roles in the IT industry. Bernd Leukert, 47 years old, holds a master’s degree in business administration. He joined SAP in 1994 and became a member of the Executive Board in May 2014. He is responsible for the global development organization including analytics, applications, cloud, database & technology, quality governance & production, and mobile as well as joint leadership of SAP Labs Network with Gerhard Oswald. Luka Mucic, 43 years old, holds master’s degrees in law and business administration. He joined SAP in 1996 and became Chief Financial Officer (CFO), Chief Operating Officer (COO) and a member of the Executive Board in July 2014. He is Part I
Item 6
Gerhard Oswald,
The members of the Executive Board of SAP To our knowledge, there are no family relationships among the Supervisory Board and Executive Board members. Compensation for Executive and Supervisory Board Members This compensation report outlines the criteria that we applied for the year
Executive Board and Supervisory Board members, and the directors’ dealings required to be disclosed in accordance with the German Securities Trading Act. Compensation for Executive Board Members Compensation System for The compensation for 2014 for Executive Board The Executive Board compensation package is performance-based.
A fixed annual salary element
A variable short-term incentive (STI)
A variable
The Supervisory Board set a compensation target for the sum of the fixed The following criteria apply to the elements of Executive Board compensation for
The fixed annual salary element is paid as a monthly salary. The variable
Part I
Item 6
The variable LTI
The number of RSUs an Executive Board member actually earns in respect of a given year exercised to preserve the fair and equitable nature of the plan in consideration of business developments that were not foreseeable when the LTI was implemented in 2012. In February 2014, the Supervisory Board modified the RSU Milestone Plan 2015 prospectively for 2014 and 2015 by eliminating the effects of exchange rate fluctuation on the underlying KPI targets. In February 2015, the Supervisory Board modified the RSU Milestone Plan 2015 and reduced the minimum performance level of the financial KPIs defined in the plan from 80% to 60%. In addition, the Supervisory Board also resolved to set new target values for those two financial KPIs for 2015 regarding this plan. After the end of each
of vested RSUs a member can attain in respect of a The Company strategy underlying the All vested RSUs are subject to a three-year holding period. The holding period commences at the end of the year Part I Item 6 retains his or her vested RSUs for completed Each vested RSU entitles its holder to a (gross) payout corresponding to the price of one SAP share after the end of the three-year holding period. The applicable share price is measured over a reference period defined in the RSU Milestone Plan 2015 terms.
The contracts of Executive Board members Bill McDermott and Robert Enslin require that compensation payments are made in U.S. dollars. The contracts include clauses that determine the Amount of Compensation for 2014 We present separately Executive Board compensation disclosures under three different compensation disclosure approaches:
Compensation disclosures fully in Compensation disclosures in accordance with the recommendations of the German Corporate Governance Code (“Code”)
I. Executive Board Members’ Compensation Executive Board Members’ Compensation for 2014 – Management View
Part I Item 6 Executive Board Members’ Compensation for 2013 – Management View
In 2012, the Executive Board members acting at that time already received all grants for the years 2012 to 2015 under the RSU Milestone Plan 2015. The Executive Board members appointed in 2014 received respective grants for the years 2014 and 2015 after their appointment. These grants, which are dependent on recipients’ uninterrupted tenure as Executive Board members in the respective years, are tied to the respective years and thus – from an economic perspective – represent compensation for the Executive Board members in the respective years. Accordingly, the share-based payment amounts in the Jim Hagemann Snabe resigned from the Executive Board with effect from May 21, 2014 (Annual General Meeting of Shareholders). To replace the payout for the RSUs granted to him in 2012 under the RSU Milestone Plan he was paid €6,485,800. Of that amount, the grant value at time of grant amounting to €4,318,400 was already included in his 2012 compensation. The remaining €2,167,400 was included in his 2013 compensation (see below) as it was granted to him in 2013. The RSUs granted to Mr. Snabe in 2013
The share-based payment amounts included in
Part I
Item 6
Share-Based Payment Under RSU Milestone Plan 2015 (Grants for 2013)
II. Executive Board Members’ Compensation According to HGB and GAS 17 Under the compensation disclosure rules of the German HGB and GAS 17, share-based compensation awards are to be included in the compensation of the year of grant, even if the awards are tied to future years. Accordingly, and in contrast to, the compensation amounts disclosed under the management view above, the Executive Board compensation amounts determined under HGB and GAS 17 for 2013 and 2014; Exclude the share-based compensation awards granted to Executive Board members in 2012 for the years 2013 and 2014 as these were already included in the 2012 compensation Include in full the grants for 2014 and 2015 made to Executive Board members appointed in 2014, that is, also including the grant for 2015 Part I Item 6 Including RSU Milestone Plan 2015 awards for 2014 and 2015 granted in 2014 to Robert Enslin (€1,574,800 for each of the two years), Bernd Leukert (2014: €1,280,000; 2015: €1,574,800), and Luka Mucic (2014: €1,141,000; 2015: €1,574,800) upon their appointment to the Executive Board, the total Executive Board compensation for 2014 calculated as required under section 314 of the German Commercial Code amounts to €23,216,200, thereof: Bill McDermott €4,048,100; Jim Hagemann Snabe €1,395,900; Werner Brandt €1,768,800; Robert Enslin €4,550,800; Bernd Leukert €4,147,200; Luka Mucic €3,691,500; Gerhard Oswald €1,954,700; and Vishal Sikka €1,659,200. Including RSU Milestone Plan 2015 awards for 2014 and 2015 granted in 2013 to Gerhard Oswald (€1,574,800 for each of the two years) upon the extension of his Executive Board contract, the total Executive Board compensation for 2013 calculated as required under section 314 of the German Commercial Code amounts to €24,109,600, thereof: Bill McDermott €5,468,800; Jim Hagemann Snabe €6,212,900; Werner Brandt €2,391,500; Lars Dalgaard €964,100; Luisa Deplazes Delgado €797,100; Gerhard Oswald €5,529,100; and Vishal Sikka €2,746,100. All amounts as determined under HGB and GAS 17, other than share-based compensation, are identical to the amounts disclosed under the management view above. III. Executive Board Members’ Compensation According to the Code Pursuant to the recommendations of the Code dated June 24, 2014, the value of benefits granted for the year under review as well as the allocation, that is the amounts disbursed for the year under review, are disclosed below based on the reference tables recommended in the Code. In contrast to the disclosure rules stipulated in the German HGB and GAS 17, the Code includes the service cost according to IAS 19 in the Executive Board compensation and requires the additional disclosure of the target value for the one-year variable compensation and the maximum and minimum compensation amounts achievable for the variable compensation elements. However, due to the payouts under the RSU Milestone Plan 2015 not being capped, there is no disclosure to be made for the maximum variable compensation amount achievable (marked as “NA” in the table below). German Corporate Governance Code (Benefits Granted in 2013 and 2014)
Part I Item 6
The total Executive Board compensation granted according to the Code amounted to €23,302,200 (2013: €16,280,900).
Part I
Item 6
The total Executive Board compensation allocated according to the Code amounted to €32,687,400 (2013: €17,583,100). End-of-Service Benefits Regular End-of-Service Undertakings Retirement Pension Plan
Werner Brandt (who retired as of June 30, 2014), Bernd Leukert, Luka Mucic, and Gerhard Oswald receive a retirement pension when they reach the retirement age of 60 (62 for Board Members appointed after January 1, 2012) and
The applied retirement pension plan is contributory. The contribution is 4% of applicable compensation up to the applicable income threshold plus 14% of applicable compensation above the applicable income threshold. For this purpose, applicable compensation is 180% of annual base salary. The applicable income threshold is the statutory annual income threshold for the state pension plan in Germany (West), as amended from time to time.
Part I Item 6 will increase by further annual contributions because he Werner Brandt’s rights to retirement pension benefits increased by further contributions after his 60th birthday until he retired from the Executive Board on June 30, 2014. Instead of paying for entitlements under the pension plan for Executive Board members, SAP paid an equivalent amount to a third-party pension plan for Jim Hagemann Snabe (2014: €117,900; 2013: €282,900). Bill McDermott has rights to future benefits under the portion of the pension plan for SAP America classified as “Non-Qualified Retirement Plan” according to the U.S.
SAP made contributions to a third-party pension plan for Bill McDermott (2014: €646,800; 2013: €698,400), Robert Enslin (2014: €148,100), and Vishal Sikka (2014: €59,900; 2013: €153,900). SAP’s contributions are based on payments by Bill McDermott, Robert Enslin, and Vishal Sikka into this pension plan.
Total
Part I Item 6 The table below shows the annual pension entitlement of each member of the Executive Board on reaching the scheduled retirement age Annual Pension Entitlement
These are vested entitlements. To the extent that members continue to serve on the Executive Board and that therefore more contributions are made for them in the future, pensions actually payable at the scheduled retirement age Postcontractual During the agreed 12-month postcontractual will be deducted from his compensation in accordance with section 74c of the German Commercial Code. The following table presents the net present values of the postcontractual Net Present Values of the Postcontractual
Part I Item 6
Early End-of-Service Undertakings Severance Payments The standard contract for all Executive Board members If an Executive Board member’s appointment to the Executive Board expires or ceases to exist because of, or as a consequence of, change or restructuring, or due to a change of control, SAP
Postcontractual Abstention compensation for the postcontractual Permanent Disability In case of permanent disability, the contract will end at the end of the quarter in which the permanent inability to work was determined. The Executive Board member receives the monthly basic salary for a further Payments to Executive Board Members Resigning or Retiring in
The unforfeitable rights allocated to him under the RSU Milestone Plan 2015 for the tranches 2012 and 2013 with the value of €2,420,800 (2012) and €1,434,500 (2013) remain available to him until their cash settlement in Werner Brandt retired from his position as Executive Board member upon the end of his current term on June 30, 2014. He received the following payments in connection with his retirement: For a period of twelve months he receives monthly abstention compensation for the postcontractual non-compete period totaling €1,841,500. The unforfeitable rights allocated to him under the
In
Payments to Former Executive Board Members In Executive Board Members’ Holdings of Long-Term Incentives Members of the Executive Board hold or held share-based payment rights throughout the year
The table below shows Executive Board members’ holdings, on December 31, RSU Milestone Plan 2015 (2014 Tranche)
Part I Item 6 The holding of RSUs on December 31, 2014, which were issued and not forfeited in 2014, reflects the number of RSUs multiplied by the 77,89% target achievement. The RSUs allocated in 2012 have a remaining term of 1.08 years; the RSUs allocated in 2013 have a remaining term of 2.08 years; and the RSUs allocated in 2014 have a remaining term of 3.08 years. RSU Milestone Plan 2015 (2013 Tranche)
The holding of RSUs on December 31, 2013, which were issued and not forfeited in 2013, reflects the number of RSUs multiplied by the 92.97% target achievement. RSU Milestone Plan 2015 (2012 Tranche)
The holding on December 31, 2012, reflects the number of RSUs issued in 2012 multiplied by the 133.55% target achievement. Part I Item 6 SAP SOP 2010 The table below shows Executive Board members’ holdings, on December 31, 2014, of virtual share options issued to them under the SAP SOP 2010 since its inception. The strike price for an option is 115% of the base price. The issued options have a term of seven years and can only be exercised on specified dates after the vesting period. The options issued in 2010 SAP SOP 2010 Virtual Share Options
Total Expense for Share-Based Payment
Total Expense for Share-Based Payment
Part I
Item 6
The expense is recognized in accordance with IFRS 2 “Share-Based Payments.” Because the RSU Milestone Plan 2015 tranche for 2015 was allocated at the respective grant date of each Executive Board member, we are required to recognize the respective expense in part in 2014 even though this future tranche depends on the achievement of specific financial targets in future periods. Share-based payment expenses were affected by a decrease in fair values of SOP 2010. Negative expenses also arose out of the lapsing of rights under the RSU Milestone Plan 2015 in connection with the departures from the company of Werner Brandt and Vishal Sikka before the end of the year. Shareholdings and Transactions of Executive Board Members No member of the Executive Board holds more than 1% of the ordinary shares of SAP The table below shows transactions by Executive Board members and persons closely associated with them notified to SAP pursuant to the German Securities Trading Act, section 15a, in
Transactions in SAP Shares
Executive Board: Other Information We did not grant any compensation advance or credit to, or enter into any commitment for the benefit of, any member of our Executive Board in As far as the law permits, SAP Compensation for Supervisory Board Members Compensation System Supervisory Board members’ compensation is governed by our Articles of Incorporation, section 16. Each member of the Supervisory Board receives, in addition to the reimbursement of his or her expenses, compensation composed of fixed elements and a variable element. The variable element depends on the dividend paid by SAP on its shares. The fixed element is €100,000 for the chairperson, €70,000 for Part I
Item 6
€10,000, provided that the committee concerned has met in the year. The chairperson of the The variable compensation element is €10,000 for the chairperson, €8,000 for However, the aggregate compensation excluding compensation for committee memberships must not exceed €250,000 for the chairperson, €200,000 for Any members of the Supervisory Board having served for less than the entire year receive one-twelfth of the annual remuneration for each month of service commenced. This also applies to the increased compensation of the chairperson and the deputy
Amount of Compensation Subject to the resolution on the appropriation of retained earnings by the Annual General Meeting of Shareholders on May Supervisory Board Members’ Compensation in 2014
Part I
Item 6
In addition, we reimburse
Frankfurt am Main, Germany (which Supervisory Board member Wilhelm Haarmann is Long-Term Incentives for the Supervisory Board We do not offer members share options or other share-based payment for their Supervisory Board work. Any share options or other share-based payment received by employee-elected members relate to their position as SAP employees and not to their work on the Supervisory Board. Shareholdings and Transactions of Supervisory Board Members Supervisory Board chairperson Hasso Plattner and the companies he controlled held
The table below shows transactions by Supervisory Board members and persons closely associated with them notified to SAP pursuant to the German Securities Trading Act, section 15a, in Transactions in SAP Shares
Part I Item 6
Supervisory Board: Other Information We did not grant any compensation advance or credit to, or enter into any commitment for the benefit of, any member of our Supervisory Board in Hasso Plattner, the chairperson of the Supervisory Board, entered into a consulting contract with SAP after he joined the Supervisory Board in May 2003. The contract does not provide for any compensation. The only cost we incurred under the contract was the reimbursement of expenses. As far as the law permits, we indemnify Supervisory Board members against, and hold them harmless from, claims brought by third parties. To this end, we maintain directors’ and officers’ (D&O) group liability insurance. The current D&O policy does not include an individual deductible for Supervisory Board members as envisaged in the German Corporate Governance Code.
Headcount
On December 31, We define the FTE headcount as the number of people we would employ if we only employed people on full-time employment contracts. Students employed On December 31, EMEA region (including
In the Americas region, headcount (FTEs) increased by
Our personnel expense per employee Employee On a worldwide basis, we believe that our employee and labor relations are excellent. On a corporate level, employees of SAP Part I Item 6, 7 On the legal entity level, the SAP
have an impact on company structure or on the employees it represents. The union negotiates agreements with SAP France S.A. and SAP Labs France S.A. In addition, the employees of
For Argentina, all employees are legally required to be affiliated with the and the IT Chamber, to be recognized by the government as an Beneficial Ownership of Shares The ordinary shares beneficially owned by the persons listed in Item 6. Directors, Senior Management and Employees — Compensation Report” SHARE-BASED COMPENSATION PLANS Share-Based Compensation We maintain certain share-based compensation plans. The share-based compensation from these plans result from cash-settled and equity-settled awards issued to employees. For more information on our share-based compensation plans refer to “Item 6.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED-PARTY TRANSACTIONS The share capital of SAP Part I Item 7, 8 The following table sets forth certain information regarding the beneficial ownership of the ordinary shares to the extent known to SAP as of March individually and as a group, in each case as reported to SAP
We at present have no knowledge about any arrangements, the operation of which may at a subsequent date result in a change in control of the company. For further information on related-party transactions see Note (31) to our Consolidated Financial Statements. CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE See “Item 18. Financial Statements” and pagesF-1 through Legal Proceedings We are subject to a variety of legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business, including claims and lawsuits involving businesses we have acquired. Refer to
Dividend Policy For more information on dividend policy see the disclosure in “Item 3. Key Information
Part I
Item 8, 9
Our ordinary shares are officially listed on the Frankfurt Stock Exchange, the Berlin Stock Exchange and the Stuttgart Stock Exchange. The principal trading market for the ordinary shares is Xetra, the electronic dealing platform of Deutsche Boerse AG. ADRs representing SAP
TRADING ON THE FRANKFURT STOCK EXCHANGE AND THE NYSE The table below sets forth, for the periods indicated, the high and low closing sales prices for the ordinary shares on the Xetra trading System of the Frankfurt Stock Exchange together with the closing highs and lows of the DAX, and the high and low closing sales prices for the ADRs on the NYSE (information is provided by Reuters):
Part I Item 9, 10 On March
ITEM 10. ADDITIONAL INFORMATION Organization and Register SAP Objects and Purposes SAP’s Articles of Incorporation state that our objects involve, directly or indirectly, the development, production and marketing of products and the provision of services in the field of information technology, including:
developing and marketing integrated product and service solutions for e-commerce;
developing software for information technology and the licensing of its use to others;
organization and deployment consulting, as well as user training, for e-commerce and other software solutions;
selling, leasing, renting and arranging the procurement and provision of all other forms of use of information technology systems and related equipment; and making capital investments in enterprises active in the field of information technology to promote the opening and advancement of international markets in the field of information technology. SAP is authorized to act in all the business areas listed above and to delegate such activities to affiliated entities within the meaning of the German Stock Corporation Act; in particular SAP is authorized to delegate its business in whole or in part to such entities. SAP Introduction SAP The Supervisory Board The Supervisory Board appoints and removes the members of the Executive Board and oversees and advises the management of the corporation. At regular intervals it meets to discuss current business as well as business development and planning. The SAP Executive Board must consult with the Supervisory Board concerning the corporate strategy, which is developed by the Executive Board. Part I Item 10 Incorporation; in addition, the Supervisory Board has specified further types of transactions that require its consent. Accordingly, the Supervisory Board must also approve the annual budget of SAP upon submission by the Executive Board and certain subsequent deviations from the approved budget.
The Supervisory Board is also responsible for representing SAP The Supervisory Board, based on a recommendation by its Audit Committee, provides its proposal for the election of the external independent
The current and first Supervisory Board of SAP SE consists of The procedure for the appointment of the employees’ representatives on the Supervisory Board of SAP SE is governed by the EIA. The employees’ representatives succeeding the current members in 2015 will be appointed by the SE Works Council. Pursuant to the EIA, the nine seats on the first Supervisory Board reserved for employees’ representatives are allocated as follows: The first six seats are allocated to Germany, the seventh seat is allocated to France, the eighth seat is also allocated to Germany, and the ninth seat is allocated to a European country not represented by the first eight seats, as determined by the SE Works Council. The employees’ representatives for the first six seats allocated to Germany will be determined by direct vote by all SAP employees with their principal place of employment in Germany. The employees’ representative for the seventh seat allocated to France will be determined according to the applicable provisions of French law on the election or appointment of employees’ representatives on a supervisory board. With regard to the eighth and ninth seat, members of the Any Supervisory Board member elected by the shareholders at the Annual General Meeting of Shareholders may be removed by three-quarters of the votes cast at the Annual General Meeting of Shareholders. Any Supervisory Board member The Supervisory Board elects a chairperson and Unless otherwise mandatorily prescribed by law or the Articles of Incorporation, resolutions of the Supervisory Board are adopted by simple majority of the votes cast. In the event of a tie, the vote of Part I Item 10 the chairperson
The members of the Supervisory Board cannot be elected or appointed, as the case may be, for a term longer than As stipulated in the German Corporate Governance Code (GCGC), an adequate number of our Supervisory Board members are independent. To be considered for appointment to the Supervisory Board and for as long as they serve, members must comply with certain criteria concerning independence, conflicts of interest and multiple memberships of management, supervisory and other governing bodies. They must be loyal to SAP in their conduct and must not accept any position in companies that are in competition with SAP. Members are subject to insider trading prohibitions and the respective directors’ dealing rules of the German Securities Trading Act. A member of the Supervisory Board may not vote on matters relating to certain contractual agreements between such member and SAP
The Audit Committee The focus of the Audit Committee (Prüfungsausschuss) is the oversight of SAP’s external financial reporting as well as SAP’s risk management, internal controls (including internal controls over the effectiveness of the financial reporting process), The Audit Committee has established procedures regarding the prior approval of all audit and non-audit services provided by our external independent auditor. See “Item 16C. Principal Accountant Fees and Services” for details. Furthermore the Audit Committee monitors the effectiveness of our internal risk management and other monitoring processes that are or need to be established. The Supervisory Board has determined Erhard Schipporeit to be an audit committee financial expert as defined by the regulations of the SEC issued under Section 407 of the Sarbanes-Oxley Act as well as an independent financial expert as defined by the German Stock Corporation Act. See “Item 16A. Audit Committee Financial Expert” for details. He is also the chairperson of the Audit Committee. The General and Compensation Committee The General and Compensation Committee (Prä Part I Item 10 work necessary for the personnel decisions made by the Supervisory Board, notably those concerning compensation for the Executive Board members and the conclusion, amendment and termination of the Executive Board members’ contracts of appointment. The German Stock Corporation Act prohibits the Compensation Committee from deciding on the The Finance and Investment Committee The Finance and Investment Committee (Finanz- und Investitionsausschuss) addresses general financing issues. Furthermore, it regularly discusses acquisitions of intellectual property and companies, venture capital investments and other investments with the Executive Board and reports to the Supervisory Board on such investments. It is also responsible for the approval of such investments if the individual investment amount exceeds certain specified limits.
The Technology and Strategy The Nomination Committee The Nomination Committee (Nominierungsausschuss) is exclusively composed of shareholder representatives and is responsible for identifying suitable candidates for membership of the Supervisory Board for recommendation to the Annual General Meeting of Shareholders. The Special Committee The Special Committee (Sonderausschuss) The People and The People and Organization Committee (Ausschuss für Mitarbeiter- und Organisationsangelegenheiten) deliberates and advises the Executive and Supervisory The duties According to the provisions of the Sarbanes-Oxley Act, SAP does not grant loans to the members of the Executive Board or the Supervisory Board. The Executive Board The Executive Board manages the Company’s business, is responsible for preparing its strategy and represents it in dealings with third parties. The Executive Board reports regularly to the Supervisory Board about SAP operations and business strategies and prepares special reports upon request. A person may not serve on the Executive Board and on the Supervisory Board at the same time. The Executive Board and the Supervisory Board must cooperate closely for the benefit of the Company. Without being asked, the Executive Board must provide to the Supervisory Board regular, prompt and comprehensive information about all of the essential issues affecting the SAP Group’s business progress and its potential business risks. Furthermore, the Executive Board must maintain regular contact with the chairperson of the Supervisory Pursuant to the Articles of Incorporation, the Executive Board must consist of at least two members. Part I Item 10 comprised of five members. Any two members of the Executive Board jointly or one member of the Executive Board and the holder of a special power of attorney (Prokurist) jointly may legally represent SAP Under German law SAP
have a duty of loyalty and care towards SAP SAP has implemented a Code of Business Conduct for employees (see “Item 16B. Code of Ethics” for details). The employee code is equally applicable to managers and members of the Executive Board. Its rules are observed as well by members of the Supervisory board as applicable. Under German law the Executive Board of SAP The can be raised or questionable conduct can be reported without fear of retaliation. Pursuant to Sec. 289a of the German Commercial Code (Handelsgesetzbuch) the Executive The Global Managing Board In May 2012, SAP created a Global Managing Board in addition to the SAP Executive Board, which retains ultimate responsibility for overseeing and deciding on the activities of the company. The Global Managing Board allows SAP to appoint a broader range of global leaders to help steer the organization. The Global Managing Board has advisory and decision-supporting functions for the Executive Board and comprises all Executive Part I Item 10 Board members as well as Helen Arnold, Stefan Ries, Michael Kleinemeier, and Steve Singh. The Annual General Meeting of Shareholders Shareholders of the Company exercise their voting rights at shareholders’ meetings. The Executive Board calls the Annual General Meeting of Shareholders, which must take place within the first At the Annual General Meeting of Shareholders, the shareholders are asked, among
other things, to formally approve the actions taken by the Executive Board and the Supervisory Board in the preceding fiscal year, to approve the appropriation of the corporation’s distributable profits and to appoint an external independent auditor. Shareholder representatives of the Supervisory Board are generally elected at the Annual General Meeting of Shareholders for a term of approximately five years. Shareholders may also be asked to grant authorization to repurchase treasury shares, to resolve on measures to raise or reduce the capital of the Company or to ratify amendments of our Articles of Incorporation. The Annual General Meeting of Shareholders can make management decisions only if requested to do so by the Executive Board. There are no provisions in the Articles of Incorporation of SAP According to the German Securities Acquisition and Takeover Act (Wertpapiererwerbs- und Übernahmegesetz) a bidder seeking control of a company with its corporate seat in Germany or another state of the European Economic Area (EEA) and its shares being traded on prudent and diligent management of a company that is not the target of a takeover bid would also take. Moreover, the target executive board may search for other bidders and, with the prior approval of the supervisory board, may take other defensive measures, provided that both boards act within the parameters of their general authority under the German Stock Corporation Act. An executive board may also adopt specific defensive measures if such measures have been approved by the supervisory board and were specifically authorized by the Under the European Takeover Directive of 2004 member states had to choose whether EU restrictions on defensive measures apply to companies that are registered in their territory. Germany decided to opt out and to retain its current restrictions on a board implementing defensive measures (as described above). As required by the Directive if a country decides to opt out the German Securities Acquisition and Takeover Act grants companies the option of voluntarily applying the European standard by a change of the Articles of Incorporation (opt-in). SAP Under German law, the capital stock may be increased in consideration of contributions in cash or in kind, or by establishing authorized capital or Part I Item 10 contingent capital or by an increase of the company’s capital reserves. Authorized capital provides the Executive Board with the flexibility to issue new shares for a period of up to five years. The Executive Board must obtain the approval of the Supervisory Board before issuing new shares with regard to the authorized capital. Contingent capital allows the issuance of new shares for specified purposes, including stock option plans for Executive Board members or employees and the issuance of shares upon conversion of convertible bonds and exercise of stock options. By law, the Executive Board may only issue new shares with regard to the contingent capital for the specified purposes.
Capital increases require an approval by at least 75% of the valid votes cast at the General Meeting of Shareholders in which the increase is proposed, and requires an amendment to the Articles of Incorporation. The share capital may be reduced by an amendment to the Articles of Incorporation approved by at least 75% of the valid votes cast at the General Meeting of Shareholders. In addition, the Executive Board of SAP The Articles of Incorporation do not contain conditions regarding changes in the share capital that are more stringent than those provided by German law. RIGHTS ACCOMPANYING OUR SHARES There are no limitations imposed by German law or the Articles of Incorporation of SAP According to the German stock corporation law, the rights of shareholders cannot be amended without shareholders’ consent. The Articles of Incorporation do not provide more stringent conditions regarding changes of the rights of shareholders than those provided by applicable European and German law. Voting Rights Each ordinary SAP Section 21 (1) of SAP
changing the corporate purpose of the company set out in the
capital increases and capital decreases;
excluding preemptive rights of shareholders to subscribe for new shares or for treasury shares;
dissolution;
a merger into, or a consolidation with, another company;
a transfer of all or virtually all of the assets; a change of corporate form, includingre-conversion into a German stock corporation; a transfer of the registered seat to another EU member state; and
any other amendment to the Articles of Incorporation (pursuant to section 21 (2) sentence 1 of the Articles of Incorporation). For any amendments of the Articles of Incorporation which require a
Part I Item 10 Dividend Rights See “Item 3. Key Information Preemptive Rights Shareholders have preemptive rights to subscribe (Bezugsrecht) for any issue of additional shares in proportion to their shareholdings in the issued capital. The
preemptive rights may be excluded under certain circumstances by a shareholders’ resolution (approved by at least 75% of the valid votes cast at the General Meeting of Shareholders) or by the Executive Board authorized by such shareholders’ resolutions and subject to the consent of the Supervisory Board. Liquidation If SAP Disclosure of Shareholdings SAP Exchange Controls and Other Limitations Affecting Security Holders The euro is a fully convertible currency. At the present time, Germany does not restrict the export or import of capital, except for investments in certain areas in accordance with applicable resolutions adopted by the United Nations and the European Union. However, for statistical purposes only, every individual or corporation residing in Germany (“Resident”) must report to the German Central Bank (Deutsche Bundesbank), subject only to certain immaterial exceptions, any payment received from or made to an individual or a corporation residing outside of Germany (“Non-Resident”) if such payment exceeds €12,500 (or the equivalent in a foreign currency). In addition, German Residents (except for individuals and certain financial institutions) must report any General The following discussion is a summary of certain material German tax and U.S. federal income tax consequences of the acquisition, ownership and disposition of our ADRs or ordinary shares to a U.S. Holder. In general, a U.S. Holder (as hereinafter defined) is any beneficial owner of our ADRs or ordinary shares that (i) is a citizen or resident of the U.S. or a corporation organized under the laws of the U.S. or any political subdivision thereof, an estate whose income is subject to U.S. federal income tax regardless of its source or a trust, if a U.S. court can exercise Part I Item 10 primary supervision over its administration and one or more U.S. persons are authorized to control all substantial decisions of the trust; (ii) is not a resident of Germany for purposes of the income tax treaty between the
U.S. and Germany (Convention between the Federal Republic of Germany and the United States of America for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital and to certain other Taxes, as amended by the Protocol of June 1, 2006 and as published in the German Federal Law Gazette 2008 vol. II pp. 611/851; the “Treaty”); (iii) owns the ADRs or ordinary shares as capital assets; (iv) does not hold the ADRs or ordinary shares as part of the business property of a permanent establishment or a fixed base in Germany; and (v) is fully entitled to the benefits under the Treaty with respect to income and gain derived in connection with the ADRs or ordinary shares. THE FOLLOWING IS NOT A COMPREHENSIVE DISCUSSION OF ALL GERMAN TAX AND U.S. FEDERAL INCOME TAX CONSEQUENCES THAT MAY BE RELEVANT FOR U.S. HOLDERS OF OUR ADRs OR ORDINARY SHARES. THEREFORE, U.S. HOLDERS ARE STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE OVERALL GERMAN TAX AND U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF OUR ADRs OR ORDINARY SHARES IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, INCLUDING THE EFFECT OF ANY STATE, LOCAL OR OTHER FOREIGN OR DOMESTIC LAWS. German Taxation The summary set out below is based on German tax laws, interpretations thereof and applicable tax treaties to which Germany is a party and that are in force at the date of this report; it is subject to any changes in such authority occurring after that date, potentially with retroactive effect, that could result in German tax consequences different from those discussed below. This discussion is also based, in part, on representations of the Depositary and assumes that each obligation of the Deposit Agreement and any related agreements will be performed in accordance with its terms. For additional information on the Depository and the fees associated with SAP’s ADR program see “Item 12. Description of Securities Other Than Equity Securities For purposes of applying German tax law and the applicable tax treaties to which Germany is a party, a holder of ADRs will generally be treated as owning the ordinary shares represented thereby. German Taxation of Dividends Under German income tax law, the full amount of dividends distributed by Generally, for many non-resident shareholders the withholding tax rate is currently reduced under applicable income tax treaties. Rates and refund procedures may vary according to the applicable treaty. To reduce the withholding tax to the applicable treaty tax rate a non-resident shareholder must apply for a refund of withholding taxes paid. Claims for refund, if any, are made on a special German claim for refund form, which must be filed with the German Federal Tax Office (Bundeszentralamt für Steuern, D-53221 Bonn, Germany; http://www.bzst.de). The relevant forms can be obtained from the German Federal Tax Office or from German embassies and consulates. For details, such non-resident shareholders are urged to consult their own tax advisors. Special rules apply for the refund to U.S. Holders (we refer to the below section “Refund Procedures for U.S. Holders”).
Refund Procedures for U.S. Holders Under the Treaty, a partial refund of the 25% withholding tax equal to 10% of the gross amount of the dividend and a full refund of the solidarity surtax can be obtained by a U.S. Holder. Thus, for each US$100 of gross dividends paid by SAP Part I Item 10 total dividend of US$85 (provided the euro/dollar exchange rate at the time of payment of the dividend is the same as at the time of refund, otherwise the effective dividend may be higher or lower). Further relief of German withholding tax under the Treaty may be available for corporate U.S. Holders owning at least 10% of the voting stock of SAP or U.S. Holders qualifying as pension fund within the meaning of the Treaty, subject to further requirements being met. To claim the refund of amounts withheld in excess of the Treaty rate, a U.S. Holder must submit (either directly or, as described below, through the Data Medium Procedure participant) a claim for refund to the German tax authorities, with, in the case of a direct claim, the original bank voucher (or certified copy thereof) issued by the paying entity documenting the tax withheld, within four years from the end of the calendar year in which the dividend is received. Claims for refund are made on a special German claim for refund form, which must be filed with the German Federal Tax Office (Bundeszentralamt für Steuern,D-53221 Bonn, Germany). The German claim for refund form may be obtained from the German tax authorities at the same address where applications are filed, from the Embassy of the Federal Republic of Germany, U.S. Holders must also submit to the German tax authorities a certification of their U.S. residency status (IRS Form 6166). This certification can be obtained from the Internal Revenue Service by filing a request for certification (generally on an IRS Form 8802, which will not be processed unless a user fee is paid) with the Internal Revenue Service, P.O. Box 71052, Philadelphia, PA 19176-6052. U.S. Holders should consult their own tax advisors regarding how to obtain an IRS Form 6166. An IT-supported quick-refund procedure is available for dividends received (the “Data Medium Procedure owner of the dividends received; (ii) it is resident in the U.S. in the meaning of the Treaty; (iii) it does not have its domicile, residence or place of management in Germany; (iv) the dividends received do not form part of a permanent establishment or fixed base in Germany; and (v) it commits, due to its participation in the DMP, not to claim separately for refund. The beneficiaries also must provide an IRS Form 6166 certification with the DMP participant. The DMP participant is required to keep these documents in its files and prepare and file a combined claim for refund with the German tax authorities by electronic media. The combined claim provides evidence of a U.S. Holder’s personal data including its U.S. Tax Identification Number. The German tax authorities reserve the right to audit the entitlement to tax refunds for several years following their payment pursuant to the Treaty in individual cases. The DMP participant must assist with the audit by providing the necessary details or by forwarding the queries to the respective refund beneficiaries. The German tax authorities will issue refunds denominated in euros. In the case of shares held through banks or brokers participating in the Depository, the refunds will be issued to the Depository, which will convert
the refunds to dollars. The resulting amounts will be paid to banks or brokers for the account of the U.S. Holders. German Taxation of Capital Gains Under German income tax law, a capital gain derived from the sale or other disposition of ADRs or ordinary shares by a non-resident shareholder is subject to income tax in Germany only if such non-resident shareholder has held, directly or indirectly, ADRs or ordinary shares representing 1% or more of the registered share capital of a company at any time during the five-year period immediately preceding the sale or other disposition.
However, a U.S. Holder of ADRs or ordinary shares that qualifies for benefits under the Treaty is not subject to German income or corporate income tax on the capital gain derived from the sale or other disposition of ADRs or ordinary shares. Part I Item 10 German Gift and Inheritance Tax Generally, a transfer of ADRs or ordinary shares by a shareholder at death or by way of gift will be subject to German gift or inheritance tax, respectively, if (i) the decedent or donor, or the heir, donee or other transferee is resident in Germany at the time of the transfer, or with respect to German citizens who are not resident in Germany, if the decedent or donor, or the heir, donee or other transferee has not been continuously outside of Germany for a period of more than five years; (ii) the ADRs or ordinary shares are part of the business property of a permanent establishment or a fixed base in Germany; or (iii) the ADRs or ordinary shares subject to such transfer form part of a portfolio that represents 10% or more of the registered share capital of the Company and has been held, directly or indirectly, by the decedent or donor, respectively, at the time of the transfer, actually or constructively together with related parties. However, the right of the German government to impose gift or inheritance tax on a non-resident shareholder may be limited by an applicable estate tax treaty. In the case of a U.S. Holder, a transfer of ADRs or ordinary shares by a U.S. Holder at death or by way of gift generally will not be subject to German gift or inheritance tax by reason of the estate tax treaty between the U.S. and Germany (Convention between the Federal Republic of Germany and the United States of America for the Avoidance of Double Taxation with respect to Estate, Gift and Inheritance Taxes, German Federal Law Gazette 1982 vol. II page 847, as amended by the Protocol of December 14, 1998 and as published on December 21, 2000, German Federal Law Gazette 2001 vol. II, page 65; the “Estate Tax Treaty”) so long as the decedent or donor, or the heir, donee or other transferee was not domiciled in Germany for purposes of the Estate Tax Treaty at the time the gift was made, or at the time of the decedent’s death, and the ADRs or ordinary shares were not held in connection with a permanent establishment or a fixed base in Germany. In general, the Estate Tax Treaty provides a credit against the U.S. federal gift or estate tax liability for the amount of gift or inheritance tax paid in Germany, subject to certain limitations, in a case where the ADRs or ordinary shares are subject to German gift or inheritance tax and U.S. federal gift or estate tax. Other German Taxes There are currently no German net worth, transfer, stamp or other similar taxes that would apply to a U.S. Holder on the acquisition, ownership, sale or other disposition of our ADRs or ordinary shares.
U.S. Taxation The following discussion applies to U.S. Holders only if the ADRs and ordinary shares are held as capital assets for tax purposes. It does not address tax considerations applicable to U.S. Holders that may be subject to special tax rules, such as dealers or traders in securities, financial institutions, insurance companies, tax-exempt entities, regulated investment companies, U.S. Holders that hold ordinary shares or ADRs as a part of a straddle, conversion transaction or other arrangement involving more than one position, U.S. Holders that own (or are deemed for U.S. tax purposes to own) 10% or more of the total combined voting power of all classes of voting stock of SAP The summary set out below is based upon the U.S. Internal Revenue Code of 1986, as amended (the “Code”), the Treaty and regulations, rulings and judicial decisions thereunder at the date of this report. Any such authority may be repealed, revoked or modified, potentially with retroactive effect, so as to result in U.S. federal income tax consequences different from those discussed below. No assurance can be given that the conclusions set out below would be sustained by a court if challenged by the IRS. The discussion below is based, in part, on representations of the Depositary, and assumes that each obligation in the Deposit Agreement and any related agreements will be performed in accordance with its terms. For U.S. federal income tax purposes, a U.S. Holder of ADRs will be considered to own the ordinary shares represented thereby. Accordingly, unless the context otherwise requires, all references in this section to ordinary shares are deemed to refer likewise to ADRs representing an ownership interest in ordinary shares. Part I Item 10 U.S. Taxation of Dividends Subject to the discussion below under “Passive Foreign Investment Company Considerations”, distributions made by SAP As discussed above, a U.S. Holder may obtain a refund of German withholding tax under the Treaty to the extent that the German withholding tax exceeds 15% of the dividend distributed. Thus, for each US$100 of gross dividends paid by SAP In the case of a distribution in euro, the amount of the distribution generally will equal the dollar value of the euro distributed (determined by reference to the spot currency exchange rate on the date of receipt of the distribution, or receipt by the Depositary in the case of a distribution on ADRs), regardless of whether the holder in fact converts the euro into dollars, and the U.S. Holder will not realize any separate foreign currency gain or loss (except to the extent that such gain or loss arises on the actual disposition of foreign currency received).
However, a U.S. Holder may be required to recognize foreign currency gain or loss on the receipt of a refund in respect of German withholding tax to the extent the U.S. dollar value of the refund differs from the U.S. dollar equivalent of that amount on the date of receipt of the underlying dividend. Dividends paid by SAP therefore, generally may not be offset by passive activity losses) and as “investment income” for purposes of the limitation on the deduction of investment interest expense. Dividends paid by SAP U.S. Taxation of Capital Gains In general, assuming that SAP the ordinary shares were held for more than one year. Capital gains may also be subject to the Medicare tax at a rate of 3.8%. The deductibility of capital losses is subject to significant limitations. Upon a sale of ordinary shares to SAP Deposit and withdrawal of ordinary shares in exchange for ADRs by a U.S. Holder will not result in its realization of gain or loss for U.S. federal income tax purposes. Part I Item 10 U.S. Information Reporting and Backup Withholding Dividend payments made to holders and proceeds paid from the sale of shares or ADRs are subject to information reporting to the Internal Revenue Service and will be subject to backup withholding taxes (currently imposed at a 28% rate) unless the holder (i) is a corporation or other exempt recipient or (ii) provides a taxpayer identification number on a properly completed IRS Form W-9 and certifies that no loss of exemption from backup withholding has occurred. Holders that are not U.S. persons are not subject to information reporting or backup withholding. However, such a holder may be required to provide a certification of its non-U.S. status in connection with payments received within the United States or through a U.S.-related financial intermediary. Backup withholding is not an additional tax and any amounts withheld as backup withholding may be credited against a holder’s U.S. federal income tax liability. A holder may obtain a refund of any excess amounts withheld under the backup withholding rules by timely filing the appropriate claim for refund with the Internal Revenue Service and furnishing any required information. Shareholders may be subject to other U.S. information reporting requirements and should consult their own tax advisors for application of these reporting requirements to their own facts and circumstances. U.S. Foreign Tax Credit In general, in computing its U.S. federal income tax liability, a U.S. Holder may elect for each taxable year to claim a deduction or, subject to the limitations on foreign tax credits generally, a credit for foreign income taxes paid or accrued by it. For U.S. foreign tax credit purposes, subject to the applicable limitations under the foreign tax credit rules, German tax withheld from dividends paid to a U.S. Holder, up to the 15% provided under the Treaty, will be eligible for credit against the U.S. Holder’s federal income tax liability or, if the U.S. Holder has elected to deduct such taxes, may be deducted in computing taxable income. For U.S. foreign tax credit purposes, dividends paid by SAP realized by a U.S. Holder on the sale or exchange of ordinary shares generally will be treated as U.S.-source gain or loss. Passive Foreign Investment Company Considerations Special and adverse U.S. tax rules apply to a U.S. Holder that holds an interest in a passive foreign investment company (PFIC). Based on current projections concerning the composition of SAP
current or future taxable years. However, because this conclusion is based on our current projections and expectations as to its future business activity, SAP
Pursuant to the Agreement and Plan of Merger dated as of
We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended. In accordance with these requirements, we file reports and furnish other information as a foreign private issuer with the SEC. These materials, including this report and the exhibits thereto, may be inspected and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. The SEC also maintains a Web site at www.sec.gov that contains reports and other information regarding registrants that file electronically with the SEC. This report as well as some of the other information submitted by us to the SEC may be Part I Item 10, 11, 12 accessed through this Web site. In addition, information about us is available at our Web site: ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to various financial risks, such as market risks, including changes in foreign currency exchange rates, interest rates and equity prices, as well as credit risk and liquidity risk. We manage these risks on a Group-wide basis. Selected derivatives are exclusively used for this purpose and not for
speculation, which is defined as entering into derivative instruments without a corresponding underlying transaction. Financial risk management is done centrally. See Notes (25), (26) and (27) to our Consolidated Financial Statements for our quantitative and qualitative disclosures about market risk. ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES Fees and Charges Payable by ADR Holders Deutsche Bank Trust Company Americas is the Depositary for SAP
taxes and other governmental charges;
registration fees as may be in effect from time to time for the registration of transfers of SAP ordinary shares on any applicable register to the Depositary or its nominee or the custodian or its nominee in connection with deposits or withdrawals under the Deposit Agreement;
applicable air courier, cable, telex and facsimile expenses of the Depositary;
expenses incurred by the Depositary in the conversion of foreign currency;
$5.00 or less per 100 ADSs (or portion thereof) to the Depositary for the execution and delivery of ADRs (including in connection with the
a maximum aggregate service fee of U.S. $2.00 per 100 ADSs (or portion thereof) per calendar year to the Depositary for the services performed by the Depositary in administering the ADR program, including for processing any cash dividends and other cash distributions; and $5.00 or less per 100 ADSs (or portion thereof) to the Depositary for distribution of securities other than SAP ordinary shares or rights. These charges are described more fully in Section 5.9 of the Amended and Restated Deposit Agreement dated November 25, 2009, incorporated by reference as Exhibit 4.1.2 to our 2010 Annual Report on Form 20-F filed with the Commission on March 18, 2011. Applicable service fees are either deducted from any cash dividends or other cash distributions or charged separately to holders in a manner determined by the Depositary, depending on whether ADSs are registered in the name of investors (whether certificated or in book-entry form) or held in brokerage and custodian accounts (via DTC). In the case of distributions of securities other than SAP ordinary shares or rights, the Depositary charges the applicable ADS record date holder concurrent with the distribution. In the case of ADSs registered in the name of the investor, whether certificated or in book entry form, the Depositary sends invoices to the applicable record date ADS holders. For ADSs held in brokerage and custodian accounts via DTC, the Depositary may, if permitted by the settlement systems provided by DTC, collect the fees through those settlement systems from the brokers and custodians holding ADSs in their DTC accounts. The brokers and custodians who hold their clients’ ADSs in DTC accounts in such case may in turn charge their clients’ accounts the amount of the service fees paid to the Depositary. In the event of a refusal to pay applicable fees, the Depositary may refuse the requested services until payment is received or may set off the amount of the service from any distribution to be made to the ADR holder, all in accordance with the Deposit Agreement. If any taxes or other governmental charges are payable by the holders and/or beneficial owners Part I
Item 12
of ADSs to the Depositary, the Depositary, the custodian or SAP may withhold or deduct from any distributions made in respect of the deposited SAP ordinary share and may sell for the account of the holder and/or beneficial owner any or all of the deposited ordinary shares and apply such distributions and sale proceeds in payment of such taxes (including applicable interest and penalties) or charges, with the holder and the beneficial owner thereof remaining fully liable for any deficiency. Fees and Other Payments Payable by the Depositary to SAP The Depositary has agreed to make certain payments to SAP as reimbursement for expenses incurred by SAP in connection with its ADR program and in support of SAP’s ongoing investor relations activities related to the ADR program. For the year ended December 31, Part II
Item 13, 14, 15, 16, 16A
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES None. ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS None. ITEM 15. CONTROLS AND PROCEDURES EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES Disclosure controls and procedures are controls and other procedures of SAP that are designed to ensure that information required to be disclosed by SAP in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by SAP in the reports that it files or submits under the Exchange Act is accumulated and communicated to SAP management, including SAP’s principal executive and financial officers (i.e. SAP’s CEO and CFO, concluded that as of December 31, MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING The management of SAP is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. SAP’s internal control over financial reporting is a process designed under the supervision of SAP’s SAP’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, Based on the assessment under these criteria, SAP management has concluded that, as of December 31, KPMG, our independent registered public accounting firm, has issued its attestation report on the effectiveness of SAP’s internal control over financial reporting, which is included in Item 18. Financial Statements, CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING There has been no change in our internal control over financial reporting during the period covered by this report that has materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting. ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT Our Supervisory Board has determined that Erhard Schipporeit is an “audit committee Part II Item 16A, 16B, 16C financial In 2003, SAP adopted a Code of Business Conduct that applies to all employees (including all personnel in the accounting and controlling departments), managers and the members of SAP’s Executive Board (including our property and non-retaliation provisions. We have made our amended Code of Business Conduct publicly available by posting the full text on our Web site underhttp://www.sap.com/corporate-en/investors/governance/ ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES AUDIT FEES, AUDIT RELATED FEES, TAX FEES AND ALL OTHER FEES Refer to Note (32) to our Consolidated Financial Statements for information on fees AUDIT COMMITTEE’S PRE-APPROVAL POLICIES AND PROCEDURES As required under German law, our shareholders appoint our external independent auditors to audit our financial statements, based on a proposal that is legally required to be submitted by the Supervisory Board. The Supervisory Board’s proposal is based on a proposal by the Audit Committee. See also the description in “Item 10. Additional Information In 2002 our Audit Committee adopted a policy with regard to the pre-approval of audit and non-audit services to be provided by our external independent auditors. This policy, which is designed to assure that such engagements do not impair the independence of our auditors, was amended and expanded in 2003, 2007 and 2009 (changes in 2009 only related to information requirements). The policy requires prior approval of the Audit Committee for all services to be provided by our external independent auditors for any entity of the SAP Group. With regard to non-audit services the policy distinguishes among three categories of services:
(i) “Prohibited services:” This category includes services that our external independent auditors must not be engaged to perform. These are services that are not permitted by applicable law or that would be inconsistent with maintaining the auditors’ independence.
(ii) “Services requiring universal approval:” Services of this category may be provided by our external independent auditors up to a certain aggregate amount in fees per year that is determined by the Audit Committee.
(iii) “Services requiring individual approval:” Services of this category may only be provided by our external independent auditors if they have been individually (specifically) pre-approved by the Audit Committee or an Audit Committee member who is authorized by the Audit Committee to make such approvals. Our Chief Accounting Officer or individuals empowered by him review all individual requests to engage our external independent auditors as a service provider in accordance with this policy and determines the category to which the requested service belongs. All requests for engagements with expected fees over a specified limit are additionally reviewed by our CFO. Based on the Part II Item 16C, 16D, 16E, 16F, 16G determination of the category the request is (i) declined if it is a “prohibited service,” (ii) approved if it is a “service requiring universal approval” and the maximum aggregate amount fixed by the Audit Committee has not been reached or (iii) forwarded to the Audit Committee for individual approval if the “service requires individual approval” or is a “service requiring universal approval” and the maximum aggregate amount fixed by the Audit Committee has been exceeded. Our Audit Committee’s pre-approval policies also include information requirements to ensure the Audit Committee is kept aware of the volume of engagements involving our external independent auditors that were not individually pre-approved by the Audit Committee itself. Substantially all of the work performed to audit our Consolidated Financial Statements was performed by our principal accountant’s full-time, permanent employees. ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES Rule 10A-3 of the Exchange Act requires that all members of our audit committee be independent, subject to certain exceptions. In accordance with German law, the Audit Committee consists of both employee and shareholder elected members. Rule 10A-3 provides an exception for an employee of a foreign private issuer such as SAP who is not an executive officer of that issuer and who is elected to the supervisory board or audit committee of that issuer pursuant to the issuer’s governing law. In this case, the employee is exempt from the independence requirements of Rule 10A-3 and is permitted to sit on the audit committee. We rely on this exemption. Our Audit Committee includes two ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Both authorizations were subject to the provision that the shares to be purchased, together with any other shares already acquired and held by SAP, do not account for more than 10% of SAP’s capital stock. ITEM 16F. CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT Not applicable. ITEM 16G. DIFFERENCES IN CORPORATE GOVERNANCE PRACTICES The following summarizes the principal ways in which our corporate governance practices differ from the New York Stock Exchange (NYSE) corporate governance rules applicable to U.S. domestic issuers (the NYSE Rules). SAP is incorporated under the laws of the European Union and Germany, with securities publicly traded on markets in Germany, including the Frankfurt Exchange and in the United States on the NYSE. The NYSE Rules permit foreign private issuers to follow applicable home country corporate governance practices in lieu of the NYSE corporate governance standards, subject to certain exceptions. Foreign private issuers electing Part II Item 16G to follow home country corporate governance rules are required to disclose the principal differences in their corporate governance practices from those required under the NYSE Rules. This Item 16G summarizes the principal ways in which SAP’s corporate governance practices differ from the NYSE Rules applicable to domestic issuers. The primary
German Commercial Code (Handelsgesetzbuch) and certain other German statutes contain corporate governance rules applicable to SAP. In addition to these mandatory rules, the German Corporate Governance Code (“GCGC”) summarizes the mandatory statutory corporate governance principles found in the German Stock Corporation Act and other provisions of German law. Further, the GCGC contains supplemental recommendations and suggestions for standards on responsible corporate governance intended to reflect generally accepted best practices. The German Stock Corporation Act requires the executive and the supervisory board of publicly listed companies like SAP to declare annually that the recommendations set forth in the GCGC have been and are being complied with or which of the recommendations have not been or are not being complied with and why not. SAP has disclosed and reasoned deviations from a few of the GCGC recommendations in its Declaration of We believe the following to be the significant differences between applicable European and German corporate governance practices, as SAP has implemented them, and those applicable to domestic companies under the NYSE Rules.
SAP is governed by three separate bodies: (i) the Supervisory Board, which counsels, supervises and controls the Executive Board; (ii) the Executive Board, which is responsible for the management of SAP; and (iii) the General Meeting of Shareholders. The rules applicable to these governing bodies are defined by European and German law and by SAP’s Articles of Incorporation. This corporate structure differs from the unitary board of directors established by the relevant laws of all U.S. states and the NYSE Rules. Under the SE Regulation and the German Stock Corporation Act, the Supervisory Board and Executive Board are separate and no individual may be a member of both boards. See “Item 10. Additional Information The NYSE Rules require that a majority of the members of the board of directors of a listed issuer and each member of its nominating, corporate governance, compensation and audit committee be “independent.” As a foreign private issuer, SAP is not subject to the NYSE board, compensation committee and corporate governance committee independence requirements but instead can elect to follow its home country rules. With respect to the audit committee, SAP is required to satisfy Rule 10A-3 of the Exchange Act, which provides certain exemptions from the audit committee independence requirements in the case of employee board representatives. The NYSE Rules stipulate that no director qualifies as “independent” unless the board of directors has made an affirmative determination that the director has no material direct or indirect relationship with the listed company. However, under the NYSE Rules a director may still be deemed independent even if the director or a member of a director’s immediate family has Part II Item 16G received during a 12 month period within the prior three years up to $120,000 in direct compensation. In addition, a director may also be deemed independent even if a member of the director’s immediate family works for the company’s auditor in a non-partner capacity and not on the company’s audit. By contrast, the GCGC requires that the Supervisory Board ensure that proposed candidates are persons with the necessary knowledge, competencies and applicable
management, supervisory and other governing bodies. They must be loyal to SAP in their conduct and they must not accept appointment in companies that are in competition with SAP. Supervisory Board members must disclose any planned non-ordinary course business transactions with SAP to the Supervisory Board promptly. The Supervisory Board members cannot carry out such transactions before the Supervisory Board has given its permission. The Supervisory Board may grant its permission for any such transaction only if the transaction is based on terms and conditions that are standard for the type of transaction in question and if the transaction is not contrary to SAP’s interest. SAP complies with these GCGC director independence requirements. Applicable European and German corporate law requires that for publicly listed stock corporations at least one member of the Supervisory Board who has expert knowledge in the areas of financial accounting and audit of financial statements must be independent. Mr. Erhard Schipporeit who is the Chairman of SAP’s Audit Committee meets these requirements. However, applicable European and German corporate law and the GCGC do not require the Supervisory Board to make an affirmative determination for each individual member that is independent or that a majority of Supervisory Board members or the members of a specific committee are independent. The NYSE independence requirements are closely linked with risks specific to unitary boards of directors that are customary for U.S. companies. In contrast, the two-tier board structure requires a strict separation of the executive board and supervisory board. In addition, the supervisory board of a European Company formed by conversion from a large German stock
As a foreign private issuer, the NYSE Rules require SAP to establish an Audit Committee that satisfies the requirements of Rule 10A-3 of the Exchange Act with respect to audit committee independence. SAP is in compliance with these requirements. The Chairman of SAP’s Audit Committee and Part II Item 16G are employee representatives who are eligible for the exemption provided by Rule The Audit Committee independence requirements are similar to the Board independence requirements under applicable European and German corporate law and the GCGC. See the section above under “Director Independence Rules.” Nonetheless, SAP meets the NYSE Rules on audit committee independence applicable to foreign private issuers. RULES ON NON-MANAGEMENT BOARD MEETINGS ARE DIFFERENT Section 303 A.03 of the NYSE Rules stipulates that the non-management board of each listed issuer must meet at regularly scheduled executive sessions without the management. Under applicable European and German corporate law and the GCGC the Supervisory Board is entitled but not required to exclude Executive Board members from its meetings. The Supervisory Board exercises this right
RULES ON ESTABLISHING COMMITTEES DIFFER Pursuant to Section 303 A.04 and 303 A.05 of the NYSE Rules listed companies are required to set up a Nominating/Corporate Governance Committee and a Compensation Committee, each composed entirely of independent directors and having a written charter specifying the committee’s purpose and responsibilities. In addition, each committee’s performance must be reviewed annually. RULES ON SHAREHOLDERS’ COMPULSORY APPROVAL ARE DIFFERENT Section 312 of the NYSE Rules requires U.S. companies to seek shareholder approval of all equity-compensation plans, including certain material revisions thereto (subject to certain exemptions as described in the rules), issuances of common stock, including convertible stock, if the common stock has, or will have upon issuance, voting power of or in excess of 20% of the then outstanding common stock, and issuances of common stock if they trigger a change of control. According to applicable European law, the German Stock Corporation Act and other applicable German laws, shareholder approval is required for a broad range of matters, such as amendments to the articles of association, certain significant corporate transactions (including inter-company agreements and material restructurings), the offering of stock options and similar equity compensation to its Executive Board members or its employees by a way of a conditional capital increase or by using treasury shares (including significant aspects of such an equity compensation plan as well as the exercise thresholds), the issuance of new shares, the authorization to purchase the corporation’s own shares, and other essential issues, such as transfers of all, or substantially all, of the assets of the stock corporation, including shareholdings in subsidiaries. SPECIFIC PRINCIPLES OF CORPORATE GOVERNANCE Under the NYSE Rules Section 303A.09 listed companies must adopt and disclose corporate guidelines. Since October 2007, SAP has applied, with few exceptions, the recommended corporate governance standards of the GCGC rather than company-specific principles of corporate governance. The GCGC recommendations differ from the NYSE Standards primarily as outlined in this Item 16G. SPECIFIC CODE OF BUSINESS CONDUCT NYSE Rules Section 303 A.10 requires listed companies to adopt and disclose a code of business conduct and ethics for directors, officers Part II Item 16G and employees, and to disclose promptly any waivers of the code for directors or executive officers. Although not required under applicable European and German law, SAP has adopted a Code of Business Conduct, which is equally applicable to employees, managers and members of the Executive Board. SAP complies with the requirement to disclose the Code of Business Conduct and any waivers of the code with respect to directors and executive officers. See “Item 16B. Code of Ethics” for details. Part III
Item 17, 18, 19
Not applicable. The The following are filed as part of this report:
Report of Independent Registered Public Accounting Firm.
Consolidated Financial Statements
Consolidated Income Statements for the years ended Consolidated Statements of Comprehensive Income for the years ended December 31,
Consolidated Statements of Financial Position as of December 31,
Consolidated Statements of Changes in Equity for the years ended December 31,
Consolidated Statements of Cash Flows for the years ended December 31,
Notes to the Consolidated Financial Statements.
The following documents are filed as exhibits to this report:
The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this report on its behalf.
Dated: March
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Supervisory Board of SAP We have audited the accompanying consolidated statements of financial position of SAP We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of SAP
Mannheim, Germany February CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED INCOME STATEMENTS OF SAP GROUP for the years ended December 31,
The accompanying Notes are an integral part of these Consolidated Financial Statements. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME OF SAP GROUP for the years ended December 31,
The accompanying Notes are an integral part of these Consolidated Financial Statements. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION OF SAP GROUP as at December 31,
The accompanying Notes are an integral part of these Consolidated Financial Statements. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY OF SAP GROUP as at December 31,
The accompanying Notes are an integral part of these Consolidated Financial Statements. CONSOLIDATED STATEMENTS OF CASH FLOWS OF SAP GROUP
The accompanying Notes are an integral part of these Consolidated Financial Statements. SAP NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The accompanying Consolidated Financial Statements of SAP We have applied all standards and interpretations that were effective on and endorsed by the European Union (EU) as at December 31, Statements comply with both IFRS as issued by the With effect from July 7, 2014, SAP AG was converted to a European Company (Societas Europaea, SE), and since this date, that company’s legal name is SAP SE. Our Executive Board approved the Consolidated Financial Statements on February All amounts included in the Consolidated Financial Statements are reported in millions of euros (€ millions) except where otherwise stated. Due to rounding, numbers presented throughout this document may not add up precisely to the totals we provide and percentages may not precisely reflect the absolute figures.
The following table summarizes the changes in the number of entities included in the Consolidated Financial Statements. Entities Consolidated in the Financial Statements
The additions relate to legal entities added in connection with acquisitions and foundations. The disposals are due to
The Consolidated Financial Statements have been prepared on the historical cost basis except for the following:
Derivative financial instruments, available-for-sale financial assets,
Where applicable, information about the methods and assumptions used in determining the respective measurement bases
Reclassifications We have modified the revenue section of our consolidated income statement to emphasize the combination of our cloud business and our core on-premise business. With this modification, only the order and subtotals were changed; the content of line items remained unchanged. Software andsoftware-related service revenue now starts with the line item cloud subscriptions and support and is followed by line items software and support of our on-premise activities. The software and cloud subscriptions subtotal was deleted and a new sum for software and support was added. Comparative amounts for prior periods presented have been reclassified accordingly to conform to the current presentation. Additionally, we have changed the classification of the expenses resulting from the Versata litigation in our consolidated income statements from cost of software and software-related services to the TomorrowNow litigation line item and renamed this line item to TomorrowNow and Versata litigation. Prior-year amounts have been adjusted accordingly (2013: €31 million, 2012: –€2 million). We believe that this reclassification helps the comparability of our ongoing operating performance across periods. For more information about this litigation, see Note (24). We have reclassified our provisions for share-based payments from other provisions to other non-financial liabilities. Prior year amounts (December 31, 2013: €445 million) have been reclassified accordingly. We believe that a classification as other non-financial liabilities reflects the substance of this particular liability more appropriately than a classification under other provisions. Starting from 2014, we present cash payments for derivative financial instruments related to business combinations separately in our consolidated statement of cash flows. Prior year amounts (2013: €0 million; 2012: €26 million) have been reclassified accordingly. This reclassification improves the transparency of the cash flows for business combinations. Business Combinations and Goodwill
whether to measure the
Foreign Currencies
The exchange rates of key currencies affecting the Company were as follows: Exchange Rates
Revenue Recognition Classes of Revenue We derive our revenue from fees charged to our customers for (a) the Software and software-related service revenue, as Revenue from cloud subscriptions and support represents fees earned from providing customers with: Software-as-a-Service (SaaS), that is, a right to use software functionality in a cloud-based-infrastructure (hosting) provided by SAP, where the customer does not have the right to terminate the hosting contract and take possession of the software to run it on the customer’s own IT infrastructure or by a third party hosting provider without significant penalty, or Additional premium support beyond the regular support which is embedded in the basic cloud subscription fees, or Hosting services and related application management services for software hosted by SAP, where the customer has the right to terminate the hosting contract and take possession of the software at any time without significant penalty. Software revenue represents fees earned from the sale or license of software to customers for use on the customer’s premises, in other Support revenue represents fees earned from providing customers with unspecified future software updates, upgrades, and enhancements, and technical product support services for on-premise software products. We do not sell separately technical product support or unspecified software upgrades, updates, and
Professional services and other service revenue as Revenue from consulting contracts primarily represents fees earned from providing customers with consulting services which primarily relate to the installation and configuration of our cloud subscriptions and on-premise software products. Revenue from other services mainly represents fees earned from providing customers with training services, and messaging services (primarily transmission of electronic text messages from one mobile phone provider to another). We account for out-of-pocket expenses invoiced by SAP and reimbursed by customers as cloud subscription and support, support, consulting, or other service revenue, Timing of Revenue Recognition We do not start recognizing revenue from customer arrangements before evidence of an arrangement exists and the amount of revenue probable. If, for any of our product or service offerings, we determine at the outset of an arrangement that the amount of revenue cannot be measured reliably, we conclude that the inflow of economic benefits associated with the transaction is not probable, and we defer revenue recognition until the arrangement fee becomes due and payable by the customer. If, at the outset of an arrangement, we determine that collectability is not probable, we conclude that the inflow of economic benefits associated with the transaction is not probable, and we defer revenue recognition until the earlier of when collectability becomes probable or payment is received. If
Revenue from the sale of perpetual licenses of our standard on-premise software products is recognized software. Occasionally, we license on-premise software for a specified period of time. Revenue from short-term time-based licenses, which usually include support services during the license period, is recognized ratably over the license term. Revenue from multi-year time-based licenses that include support services, whether separately priced or not, is recognized ratably over the license term unless a substantive support service renewal rate exists; if this is the case, the amount allocated to the delivered software is recognized as software revenue based on the residual method once the basic criteria described above have been met. In general, our on-premise software license agreements do not include acceptance-testing provisions. If an arrangement allows for customer acceptance-testing of the software, we defer revenue until the earlier of customer acceptance or when the acceptance right lapses. We usually recognize revenue from on-premise software arrangements involving resellers on evidence of sell-through by the reseller to the end-customer, because the inflow of the economic benefits associated with the arrangements to us is not probable before sell-through has occurred.
we recognize such fees ratably over the term of the arrangement beginning with the delivery of the first product. Revenue from on-premise software subscription contracts is allocated to the software revenue and support revenue line items in our Consolidated Income Statements.
Revenue from We recognize support revenue based on our performance under the support arrangements. Under our major support services,
We recognize
Measurement of Revenue Revenue is recognized
Our contributions to resellers that allow our resellers to execute qualified and approved marketing activities are recognized as an offset to revenue, unless we obtain a separate identifiable benefit for the contribution and the fair value of Multiple-Element Arrangements We combine two or more customer contracts with the same customer and account for the contracts as a single contract if the contracts are negotiated as a package or otherwise linked. Thus, the majority of our contracts that contain cloud offerings or on-premise software also include other goods or services (multiple-element arrangements). We account for the different goods and services promised under our customer contracts as separate units of account (distinct deliverables) unless: The contract involves significant production, modification, or customization of the cloud subscription or on-premise software and The services are not available from third-party vendors and are therefore deemed essential to the cloud subscription or on-premise software. Goods and services that do not qualify as distinct deliverables are combined into one unit of account (combined deliverables). The portion of the transaction fee allocated to one distinct deliverable is recognized in revenue separately under the policies applicable to the respective deliverable. For combined deliverables consisting of cloud offerings or on-premise software and other services the allocated portion of the transaction fee is recognized using the percentage-of-completion method, as outlined above, or over the cloud subscription term, if applicable, depending on which service term is longer. We allocate the total transaction fee of a customer contract to the distinct deliverables under the contract based on their fair values. The allocation is done relative to the distinct deliverables’ individual fair values unless the residual method is applied as outlined below. Fair value is determined by company-specific objective evidence of fair value which is the price charged consistently when that element is sold separately or, for elements not yet sold separately, the price established by our management if it is probable that the price will not change before the element is sold separately. Where company-specific objective evidence of fair value and third-party evidence of selling price cannot be established due to lacking stand-alone sales or lacking pricing consistency, we determine the fair value of a distinct deliverable by estimating its stand-alone selling price. Company-specific objective evidence of fair value and estimated stand-alone selling prices (ESP) for our major products and services is determined as follows: We derive the company-specific objective evidence of fair value for our renewable support services from the rates charged to renew the support services annually after an initial period. Such renewal rates generally represent a fixed percentage of the discounted software license fee charged to the customer. The majority of our customers renew their annual support service contracts at these rates. Company-specific objective evidence of fair value can generally not be established for our cloud subscriptions. ESP for these offerings is determined based on the rates agreed with the individual customers to apply if and when the subscription arrangement renews. We determine ESP by considering multiple factors which include, but are not limited to, the following:
For our on-premise software offerings company-specific objective evidence of fair value can generally not be established and representative stand-alone selling prices are not discernible from past transactions. We therefore apply the residual method to multiple-element arrangements that include on-premise software. Under this method, the transaction fee is allocated to all undelivered elements in the amount of their respective fair values and the remaining amount of the arrangement fee is allocated to the delivered element. With this policy we have considered the guidance provided by FASB ASC Subtopic 985-605 (Software Revenue Recognition), where applicable, as authorized by IAS 8 (Accounting Policies, Changes in Accounting Estimates and Errors). We consider FASB ASC 985-605 in our accounting for options that entitle the customer to purchase, in the future, additional on-premise software. We allocate revenue to future incremental discounts whenever customers are granted a material right, that is, the right to license additional on-premise software at a higher discount than the one given within the initial software license arrangement, or to purchase or renew services at rates below the fair values established for these services. We also consider whether future purchase options included in arrangements for cloud subscription deliverables constitute a material right. Cost of Software and Software-Related Services Cost of software and software-related services includes the cost incurred in producing the goods and providing the services that generate software and software-related service revenue. Consequently, this line item includes primarily employee expenses relating to these services, amortization of acquired intangibles, fees for third-party licenses, shipping and ramp-up Cost of Professional Services and Other Services Cost of professional services and other services includes the cost incurred in providing the services that generate professional service and other service revenue including messaging revenues. The item also includes sales and marketing expenses related to our professional services and other services that result from sales and marketing efforts that cannot be clearly separated from providing the services. Research and Development Research and development includes the costs incurred by activities related to the development of software solutions (new products, updates, and enhancements) including resource and hardware costs for the development systems.
We have determined that the conditions for recognizing internally generated intangible assets from our software development activities are not met until shortly before the products are available for sale. Development costs incurred after the recognition criteria are met have not been material. Consequently, Sales and Marketing Sales and marketing includes costs incurred for the selling and marketing activities related to our software solutions, software-related service portfolio, and General and Administration General and administration includes costs related to finance and administrative functions, human resources, and general management as long as they are not directly attributable to one of the other operating expense line items.
We
Share-Based Share-based
We grant our employees discounts on certain share-based
For more information about our share-based
Financial Assets Our financial assets comprise cash and cash equivalents (highly liquid investments with original maturities of three months or less), loans and receivables, acquired equity and debt investments, and derivative financial instruments (derivatives) with positive fair values.
Regular way purchases and All financial assets not accounted for at fair value through profit or loss are assessed for impairment at each reporting date or if we become aware of objective evidence of impairment as a result of one or more events that indicate that the carrying amount of the asset may not be recoverable. Objective evidence includes but is not limited to a significant or prolonged decline of the fair value below its carrying amount, a high probability of insolvency, or a material breach of contract by the issuer such as a significant delay or a shortfall in payments due. Impairment
Income/expenses and gains/losses on financial assets consist of impairment
Derivatives
Derivatives Many transactions constitute economic hedges, and therefore contribute effectively to the securing of financial risks but do not qualify for hedge accounting under IAS 39. In addition, we occasionally have contracts which contain foreign currency embedded derivatives to be accounted for separately.
We
In general, we apply cash flow hedge accounting to the foreign currency risk of highly probable forecasted transactions and interest rate risk on variable rate financial liabilities.
We apply fair value hedge accounting for hedging certain of our fixed rate financial liabilities. Valuation and Testing of Effectiveness The effectiveness of the hedging relationship is tested prospectively and retrospectively. Prospectively, we apply the critical terms match for our foreign currency hedges as currencies, maturities, and the amounts are identical for the forecasted transactions and the spot element of the forward exchange rate contract or intrinsic value of the currency options, respectively. For interest rate swaps, we also apply the critical terms match as the notional amounts, currencies, maturities, basis of the variable legs The method of retrospectively testing effectiveness depends on the type of the hedge as described further below:
Retrospectively, effectiveness is tested on a cumulative basis applying the
Retrospectively, effectiveness is tested using statistical methods in the form of a regression analysis by which the validity and extent of the relationship between the change in value of the hedged items as the independent and the fair value change of the derivatives as the dependent variable is determined. The hedge is deemed highly effective if the determination coefficient between the hedged items and the hedging instruments exceeds 0.8 and the slope coefficient lies within a range of –0.8 to –1.25. Trade and Other Receivables Trade receivables are recorded at invoiced amounts less sales allowances and allowances for doubtful accounts. We record these allowances based on a specific review of all significant outstanding invoices. When analyzing the recoverability of our trade receivables, we consider the following factors:
First, we consider the financial solvency of specific customers and record an allowance for specific customer balances when we believe it is probable that we will not collect the amount due according to the contractual terms of the arrangement.
Second, we evaluate homogenous portfolios of trade receivables according to their default risk primarily based on the age of the receivable and historical loss experience, but also taking into consideration general market factors that might impact our trade receivable portfolio. We record a general bad debt allowance to record impairment losses for a portfolio of trade receivables when we believe that the age of the receivables indicates that it is probable that a loss has occurred and we will not collect some or all of the amounts due. Account balances are written off, that is, charged off against the allowance after all collection efforts have been exhausted and the likelihood of recovery is considered remote. In our Consolidated Income Statements, expenses from recording bad debt allowances for a portfolio of trade receivables are classified as other operating income, net, whereas expenses from recording bad debt allowances for specific customer balances are classified as cost of software and software-related services or cost of professional services and other services, depending on the transaction from which the respective trade receivable results. Sales allowances are recorded as an offset to the respective revenue item. Included in trade receivables are unbilled receivables related to fixed-fee and time-and-material consulting arrangements for contract work performed to date. Other Non-Financial Assets Other non-financial assets are recorded at amortized cost. We capitalize Intangible Assets We classify intangible assets according to their nature and use in our operation. Software and database licenses consist primarily of technology for internal use, whereas acquired technology consists primarily of purchased software to be incorporated into our product offerings and in-process research and development.
Amortization expenses of intangible assets are classified as cost of software and software-related services, cost of professional services and other services, research and development, sales and marketing, and general and administration depending on their use. Property, Plant, and Equipment Property, plant, and equipment are carried at acquisition cost plus the fair value of related asset retirement costs if any and if reasonably estimable, and less accumulated depreciation. Interest incurred during the construction of qualifying assets is capitalized and amortized over the related assets’ estimated useful lives. Property, plant, and equipment are depreciated over their expected useful lives, generally using the straight-line method.
Useful Lives of Property, Plant, and Equipment
Impairment of Goodwill and Non-Current Assets
The recoverable amount of goodwill is estimated each year at the same time. The goodwill impairment test is performed at the level of our operating
Impairment losses are
Liabilities Financial Liabilities Financial liabilities include trade and other payables, bank loans, issued bonds, private placements and other financial liabilities which comprise derivative and non-derivative financial liabilities.
Expenses and gains/losses on financial liabilities consist of interest
Post-Employment Benefits
Since our domestic defined benefit pension plans primarily consist of an employee-financed post-retirement plan that is fully financed with qualifying insurance policies, current service cost may become a credit as a result of adjusting the
Deferred Income Deferred income is recognized as cloud subscription and support revenue, software revenue, support revenue,
The preparation of the Consolidated Financial Statements in conformity with IFRS requires management to make judgments, estimates, and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenues, and expenses, as well as disclosure of contingent assets and liabilities. We base our judgments, estimates, and assumptions on historical and forecast information, as well as regional and industry economic conditions in which we or our customers operate, changes to which could adversely affect our estimates. Although we believe we have made reasonable estimates about the ultimate resolution of the underlying uncertainties, no assurance can be given that the final outcome of these matters will be consistent with what is reflected in our assets, liabilities, revenues, and expenses. Actual results could differ from original estimates. The accounting policies that most frequently require us to make judgments, estimates, and assumptions, and therefore are critical to understanding our results of operations,
Revenue recognition
Valuation of trade receivables
Accounting for share-based
Accounting for income tax
Accounting for business combinations
Subsequent accounting for Determination of operating segments
Accounting for legal contingencies
Recognition of internally generated intangible assets from development Our management periodically discusses these critical accounting policies with the Audit Committee of the Supervisory Board. Revenue Recognition As described in the Revenue Recognition section of Note (3b), we do not recognize revenue before and collection of the related receivable is
In the accounting for our multiple-element arrangements we have to determine the following: Which contracts with the same customer are to be accounted for as one single contract Which deliverables under one contract are distinct and thus to be accounted for separately How to allocate the total arrangement fee to the distinct deliverables of one contract The determination of whether different contracts with the same customer are to be accounted for as one contract is highly judgmental, as it requires us to evaluate whether the contracts are negotiated together or linked in any other way. The timing and amount of revenue recognition can vary depending on whether two contracts are accounted for separately or as one single contract. Under a multiple-element arrangement including a cloud subscription, or on-premise software, and other deliverables, we do not account for the cloud subscription, or on-premise software, and the other deliverables separately if one of the other deliverables (such as consulting services) is deemed to be essential to the functionality of the cloud subscription, or on-premise software. The determination whether an undelivered element is essential to the functionality of the delivered element requires the use of judgment. The timing and amount of revenue recognition can vary depending on how that judgment is exercised, because revenue may be recognized over a longer service term. In the area of allocating the transaction fee to the different deliverables under the respective customer contract judgment is required in the determination of an appropriate fair value measurement which may impact the timing and amount of revenue recognized depending on the following: Whether an appropriate measurement of fair value can be demonstrated for undelivered elements. The approaches used to establish fair value. Additionally, our revenue for on-premise software contracts would be significantly different if we applied a revenue allocation policy other than the residual method. Valuation of Trade Receivables As described in the Trade and Other Receivables section in Note (3b), we account for impairments of trade receivables by recording sales allowances and allowances for doubtful accounts on an individual receivable basis and on a portfolio basis. The assessment of whether a receivable is collectible is inherently judgmental and requires the use of assumptions about customer defaults that could change significantly. Judgment is required when we evaluate available information about a particular customer’s financial situation to determine whether it is probable that a credit loss will occur and the amount of such loss is reasonably estimable and thus an allowance for that specific account is necessary. Basing the general allowance for the remaining receivables on our historical loss experience, too, is highly judgmental, as history may not be indicative of future
Accounting for Share-Based
We use certain assumptions in estimating the fair values for our share-based option life (which represents our estimate of the average amount of time remaining until the options are exercised or expire unexercised). In addition, the final payout for these plans also depends on our share price at the respective exercise dates. All these assumptions may significantly impact the fair value determination and thus the amount and timing of our share-based For the purpose of determining the estimated fair value of our stock options, we believe expected volatility is the most sensitive assumption. Regarding future payout under the plans, the price of SAP’s shares Accounting for Income Tax We conduct operations and earn income in numerous foreign countries and are subject to changing tax laws in multiple jurisdictions within the countries in which we operate. Our ordinary business activities also include transactions where the ultimate tax outcome is uncertain, such as those involving revenue sharing and cost reimbursement arrangements between SAP Group entities. In addition, the amount of income tax we pay is generally subject to ongoing audits by domestic and foreign tax authorities. As a result, The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and is reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of the deferred tax assets to be utilized. This assessment requires management deferred tax assets, we consider all available positive and negative evidence, including the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are recoverable. Our For more information about our income tax, see Note (11). Accounting for Business Combinations In our accounting for business combinations, judgment is required in determining whether an intangible asset is identifiable, and should be recorded separately from goodwill. Additionally, estimating the acquisition date fair values of the identifiable assets acquired and liabilities assumed involves considerable management judgment. The necessary measurements are based on information available at the acquisition date and are based on expectations and assumptions that have been deemed reasonable by management. These judgments, estimates, and assumptions can materially affect our financial position and profit for several reasons, among which are the following:
Fair values assigned to assets subject to depreciation and amortization affect the amounts of depreciation and amortization to be recorded in operating profit in the periods following the acquisition.
Subsequent negative changes in the estimated fair values of assets may result in additional expense from impairment charges.
Subsequent changes in the estimated fair values of liabilities and provisions may result in additional expense (if increasing the estimated fair value) or additional income (if decreasing the estimated fair value). Subsequent Accounting for As described in the Intangible Assets section in Note (3b), all our intangible assets other than goodwill have finite useful lives. Consequently, the depreciable amount of the intangible assets is amortized on a systematic basis over their useful lives. Judgment is required
The
The Both the amortization period and the amortization method have an impact on the amortization expense that is recorded in each period. In making impairment assessments for our intangible assets, the outcome of these tests is highly dependent on management’s latest estimates and
Accounting for Legal Contingencies As described in Note (24), required in the determination of whether a provision is to be recorded and what the appropriate amount for such provision should be. Notably, judgment is required
Determining whether an obligation exists
Determining the probability of outflow of economic benefits
Determining whether the amount of an obligation is reliably estimable
Estimating the amount of the expenditure required to settle the present obligation Due to uncertainties relating to these matters, provisions are based on the best information available at the time. At the end of each reporting period, we reassess the potential obligations related to our pending claims and litigation and adjust our respective provisions to reflect the current best estimate. In addition, we monitor and evaluate new information that we receive after the end of the respective reporting period but before the Consolidated Financial Statements are authorized for issue to determine whether this provides additional information regarding conditions that existed at the end of the reporting period. Such revisions to our estimates of the potential obligations could have a material impact on our financial position and profit. Recognition of Internally Generated Intangible Assets from Development
We believe that determining whether internally generated intangible assets from development are to be recognized as intangible assets requires significant judgment, particularly in the following areas:
Determining whether activities should be considered research activities or development activities.
Determining whether the conditions for recognizing an intangible asset are met requires assumptions about future market conditions, customer demand and other developments.
The term “technical feasibility” is not defined in IFRS, and therefore determining whether the completion of an asset is technically feasible requires judgment and a company-specific approach. Determining the future ability to use or sell the intangible asset arising from the development and the determination of the probability of future benefits from sale or use.
Determining whether a cost is directly or indirectly attributable to an intangible asset and whether a cost is necessary for completing a development.
On May 28, 2014, the IASB issued IFRS On July 24, 2014, the IASB issued the fourth and final version of IFRS 9 (Financial Instruments), which will be applicable in fiscal year 2018. The new guidance is expected to mainly impact the classification and
In Acquired Businesses
The initial accounting for the Concur business combination is incomplete The businesses acquired in 2014 contributed €91 million (thereof €39 million from Concur) to the 2014 cloud subscription and support revenue. The acquisition-related costs incurred totaled €22 million for our 2014 business combinations, all of which were Prior year acquisitions are described in the Consolidated Financial Statements in the 2013 Annual Report. Acquisition of Concur We announced on On December 4, 2014, following satisfaction of applicable regulatory and other approvals, we acquired 100% of the shares of Concur. SAP paid US$129 per share, representing consideration transferred of approximately US$7.7 billion. The acquisition of Concur affects comparability of our 2014 Consolidated Financial Statements with our 2013 and 2012 Consolidated Financial Statements. Financial Impact as of the Acquisition Date
The following table summarizes the values of identifiable assets acquired and liabilities assumed in connection with the acquisition Recognized Amounts of Identifiable Assets Acquired and
By combining Concur’s solutions with SAP products we expect to enable our customers to drive operating efficiencies, collaboration, and real-time data sharing across all major spend categories. Concur goodwill is attributed to
Cross-selling opportunities to existing SAP customers across all regions using SAP’s sales organization Combining Concur products and SAP products to deliver a world-class employee experience Improved profitability in Concur sales and operations Valuation of Trade Receivables Acquired
Impact of the Business Combination on Our Financial Statements The Impact on SAP’s Financials
Had Concur been consolidated as of January 1, 2014, our estimated pro forma revenue for the reporting period would have been €18,040 million, and pro forma profit after tax would have been €3,146 million. These amounts were calculated after applying the Company’s accounting policies and after adjusting the results for Concur to Additional depreciation and amortization that would have been charged assuming the fair value adjustment to property, plant, and equipment and intangible assets had been applied from January 1, 2014 The impact of fair value adjustments on The borrowing costs on the funding levels and debt/equity position of the Company after the business combination Employee benefits, such as share-based compensation Capitalization of sales commissions Transaction expenses incurred as part of the acquisition Related tax effects These pro forma numbers have been prepared for comparative purposes only. The pro forma revenue and profit numbers are not
For detailed information about our revenue recognition policies, see Note (3). Professional services and other service revenue comprises the following: Professional Services and Other Service Revenue
The item includes professional services and other service revenue related to our cloud offerings of €222 million in 2014 (2013: €170 million, 2012: €92 million). For revenue information by Revenue from construction-type contracts (contract revenue) is mainly included in software revenue and consulting revenue depending on the type of project. In 2014, contract revenue of €285 million was recognized for all our construction projects (2013: €261 million, 2012: €241 million). The status of our construction projects in progress at the end of the reporting period accounted for under IAS 11 (Construction Contracts) was as follows: Construction Projects in Progress
The item includes cost of cloud subscriptions and support revenue of €481 million in 2014 (2013: €314 million, 2012: €199 million).
Restructuring expenses were as follows: Restructuring Expenses
Restructuring Expenses by Functional Area
Cost of software and software-related services Cost of professional services and other services Research and development Sales and marketing General and administration Restructuring expenses
(8) Employee Benefits Expense and Headcount Employee Benefits Expense Employee benefits expense comprises the following: Employee Benefits Expense
Pension expense includes the amounts recorded for our defined benefit and defined contribution plans as described in Note (19a). Expenses for local state pension plans are included in social security expense. Number of Employees On December 31, Number of Employees
Allocation of Share-Based The allocation of expense for share-based Share-Based
For more information about our share-based (9) Other Non-Operating Income/Expense, Net Other non-operating income/expense, net was as follows: Other Non-Operating Income/Expense, Net
(10) Financial Income, Net
Income tax expense for the years ended December 31 is attributable to the following regions: Tax Expense According to Region
Income tax expense for the years ended December 31 comprised the following components:
Major Components of Tax Expense
Profit before tax for the years ended December 31 consisted of the following: Profit Before Tax
The following table reconciles the expected income tax expense computed by applying our combined German Relationship Between Tax Expense and
Deferred tax assets and liabilities on a gross basis as at December 31 Recognized Deferred Tax Assets and Liabilities
The increased mainly
Deferred tax assets have not been recognized in respect of the following items for the years ended December Items
€567 million (2013: €421 million; 2012: €367 million) of the unused tax losses relate to U.S. state tax loss carryforwards. Current income tax payments were reduced by €71 million in 2014 (2013: €0 million; 2012: €4 million) due to the TomorrowNow and Versata litigation. We have not recognized a deferred tax liability on approximately for undistributed profits of our subsidiaries, because we are in a position to control the timing of the reversal of the temporary difference and it is probable that such differences will not reverse in the foreseeable future. The proposed dividend payment of €1.10 per share for the year ended December 31,
Total income tax including the items charged or credited directly to share premium and other comprehensive income for the years ended December 31 Total Income Tax
We are subject to ongoing tax audits by domestic and foreign tax authorities. the would expect to have an additional tax expense (including related interest
Restricted shares (the bonus shares in the Share Matching Plan
Earnings per share for the years ended December 31 was calculated as follows: Earnings per Share
Other financial assets as at December 31 were as follows: Other Financial Assets
Loans and Other Financial Receivables Loans and other financial receivables mainly consist of time deposits, investments in assets As at December 31, not impaired. We have no indications of impairments of loans and other financial receivables that are not past due and not impaired as at the reporting date. For general information on financial risk and the nature of risk, see Note (25). Available-for-Sale Financial Assets Our available-for-sale financial assets consist of debt investments in
These available-for-sale financial assets are denominated in the following currencies: Currencies of Available-for-Sale Financial Assets
Derivatives Detailed information about our derivative financial instruments is presented in Note (26).
Trade and other receivables as at December 31 were as follows: Trade and Other Receivables
The carrying amounts of our trade receivables as at December 31 are as follows: Carrying Amounts of Trade Receivables
The aging of trade receivables as at December 31 was: Aging of Trade Receivables
For more information about financial risk and how we manage it, see Notes (25) and (26).
Other Non-Financial Assets
Prepaid expenses primarily consist of prepayments for operating leases, support services, and software
Goodwill and Intangible Assets
The additions, other than from business combinations, to software and database licenses in acquired from third parties and include cross-license agreements and We carry the following significant intangible assets: Significant Intangible Assets
Goodwill Impairment Testing SAP had a single operating segment in 2014 (in 2013, we had four). Single Segment We determined the recoverable amount for our single segment based on fair value less costs of disposal using market capitalization derived from public quotations of SAP stock. We believe that no reasonably foreseeable change in the price of SAP stock would cause the carrying amount of our single operating segment to exceed its recoverable amount. Unallocated Goodwill The unallocated goodwill acquisition was executed very close to December 31,
obtained from publicly available information. Analysis of these factors did not reveal any indications of impairment. For more information about
Pre-tax discount rates Terminal revenue growth rate
Property, Plant, and Equipment
(18a) Trade and Other Payables Trade and other payables as at December 31 were as follows: Trade and Other Payables
Miscellaneous other liabilities include mainly deferral amounts for free rent (18b) Financial Liabilities Financial liabilities as at December 31 were as follows: Financial
Financial liabilities are unsecured, except for the retention of title and similar rights customary in our industry. Effective interest rates on our 2012.
Bonds As at December 31, Bonds
Since September 2012, we have used a debt issuance program to issue bonds in a number of tranches in different currencies. Currently, this program has a total volume of €6 billion. In November 2012 and in November 2014, we issued bonds under the program as shown in the table above. At the reporting date, a volume of €1.95 billion (2013: €4 billion) is available for new bond issuances. All our Eurobonds are listed for trading on the Luxembourg Stock Exchange. Our other bonds were originally issued by Concur in 2010 and 2013. The majority of these notes were settled shortly after the acquisition of Concur and the remainder of US$98 million is expected to be settled in the first quarter 2015. Private Placement Transactions Our private placement transactions have the following terms: Private Placements
The U.S. private placement notes were issued Bank Loans
Bank Loans
Other Financial Liabilities Our other financial liabilities mainly comprise (18c) Other Non-Financial Liabilities Other non-financial liabilities as at December 31 were as follows: Other Non-Financial Liabilities
Other employee-related liabilities mainly relate to vacation accruals, bonus and sales commission accruals, as well as employee-related social security obligations. For more information about our share-based payments, see Note (28). Other taxes comprise mainly payroll tax liabilities and value-added tax liabilities.
Provisions Provisions
Defined Benefit Plans The measurement dates for
The following table shows the Nature of the Benefits
Present value of the defined benefit obligations (DBOs) and the fair value of the plan assets with a reconciliation of the funded status to net
The following weighted average assumptions were used for the actuarial valuation of our domestic and foreign pension liabilities as well as other post-employment benefit obligations as at the respective measurement date: Actuarial Assumptions
The time, holding all other actuarial assumptions constant. The reasonable possible change in actuarial assumptions of 50 basis points in either direction, except for discount Sensitivity Analysis
The components of total expense of defined benefit pension plans for the years Total Expense of Defined Benefit Pension Plans
Our investment strategy on domestic benefit plans is to invest all contributions in stable insurance policies.
a mix of assets, plan assets can fluctuate over time which exposes the Group to actuarial and market (investment) risks. Depending on the statutory requirements in each country, it might be necessary to reduce the underfunding by addition of liquid assets. To minimize these actuarial and market fluctuations, SAP reviews relevant financial factors for appropriateness and reasonableness and makes modifications to eliminate certain effects when considered necessary. Our plan asset allocation Plan Asset Allocation
Our expected contribution in defined benefit plans amounted to
The
Less than a year Between 1-2 years Between 2-5 years Over 5 years Total Defined Contribution We also maintain domestic and foreign defined contribution plans. Amounts contributed by us under such plans are based on a percentage of the employees’ salaries or the amount of contributions made by employees. Furthermore, in Germany Total Expense of Defined Contribution Plans and State Plans
(19b) Other Provisions Changes in other provisions over the reporting year were as follows: Other Provisions
In 2014, we established a restructuring plan to execute a number of organizational changes triggered by our
Prior year restructuring provisions
cash outflows associated with employee-related restructuring costs are substantially short-term in nature.
Deferred income consists mainly of prepayments made by our customers for cloud subscriptions, support services and As at December 31, 2014, current deferred income included a total of €690 million in deferred revenue (December 31, 2013: €443 million), which in the future will be recognized as revenue from cloud subscriptions and support.
Issued Capital As at December 31, Change in Issued Capital and Treasury Shares
Authorized Shares The Articles of Incorporation authorize the Executive Board to increase the issued capital:
Up to a total amount of €250 million by issuing new
Up to a total amount of €250 million by issuing new
Up to a total amount of approximately €30 million by issuing new Contingent Shares SAP extent that the holders or creditors of
Other The component of other comprehensive income before tax that will be reclassified to profit or loss in the future includes the following items: Items Loss Before Tax
Treasury Shares By resolution of SAP
prepared under the accounting rules Dividends per share for
Capital Structure Management The primary objective of our capital structure management is to maintain a strong financial profile for investor, creditor, and customer confidence, and to support the growth of our business. We
Capital Structure
Total financial debt consists of current and non-current bank loans, bonds and private placements. For more information about our financial debt, see Note (18). As part of our financing activities, the Company intends to repay a €550 million Eurobond as well as a US$300 million U.S. private placement tranche when they mature in 2015. Furthermore, we are planning to repay a substantial portion of our outstanding bank loans. We will consider issuing new debt, such as bonds or U.S. private placements, to refinance existing bank loans or to cover additional capital needs. While we continuously monitor Group Liquidity of SAP Group
Distribution Policy Our In 2012 related to
described in
Other Financial Commitments |
Other Financial Commitments
Our other financial commitments as at December 31, 2011,2014, and 2010,2013, were as follows:
Other Financial Commitments
€ millions | 2011 | 2010 | 2014 | 2013 | ||||||||||||
Operating leases | 878 | 754 | 1,332 | 1,204 | ||||||||||||
Contractual obligations for acquisition of property, plant, and equipment and intangible assets | 76 | 74 | 111 | 80 | ||||||||||||
Other purchase obligations | 496 | 387 | 748 | 390 | ||||||||||||
| ||||||||||||||||
Purchase obligations | 572 | 461 | 859 | 470 | ||||||||||||
Capital contribution commitments | 77 | 34 | ||||||||||||||
Total | 1,450 | 1,215 | 2,268 | 1,708 |
Our operating leases relate primarily to the lease of office space, hardware, and cars,vehicles, with remaining non-cancelable lease terms between less than one and 2534 years. On a limited scale, the operating lease contracts include escalation clauses (based, for example, on the consumer price index) and renewal options. The contractual obligations for acquisition of property, plant, and equipment and intangible
assets relate primarily to the construction of new and existing facilities and to the purchase of hardware, software, patents, office equipment, and car purchase obligations.vehicles. The remaining obligations relate mainly to marketing, consulting, maintenance, license agreements, and other third-partythird-
party agreements. Historically, the majority of such purchase obligations have been realized.
SAP invests and holds interests in other entities. As of December 31, 2014, total commitments to such equity investments amounted to €123 million (2013: €62 million) of which €46 million had been drawn (2013: €28 million). By investing in such equity investments, we are exposed to the risks inherent in the business segments in which these funds choose to invest contributed funds. Our maximum exposure to loss is the amount invested plus unavoidable future capital contributions.
Commitments under operating leasing contracts and purchase obligations as at December 31, 2011,2014, were as follows:
Other Financial Commitments
€ millions | Operating Leases | Purchase Obligations | Operating Leases | Purchase Obligations | Capital Contribution Commitments | |||||||||||||||
Due 2012 | 212 | 371 | ||||||||||||||||||
Due 2013-2016 | 535 | 170 | ||||||||||||||||||
Due 2015 | 262 | 479 | 77 | |||||||||||||||||
Due 2016–2019 | 729 | 318 | 0 | |||||||||||||||||
Due thereafter | 131 | 31 | 341 | 62 | 0 | |||||||||||||||
| ||||||||||||||||||||
878 | 572 | |||||||||||||||||||
Total | 1,332 | 859 | 77 |
Our rental and operating lease expenses were €241€291 million, €267€273 million, and
€264 €277 million for the years 2011, 2010,2014, 2013, and 2009,2012, respectively.
Contingent Liabilities
In the normal course of business, we usually indemnify our customers against liabilities arising from a claim that our software products infringe a third party’s patent, copyright, trade secret, or other proprietary rights. In addition, we occasionally grant function or performance guarantees in routine consulting contracts or development arrangements. Also, our software license agreements generally include a clause guaranteeing that the software substantially conforms to the specifications as described in applicable documentation for a period of six to 12 months from delivery. Our product and service warranty liability, which is measured based on historical experience and evaluation, is included in other provisions (see Note (19b)).
For contingent liabilities related to litigation matters, see Note (24).
(24) |
We are subject to a variety of claims and lawsuits that arise from time to time in the ordinary course of our business, including proceedings and claims that relate to companies which we have acquired, and claims that relate to customers demanding indemnification for proceedings initiated against them based on their use of SAP software.software, and claims that relate to customers’ being dissatisfied
with the products and services that we have delivered to them. We will continue to vigorously defend against all claims and lawsuits against us. We record a provision for such matters when it is probable that we have a present obligation that results from a past event, is reliably estimable and the settlement of which is probable to require an outflow of resources embodying economic benefits. For the TomorrowNow litigation, we have recorded a provision of US$272 million (US$1.3 billion as at December 31, 2010). We currently believe that resolving all otherthe claims and lawsuits against us,pending as of December 31, 2014, will neither individually ornor in the aggregate did not and will not have a material adverse effect on our business, financial position, profit, or cash flows. Consequently, the provisions currently recorded
for these other claims and lawsuits as of December 31, 2014, are neither individually nor in aggregate material to SAP.
However, the outcome of litigation and other claims or lawsuits is intrinsically subject to considerable uncertainty. Management’s view of the litigation may also
change in the future. Actual outcomes of litigation and other claims or lawsuits may differ from the assessments made by management in prior periods, which could result in a material impact on our business, financial position, profit, cash flows, or reputation. We cannotMost of the lawsuits and claims are of a very individual nature and claims are either not quantified by the claimants or claim amounts quantified are, based on historical evidence, not expected to be a good proxy for the expenditure that would be required to settle the case concerned. The specifics of the jurisdictions where most of the claims are located further impair the predictability of the outcome of the cases. Therefore, it is not practicable to reliably estimate the maximum possible loss in case of an unfavorable outcome.
For a description of the development of the provisions recordedfinancial effect that these lawsuits and claims would have if SAP were to incur expenditure for litigation, see Note (19b).these cases.
Among the claims and lawsuits are the following:following classes:
Intellectual PropertyProperty-related Litigation and Claims
In January 2007, German-based CSB-Systems AG (CSB) instituted legal proceedingsIntellectual property-related litigation and claims comprise cases in Germany against SAP. CSB allegeswhich third parties have threatened or initiated litigation claiming that SAP’s products infringeSAP violates one or more intellectual property rights that they possess. Such intellectual property rights may include patents, copyrights, and other similar rights.
The carrying amount of the provisions recorded for intellectual property-related litigation and claims of a German patent and a German utility model held by CSB. In its complaint, CSB has set the change in the carrying amount in dispute at €1 millionthe reporting period are disclosed in Note (19b). The expected timing of any resulting outflows of economic benefits from these lawsuits and claims is seeking permanent injunctive relief. Within these proceedings CSB isuncertain and not precluded from requesting damages in excessestimable as it depends generally on the duration of the amount in dispute. In July 2007, SAP filed its response in the legal proceedings includingand settlement negotiations required to resolve them. Uncertainties about the amounts result primarily from the unpredictability of the outcomes of legal disputes in several jurisdictions. For more information, see Note (3c).
Contingent liabilities exist from intellectual property-related litigation and claims for which no provision has been recognized. Generally, it is not practicable to estimate the financial impact of these contingent liabilities due to the uncertainties around the litigation and claims, as outlined above. The total amounts claimed by plaintiffs in those intellectual property-related lawsuits or claims in which a nullity actionclaim has been quantified were not material to us as of December 31, 2014 and cancellation proceeding against2013. Based on our past experience, most of the patent
intellectual property-related litigation and utility model, respectively. The nullity hearing onclaims tend to be either dismissed in court or settled out of court for amounts significantly below the German patent was held in January 2009originally claimed amounts and not material to our consolidated financial statements. Only a few cases (specifically the TomorrowNow and the German court determined that the patent is invalid. On appealVersata litigation) ultimately resulted in June 2011, the Federal Supreme Court also concluded the patent was invalid. The cancellation hearing for the utility model was held in May 2009a significant cash outflow, as described below.
Individual cases of intellectual property-related litigation and the court determined that the utility model was invalid. CSB is appealing the invalidity determination of the utility model, however, the infringement hearing has been stayed pending the appeals.
In May 2010, CSB-Systems International, Inc., (CSB) instituted legal proceedings in the United States against SAP. CSB alleges that SAP’s products infringe one or more of the claims in one patent held by CSB. In its complaint, CSB seeks unspecified monetary damages and permanent injunctive relief. The Markman hearing was held in June 2011. The trial is scheduled for June 2012.comprise:
In March 2007, United States-based Oracle Corporation and certain of its subsidiaries (Oracle) instituted legal proceedings in the United States against TomorrowNow, Inc., its parent company SAP America, Inc., and SAP America’s parent company SAP AGSE (SAP). Oracle filed several amended complaints between 2007 and 2009. As amended, the lawsuit alleges copyright infringement, violations of the Federal Computer Fraud and Abuse Act and the California Computer Data Access and Fraud Act, unfair competition, intentional and negligent interference with prospective economic advantage, and civil conspiracy. The lawsuit alleges that SAP unlawfully copied and misappropriated proprietary, copyrighted software products and other confidential materials developed by Oracle to service its own customers. The lawsuit seekssought injunctive relief and monetary damages, including punitive damages, alleged by Oracle to be in the billions of U.S. dollars. The trial was held in November 2010. Prior to trial, SAP AG,SE, SAP America and TomorrowNow stipulated to liability for certain claims and SAP agreed to pay Oracle US$120 million for attorneys’ fees. After the trial, the jury returned a damages verdict of US$1.3 billion. The judgment, which was issued on February 3, 2011, additionally provided for prejudgment interest of US$15 million. The judgment amount iswas also subject to post-judgment interest, which accrues from the time judgment iswas entered.
The jury based its verdict on the theory of a hypothetical license, that is, the value of what TomorrowNow would have paid if it had negotiated with Oracle a license for the copyrights infringed by TomorrowNow. Before and during the course of the trial, various
damages amounts had been presented by the parties to the litigation. They included the following:
a)
a) | Before the trial, Oracle had requested damages in excess of US$3.5 billion based on alleged “saved acquisition costs,” the court dismissed that damage claim based on a pretrial motion, but Oracle had |
b)
b) | During the trial, Oracle’s damages experts presented an amount of US$408 million based on lost profits and disgorgement of infringer’s profit. |
c) | During the trial, members of Oracle management presented, as part of their testimonies, amounts of up to US$5 billion. Oracle’s damages expert presented a damages estimate of “at least” US$1.655 billion under a hypothetical license theory. Oracle’s counsel asked the jury to award “somewhere between US$1.65 and US$3 billion.” |
c) During the trial, members of Oracle management presented, as part of their testimonies, amounts of up to US$5 billion. Oracle’s damages expert presented a damages estimate of “at least” US$1,655,600,000 under a hypothetical license theory. Oracle’s counsel asked the jury to award “somewhere between US$1.65 and US$3 billion.”
d) During the trial, the damages expert for TomorrowNow and SAP presented an amount of US$28 million based on lost profits and infringer’s profits or, alternatively, US$40.6 million based on a hypothetical license theory. Counsel for SAP and TomorrowNow asked the jury to award US$28 million.
d) | During the trial, the damages expert for TomorrowNow and SAP presented an amount of US$28 million based on lost profits and infringer’s profits or, alternatively, US$40.6 million based on a hypothetical license theory. Counsel for SAP and TomorrowNow asked the jury to award US$28 million. |
We believed both before and during the trial and continue to believe that the hypothetical license theory is not an appropriate basis for calculating the damages. Instead, we believe that damages should be based on lost profits and infringer’s profits. As such, SAP filed post-trial motions asking the judge to overturn the judgment. A hearing on the post-trial motions was held in July 2011. On September 1, 2011, the trial judge issued an order which set aside the jury verdict and vacated that part of the judgment awarding US$1.3 billion in damages. The trial judge also gave Oracle the choice of accepting the reduced damages of US$272 million or having a new trial which would decide between damages based on lost profits orand infringer’s profits. Oracle filed a motion seeking an early appeal from the ruling vacating the jury’s damages award, which was denied by the judge.
Consequently, Oracle elected to proceed with a new trial. TheIn lieu of a new trial, date hasthe parties stipulated to a judgment of US$306 million while each preserving all rights for appeal. Both parties filed respective notices of appeal; ultimately, SAP did not yet been set.
Additionally, in June 2007, SAP became aware thatpursue an appeal, and instead defended the United States Departmentdistrict court’s judgment. On appeal, Oracle sought three forms of Justice (U.S. DOJ) had opened an investigation concerning related issues and had issued subpoenas to SAP and TomorrowNow. The DOJ investigation has been resolved by way of a plea agreement which includes TomorrowNow pleading guilty to 11 counts of violationsrelief: (1) reinstatement of the Computer FraudNovember 2010 US$1.3 billion verdict; (2) as a first alternative, a new trial at which Oracle may again seek hypothetical license damages (based in part on evidence of alleged saved development costs) plus SAP’s alleged infringer’s profits without any deduction of expenses (Oracle did not put a number on its claim for the requested new trial); and Abuse Act, one count(3) as a second alternative, increase of criminal copyright infringement, the paymentremittitur (alternative to new trial) to US$408.7 million (versus the US$272 million Oracle had previously rejected). The hearing was
held on May 13, 2014. On August 29, 2014, the appeals court issued its decision affirming the district court’s judgment and rejecting Oracle’s request to reinstate the November 2010 jury verdict or allow it to seek hypothetical license damages at any new trial. The appeals court did order an increase in the remittitur (as an alternative to new trial) to US$356.7 million, as opposed to the US$408.7 million Oracle requested. In mid-November, 2014, Oracle made its election to accept the remittitur. On November 14, 2014, the trial judge entered final judgment and the civil case was closed. Payment to Oracle of a US$20359 million fine and three years probation. No charges were brought against SAP AG or subsidiaries thereof other than TomorrowNow.was made on November 25, 2014.
In April 2007, United States-based Versata Software, Inc. (formerly Trilogy Software, Inc.) (Versata) instituted legal proceedings in the United States District Court for the Eastern District of Texas against SAP. Versata allegesalleged that SAP’s products infringe one or more of the claims in each of five patents held by Versata. In its complaint, Versata seekssought unspecified monetary damages and permanent injunctive relief. The first trial was held in August 2009. The jury returned a verdict in favor of Versata and awarded Versata US$138.6 million for past damages. In January 2011, the court vacated the jury’s damages award and ordered a new trial on damages in May 2011.damages. The re-trialretrial was held in May 2011. The jury returned a verdict in favor of Versata and awarded Versata US$345 million for past damages. In September 2011, the judge denied SAP’s post-trial motions with the exception of reducing the damages verdict by US$16 million to approximately US$329 million. The judge also ordered approximately US$60 million in pre-judgment interest. Additionally, the judge granted Versata’s request for a broad injunction which prohibits SAP from 1) selling products in the United States with the infringing functionality, 2) providing maintenance to or accepting maintenance revenue from existing customers in the United States until such customers disable the infringing functionality and verify such disablement, and 3) licensing additional users to existing customers in the United States until such customers disable the infringing functionality and verify such
disablement. Finally, the judge stayed the injunction pending the outcome of an appeal.
Both parties appealed to the U.S. Court of Appeals for the Federal Circuit. The appeal hearing occurred in February 2013 and a decision was issued on May 1, 2013. The three-judge panel ruled in Versata’s favor on infringement and damages, leaving both fully intact. The past damages verdict stood at approximately
US$390 million. Regarding the injunction, the court ruled that the injunction was too broad, stating that SAP should be able to provide maintenance or additional seats for prior customers of the infringing products, so long as the maintenance or the additional seat does not involve, or allow access to, the “enjoined capability” where enjoined capability is appealing.
defined as the capability to execute a pricing procedure using hierarchical access of customer and product data. SAP filed a petition seeking rehearing by the three-judge panel that issued this decision and/or by the entire appeals court. The appeals court requested that Versata respond to SAP’s petition no later than July 29, 2013. In August 2007, United States-based elcommerce.com, Inc. (elcommerce) instituted legal proceedings in2013, the appeals court denied SAP’s request for rehearing and issued its mandate passing jurisdiction to the district court.
Separately, SAP filed a petition with the United States against SAP. elcommerce alleges that SAP’s products infringe one or morePatent and Trademark Office (USPTO) challenging the validity of the claims in one patent held by elcommerce.asserted Versata patent. In its complaint, elcommerce seeks unspecified monetary damages and permanent injunctive relief. The court in East TexasJanuary 2013, the USPTO granted SAP’s request to transferreconsider the validity of Versata’s patent and instituted the relevant procedure (transitional post grant review). A decision was issued in June 2013 rendering all challenged patent claims (including all the patent claims SAP was found to have infringed) unpatentable. Versata filed with the USPTO a request seeking reconsideration of the decision on six different grounds. The USPTO invited SAP to file an opposition responding to two of the six grounds. On September 13, 2013, the USPTO denied Versata’s request for reconsideration. In November, 2013, Versata sought appeals court review of the USPTO decision. The hearing on appeal occurred on December 3, 2014. A decision on appeal is expected in 2015.
In June 2013, following the determination of unpatentability, SAP filed a request with the appeals court to stay the litigation pending review of the USPTO decision. That request was denied in early July 2013.
In December 2013, SAP filed with the United States Supreme Court a petition for a writ of certiorari to review the decisions of the appeals court. That petition was denied in January 2014. Immediately thereafter, Versata requested that the District Court dismiss its remaining claims for injunctive and equitable relief. The District Court granted that request and deemed the previously entered judgment final. On that same day, SAP requested that the District Court vacate the judgment or stay the litigation, based on the USPTO decision declaring Versata’s patent claims unpatentable. Versata requested an order
requiring SAP to pay the judgment. In April 2014, the District Court denied SAP’s motion to vacate the judgment or stay the litigation. SAP filed an appeal seeking review of that district court decision. On motion by Versata, the appeals court dismissed SAP’s appeal in June 2014. On June 30, 2014, SAP filed a motion with the appeals court to stay issuance of its mandate. That motion was denied. SAP subsequently requested from East Texas to Pennsylvania. Subsequent to the Markman ruling by the court, the parties agreed to the entry of final judgment regarding non-infringement by SAP. elcommerce has appealed the court’s Markman ruling. The hearingU.S. Supreme Court a temporary stay for the appeal has not yet been scheduled.purpose of the Court considering a petition for a writ of certiorari. That request was denied. Versata’s request for an order requiring SAP to pay the judgment remained undecided at the District Court. In August 2014, Versata and SAP entered into a Patent License and Settlement Agreement (the “Agreement”) to settle the existing patent litigation between the companies. Under the terms of the Agreement, Versata will license to SAP certain patents in exchange for a one-time cash payment and a potential additional contingent payment. The Agreement also provides for general releases, indemnification for its violation, and dismisses the existing litigation with prejudice.
In February 2010, United States-based TecSec, Inc. (TecSec) instituted legal proceedings in the United States against SAP Sybase,(including its subsidiary Sybase), IBM, and many other defendants. TecSec allegesalleged that SAP’s and Sybase’s products infringe one or more of the claims in five patents held by TecSec. In its complaint, TecSec seeks unspecified monetary damages and permanent injunctive relief. The trial has not yet been scheduled. The legal proceedings have beenwere stayed against all defendants pending a decision from the outcome of an appeal by TecSec regardingU.S. Supreme Court on SAP’s and other defendants’ request for review. Supreme Court review was declined in June 2014. The lawsuit has resumed at the court’s determination that IBM does not infringe the patents.district court but only with respect to one defendant. The lawsuit against SAP and Sybase remains stayed.
In April 2010, SAP instituted legal proceedings (a Declaratory Judgment action) in the United States against Wellogix, Inc. and Wellogix Technology Licensing, LLC (Wellogix). The lawsuit seeks a declaratory judgment that five patents owned by Wellogix are invalid and/or not infringed by SAP. The trial has not yet been scheduled. The legal proceedings have been stayed pending the outcome of re-examinationssix reexaminations filed with the U.S. Patent and Trademark Office.
Other Litigation
USPTO. In April 2008, South African-based Systems Applications Consultants (PTY)September 2013, the USPTO issued a decision on four of the six reexaminations, invalidating every claim of each of the four patents. SAP is awaiting a decision on the two remaining reexamination requests. In response to SAP’s patent Declaratory Judgment
Limited (Securinfo)action, Wellogix has re-asserted trade secret misappropriation claims against SAP (which had previously been raised and abandoned). The court granted SAP’s motion for an early dispositive decision on the trade secret claims, but Wellogix has asked the court to reconsider its decision and we are awaiting the court’s decision on the reconsideration motion.
In August 2007, United States-based elcommerce.com, Inc. (elcommerce) instituted legal proceedings in South Africathe United States against SAP. Securinfo allegeselcommerce alleged that SAP has causedSAP’s products infringe one or more of its subsidiaries to breach a software distribution agreement with Securinfo.the claims in one patent held by elcommerce. In its complaint, Securinfo seekselcommerce sought unspecified monetary damages and permanent injunctive relief. The court in East Texas granted SAP’s request to transfer the litigation from East Texas to Pennsylvania. Subsequent to the Markman ruling by the court, the parties agreed to the entry of approximately €610 million plus interest. In September 2009,final judgment regarding non-infringement by SAP of the method claims of the patent and invalidity of the system claims. elcommerce has appealed the court’s Markman ruling. The hearing for the appeal was held in May 2012. SAP also filed a motionreexamination request with the USPTO to invalidate elcommerce’s patent. On September 23, 2013, the USPTO issued a decision invalidating the patent. elcommerce sought rehearing from the USPTO, but that request was denied in March, 2014. The Federal Circuit appeals court also issued a decision in February, 2014, confirming that SAP did not infringe some claims of the elcommerce patent, but reversing the district court’s decision of invalidity of the patent. SAP has asked the Federal Circuit court to reconsider its invalidity decision. In June 2014, elcommerce and SAP jointly moved to dismiss the appeal on the Federal Circuit court. The legal dispute is thus closed.
Customer-related Litigation and Claims
Customer-related litigation and claims include cases in which was rejected. A trial datewe indemnify our customers against liabilities arising from a claim that our products infringe a third party’s patent, copyright, trade secret, or other proprietary rights. Occasionally, consulting or software implementation projects result in disputes with customers. Where customers are dissatisfied with the products and services that we have delivered to them in routine consulting contracts or development arrangements, we may grant functions or performance guarantees.
The carrying amount of the provisions recorded for customer-related litigation and claims and the development of the carrying amount in the reporting period are disclosed in Note (19b). The expected timing or amounts of any resulting outflows of economic benefits from these lawsuits and claims is uncertain and not estimable as they generally depend on the duration of the legal proceedings and settlement negotiations required to resolve the litigation and claims and the unpredictability of the outcomes of legal disputes in several jurisdictions. For more information, see Note (3c).
Contingent liabilities exist from customer-related litigation and claims for which was scheduled for June 2011no provision has been postponed. No new trial date has been scheduled yet.recognized. Generally, it is not practicable to estimate the financial impact of these contingent liabilities due to the uncertainties around these lawsuits and claims outlined above.
Non-Income Tax-related Litigation and Claims
We are subject to ongoing audits by domestic and foreign tax authorities. Along with many other companies operating in Brazil, we are involved in various proceedings with Brazilian authorities regarding assessments and litigation matters on non-income taxes on intercompany royalty payments and intercompany services. The total potential amount related to these matters for all applicable years is approximately €82€95 million. We have not recorded a provision for these matters, as we believe that we will prevail on these matters.prevail.
For income-tax risk-relatedmore information about income tax-related litigation please refer torisks, see Note (11).
(25) |
We are exposed to various financial risks, such as market risks (including foreign currency exchange rate risk, interest rate risk, and equity price risk), credit risk, and liquidity risk.
Market Risk
a) Foreign Currency Exchange Rate Risk
Foreign currency exchange rate risk is the risk of loss due to adverse changes in foreign currency exchange rates. Under IFRS, foreign currency exchange rate risks arise on account of monetary financial instruments denominated in currencies other than the functional currency where the non-functional currency is the respective risk variable; translation risks are not taken into consideration.
As a globally active enterprise, we are subject to risks associated with fluctuations in
foreign currencies with regard to our ordinary operations. Since the Group’s entities mainly conduct their operating business in their own functional currencies, our risk of exchange rate fluctuations
from ongoing ordinary operations is not considered significant. However, occasionally we generate foreign-currency-denominatedforeign currency-denominated receivables, payables, and other monetary items by transacting in a currency other than the functional currency. To mitigate the extent of the associated foreign currency exchange rate risk, the majority of these transactions are hedged as described in Note (26).
In rare circumstances, transacting in a currency other than the functional currency also leads to embedded foreign currency derivatives being separated and measured at fair value through profit or loss.
In addition, the Intellectual Property (IP) holders in the SAP AG isGroup are exposed to risks associated with forecasted intercompany cash flows in foreign currencies. These cash flows arise out of royalty payments from SAP subsidiaries to SAP AG.the respective IP holder. The royalties are linked to the subsidiaries’ external revenue. This arrangement leads to a concentration of the foreign currency exchange rate risk with SAP AG in Germany,the IP holders, as the royalties are mostly denominated in the subsidiaries’ local currencies, while the functional currency of SAP AGthe IP holders with the highest royalty volume is the euro. The highest foreign currency exchange rate exposure of this kind relates to the currencies of subsidiaries with significant operations, for example the U.S. dollar, the pound sterling, the Japanese yen, the Swiss franc, the Canadian dollar,Brazilian real, and the Australian dollar.
Generally, we are not exposed to any significant foreign currency exchange rate risk with regard to our investing and financing activities, as such activities are normally conducted in the functional currency of the investing or borrowing entity. However, as at December 31, we were exposed to a cash flow risk from the consideration to be paid in U.S. dollars for the acquisition of SuccessFactors, Inc.Concur and Fieldglass in 2014 and hybris in 2013 as the funds arewere provided through our free cash and aacquisition term loan,loans, both mostly generated in euros. For more information, see Notes (4) andNote (26).
Interest-Rateb) Interest Rate Risk
Interest-rate risks result from changes in market interest rates, which can cause changes in the fair values of fixed-rate instruments and in the interest to be paid or received for variable-rate instruments. We are exposed to interest-rateinterest rate risk as a result of our investing and financing activities mainly in euros and U.S. dollars.
As at December 31, 2011,2014, our liquidity was mainly invested in time deposits and government bonds with fixed yields, and money market instruments with variable yields, held as cash equivalents and current and non-current investments. Since we do not account formost of the fixed-yieldfixed
yield time deposits held at year-end at fair value, we arehave short maturities, they do not exposedexpose us to an interest-rate risk with regard to these investments. However, a substantial fair value interest rate exposure arises from the government bonds classified as available for sale. Also,risk. However, we are exposed to a cash flow risk from our cash held at banks spread across the variable-yieldworld and the variable yield money market funds, mainly held in the euro zoneUnited States and the U.S.Germany.
As at December 31, 2011,2014, we are alsowere exposed to an interest-rateinterest rate risk from our financing activities (for more details oninformation about the individual instruments, see Note (18b)). While all as €3.8 billion of our issued bonds with a total volume of €2.2 billion and ourall the U.S. private placement notes with a volume of US$1.25 billion pay fixed interest the SSD,leading to a fair value risk while our term loans totaling €697 million has€4.3 billion and a €547.5 million variable-rate tranche, which gives€750 million-bond give rise to a cash-flow risk, as the interest payments are based on the prevailing EURIBOR rates. The same applies to the variable-rate additional term loan with a volume of €100 million.
Equity-Pricec) Equity Price Risk
Equity-price risk is the risk of loss due to adverse changes in equity markets. We are exposed to such equity price risk with regard to our investments in listed equity securities (2011: €39(2014: €209 million; 2010: €282013: €83 million) and our share-based compensation planspayments (for the exposure from these plans, see Note (28)).
Credit Risk
Credit risk is the risk of economic loss of principal or financial rewards stemming from a counterparty’s failure to repay or service debt according to the contractual obligations.
To reduce the credit risk in trade receivables and investments, we have made the following arrangements:
An agreement with an insurerarranged to insure part of our trade receivables against credit losses
The receipt ofreceive rights to collateral for certain investing activities in the full amount of the investment volume, which we would only be allowed to make use of only in the case of default of the counterparty to the investment.
With In the exceptionabsence of these transactions, we have not executedother significant agreements to reduce our overall credit risk exposure, such as master netting arrangements. Therefore, the total amounts recognized as cash and cash equivalents, current investments, loans and other financial receivables, and derivative financial assets represent our maximum exposure to credit risks, except for the agreements mentioned above.
Liquidity Risk
Liquidity risk results from the potential inability to meet financial obligations, such as payments to suppliers or employees. A maturity analysis that provides the remaining contractual maturities of all our financial liabilities held at December 31, 2011,2014, is shown in the table below. Financial liabilities shown in the table below for which repayment can be requested by the contract partner at any time are assigned to the earliest possible period. Variable interest payments were calculated using the last relevant interest rate fixed as at December 31, 2011.2014. As we generally settle our derivative contracts gross, we show the pay and receive legs separately for all our currency and interest rate derivatives, whether
or not the fair value of the derivative is negative.negative, except for the derivative forward contracts entered into in connection with the acquisition of Concur, where we buy and sell US$8.5 billion because we plan to settle those net. The cash outflows for the currency derivatives are translated using the applicable forward rate.
The cash flows for unrecognized but contractually agreed financial commitments are shown in Note (24)(23).
Contractual Maturities of Financial Liabilities and Financial Assets
Carrying Amount | Contractual Cash Flows | |||||||||||||||||||||||||||
€ millions | 12/31/2011 | 2012 | 2013 | 2014 | 2015 | 2016 | Thereafter | |||||||||||||||||||||
Non-derivative financial liabilities | ||||||||||||||||||||||||||||
Trade payables | –727 | –727 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
Financial liabilities | –4,034 | –1,264 | –687 | –840 | –276 | –495 | –792 | |||||||||||||||||||||
| ||||||||||||||||||||||||||||
Total of non-derivative financial liabilities | –4,761 | –1,991 | –687 | –840 | –276 | –495 | –792 | |||||||||||||||||||||
Derivative financial liabilities and assets | ||||||||||||||||||||||||||||
Derivative financial liabilities | ||||||||||||||||||||||||||||
Currency derivatives without designated hedge relationship | –179 | |||||||||||||||||||||||||||
cash outflows | –2,887 | –10 | –10 | –10 | –10 | –40 | ||||||||||||||||||||||
cash inflows | 2,797 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||
Currency derivatives with designated hedge relationship | –34 | |||||||||||||||||||||||||||
cash outflows | –569 | –50 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||
cash inflows | 534 | 49 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||
Interest rate derivatives with designated hedge relationship | –8 | |||||||||||||||||||||||||||
cash outflows | –9 | –5 | –3 | 0 | 0 | 0 | ||||||||||||||||||||||
cash inflows | 6 | 3 | 1 | 0 | 0 | 0 | ||||||||||||||||||||||
Derivative financial assets | ||||||||||||||||||||||||||||
Currency derivatives without designated hedge relationship | 118 | |||||||||||||||||||||||||||
cash outflows | –2,172 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||
cash inflows | 2,281 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||
Currency derivatives with designated hedge relationship | 4 | |||||||||||||||||||||||||||
cash outflows | –82 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||
cash inflows | 87 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||
| ||||||||||||||||||||||||||||
Total of derivative financial liabilities and assets | –99 | –14 | –13 | –12 | –10 | –10 | –40 |
Carrying Amount | Contractual Cash Flows | |||||||||||||||||||||||||||
€ millions | 12/31/2014 | 2015 | 2016 | 2017 | 2018 | 2019 | Thereafter | |||||||||||||||||||||
Non-derivative financial liabilities | ||||||||||||||||||||||||||||
Trade payables | –756 | –756 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
Financial liabilities | –11,209 | –2,377 | –625 | –3,976 | –958 | –827 | –3,262 | |||||||||||||||||||||
Total of non-derivative financial liabilities | –11,964 | –3,133 | –625 | –3,976 | –958 | –827 | –3,262 | |||||||||||||||||||||
Derivative financial liabilities and assets | ||||||||||||||||||||||||||||
Derivative financial liabilities | ||||||||||||||||||||||||||||
Currency derivatives not designated as hedging instruments | –310 | |||||||||||||||||||||||||||
Cash outflows | –4,110 | –9 | –9 | –9 | –9 | –8 | ||||||||||||||||||||||
Cash inflows | 3,836 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||
Currency derivatives designated as hedging instruments | –22 | |||||||||||||||||||||||||||
Cash outflows | –487 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||
Cash inflows | 464 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||
Interest-rate derivatives designated as hedging instruments | –1 | |||||||||||||||||||||||||||
Cash outflows | –7 | –10 | –12 | –2 | 0 | 0 | ||||||||||||||||||||||
Cash inflows | 9 | 9 | 9 | 1 | 0 | 0 | ||||||||||||||||||||||
Total of derivative financial liabilities | –333 | ��295 | –10 | –12 | –10 | –9 | –8 | |||||||||||||||||||||
Derivative financial assets | ||||||||||||||||||||||||||||
Currency derivatives not designated as hedging instruments | 411 | |||||||||||||||||||||||||||
Cash outflows | –1,236 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||
Cash inflows | 1,656 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||
Currency derivatives designated as hedging instruments | 10 | |||||||||||||||||||||||||||
Cash outflows | –162 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||
Cash inflows | 163 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||
Interest-rate derivatives designated as hedging instruments | 77 | |||||||||||||||||||||||||||
Cash outflows | –34 | –40 | –48 | –39 | –43 | –123 | ||||||||||||||||||||||
Cash inflows | 62 | 63 | 63 | 44 | 44 | 99 | ||||||||||||||||||||||
Total of derivative financial assets | 498 | 449 | 23 | 15 | 5 | 1 | –24 | |||||||||||||||||||||
Total of derivative financial liabilities and assets | 165 | 154 | 13 | 3 | –5 | –8 | –32 |
Contractual Maturities of Financial Liabilities and Financial Assets
Carrying Amount | Contractual Cash Flows | |||||||||||||||||||||||||||
€ millions | 12/31/2010 | 2011 | 2012 | 2013 | 2014 | 2015 | Thereafter | |||||||||||||||||||||
Non-derivative financial liabilities | ||||||||||||||||||||||||||||
Trade payables | –699 | –699 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
Financial liabilities | –4,445 | –145 | –2,220 | –667 | –824 | –253 | –695 | |||||||||||||||||||||
| ||||||||||||||||||||||||||||
Total of non-derivative financial liabilities | –5,144 | –844 | –2,220 | –667 | –824 | –253 | –695 | |||||||||||||||||||||
Derivative financial liabilities and assets | ||||||||||||||||||||||||||||
Derivative financial liabilities | ||||||||||||||||||||||||||||
Currency derivatives without designated hedge relationship | –109 | |||||||||||||||||||||||||||
cash outflows | –883 | –9 | –9 | –9 | –9 | –42 | ||||||||||||||||||||||
cash inflows | 852 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||
Currency derivatives with designated hedge relationship | –27 | |||||||||||||||||||||||||||
cash outflows | –360 | –38 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||
cash inflows | 333 | 36 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||
Interest rate derivatives with designated hedge relationship | –10 | |||||||||||||||||||||||||||
cash outflows | –12 | –9 | –5 | –3 | 0 | 0 | ||||||||||||||||||||||
cash inflows | 5 | 4 | 2 | 1 | 0 | 0 | ||||||||||||||||||||||
Derivative financial assets | ||||||||||||||||||||||||||||
Currency derivatives without designated hedge relationship | 80 | |||||||||||||||||||||||||||
cash outflows | –4,502 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||
cash inflows | 4,590 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||
Currency derivatives with designated hedge relationship | 3 | |||||||||||||||||||||||||||
cash outflows | –62 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||
cash inflows | 64 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||
| ||||||||||||||||||||||||||||
Total of derivative financial liabilities and assets | –63 | 25 | –16 | –12 | –11 | –9 | –42 |
Non-derivative financial liabilities Trade payables Financial liabilities Total of non-derivative financial liabilities Derivative financial liabilities and assets Derivative financial liabilities Currency derivatives not designated as hedging instruments Cash outflows Cash inflows Currency derivatives designated as hedging instruments Cash outflows Cash inflows Interest-rate derivatives designated as hedging instruments Cash outflows Cash inflows Total of derivative financial liabilities Derivative financial assets Currency derivatives not designated as hedging instruments Cash outflows Cash inflows Currency derivatives designated as hedging instruments Cash outflows Cash inflows Interest-rate derivatives designated as hedging instruments Cash outflows Cash inflows Total of derivative financial assets Total of derivative financial liabilities and assetsThe overall decrease of cash outflows for our non-derivative financial liabilities compared to year-end 2010 is mainly due to the early repayment of the acquisition term loan in the amount of €1 billion while our 2011 financing activities only amounted to €580 million. For more information, see Note (18b). Carrying Amount Contractual Cash Flows € millions 12/31/2013 2014 2015 2016 2017 2018 Thereafter –640 –640 0 0 0 0 0 –4,336 –731 –863 –513 –891 –153 –1,730 –4,976 –1,371 –863 –513 –891 –153 –1,730 –144 –1,975 –9 –9 –8 –8 –15 1,885 0 0 0 0 0 –3 –178 0 0 0 0 0 174 0 0 0 0 0 –23 –12 –17 –27 –39 –37 –192 30 35 35 35 28 123 –170 –76 9 –1 –12 –17 –84 26 –2,544 0 0 0 0 0 2,569 0 0 0 0 0 30 –391 0 0 0 0 0 419 0 0 0 0 0 5 –12 –25 –29 –36 –21 –24 19 33 33 33 16 16 61 60 8 4 –3 –5 –8 –109 –16 17 3 –15 –22 –92
(26) |
We manage market risks (including foreign currency exchange rate risk, interest rate risk,
and equity price risk), credit risk, and liquidity risk on a Group-wide basis through our global treasury department. Our risk management and hedging strategy is set by our treasury guideline and other internal guidelines, and is subject to continuous internal risk analysis. Derivative financial instruments are only purchased to reduce risks and not for speculation, which is defined as entering into derivative instruments without a corresponding underlying transaction.
In the following sections we provide details on the management of each respective financial risk and our related risk exposure. In the sensitivity analyses that show the effects of hypothetical changes of relevant risk variables on profit or other comprehensive income, we determine the periodic effects by relating the hypothetical changes in the risk variables to the balance of financial instruments at the reporting date.
Foreign Currency Exchange Rate Risk Management
We continually monitor our exposure to currency fluctuation risks based on monetary items and forecasted transactions and pursue a Group-wide strategy to manage foreign currency exchange rate risk, using derivative financial instruments, primarily foreign exchange forward contracts, as appropriate, with the primary aim of reducing profit or loss volatility.
Currency Hedges WithoutNot Designated Hedge Relationshipas Hedging Instruments
The foreign exchange forward contracts we enter into to offset exposure relating to foreign currency-denominatedforeign-currency denominated monetary assets and liabilities from our operating activities are not designated as being in a hedge accounting relationship, because the realized currency gains and losses from the underlying items are recognized in profit or loss in the same periods as the gains and losses from the derivatives.
Currency hedges without anot designated hedge relationshipas hedging instruments also include foreign currency derivatives embedded in non-derivative host contracts that are separated and accounted for as derivatives according to the requirements of IAS 39.
In addition, during 2014 we held foreign exchange forward contracts and foreign currency options as at December 31, 2011, to partially hedge the cash flow risk from the consideration to be paid in U.S. dollars for the acquisition of SuccessFactors. For more information see Note (4).Concur.
Currency Hedges with Designated Hedge Relationshipas Hedging Instruments (Cash Flow Hedges)
We enter into derivative financial instruments, primarily foreign exchange forward contracts, to hedge significant forecasted cash flows (royalties) from foreign subsidiaries denominated in foreign currencies with a defined set of hedge ratios and a hedge horizon of up to 1512 months. Specifically, we exclude the interest component and only designate the spot rate of the foreign exchange forward contracts as the hedging instrument to offset anticipated cash flows relating to the subsidiaries with significant operations, including the United States, the United Kingdom, Japan, Switzerland, Canada,Brazil, and Australia. We generally use foreign exchange derivatives that have maturities of 1512 months or less, which may be rolled over to provide continuous coverage until the applicable royalties are received.
In 2011,2014, net losses totaling €14€30 million (2010:(2013: net lossesgains of €55€57 million; 2009:2012: net lossesgains of €18€17 million) resulting from the change in the component of the derivatives designated as hedging instruments were recorded in other comprehensive income.
For the years ended December 31, 20112014 and 2010,2013, no previously highly probable transaction designated as a hedged item in a foreign currency cash flow hedge relationship ceased to be probable. Therefore, we did not discontinue any of our cash flow hedge relationships. Also, we identified no ineffectiveness in 2011 and 2010 and only immaterial ineffectiveness for these hedges in 2009.all years reported. In 2011,2014, we reclassified net losses of €13€2 million (2010:(2013: net gains of €57 million; 2012: net losses of €44 million; 2009: net losses of €37€24 million) from other comprehensive income to profit or loss due to the hedged items affecting income. Generally, the cash flows of the hedged forecasted transactions are expected to occur and to be recognized in profit or loss monthly within a time frame of 1512 months from the date of the statement of financial position. It is estimated that €21€8 million of the net losses recognized in other comprehensive income as at December 31, 2011,
in 2014 will be reclassified from other comprehensive income to profit or loss during fiscal year 2012.in 2015.
Foreign Currency Exchange Rate Exposure
In line with our internal risk reporting process, we use the value-at-riskcash flow-at-risk method to quantify our
risk positions andwith regard to manage foreign currency exchange rate risk. Our calculation of the value-at-risk includes both, our foreign currency-denominated financial instruments and our forecasted intercompany transactions although the latter are scoped out of IFRS 7. Asand value-at-risk for our internal calculation of value-at-risk is thusforeign-currency denominated financial instruments. In order not in line with the requirements of IFRS 7,to provide two different methodologies, we have opted to disclose our risk exposure based on a sensitivity analysis considering the following:
Since the SAP Group’s entities generally operate in their functional currencies, the majority of our non-derivative monetary financial instruments, such as cash and cash equivalents, trade receivables, trade payables, loans to employees and third parties, bank liabilities, and other financial liabilities, are denominated in the respective entities’ functional currency. Thus, a foreign currency exchange rate risk in these transactions is nearly non-existent. In exceptional cases and limited economic environments, operating and financing transactions are denominated in currencies other than the functional currency, leading to a foreign currency exchange rate risk for the related monetary instruments. Where we hedge against currency impacts on cash flows, these foreign-currency-denominatedforeign currency-denominated financial instruments are economically converted into the functional currency by the use of forward exchange contracts or options. Therefore, fluctuations in foreign currency exchange rates neither have a significant impact on profit nor on other comprehensive income with regard to our non-derivative monetary financial instruments.
Income or expenses recorded in connection with the non-derivative monetary financial instruments discussed above are mainly recognized in the relevant entity’s functional currency. Therefore, fluctuations in foreign currency exchange rates neither have a significant impact on profit nor on other comprehensive income in this regard.
Our free-standing derivatives designed for hedging foreign currency exchange rate risks almost completely balance the changes in the fair values of the hedged item attributable to exchange rate movements in the Consolidated Income Statements in the same period. As a consequence, the hedged items and the hedging instruments are not exposed to foreign currency exchange rate risks, and thereby have no effect on profit or other comprehensive income.profit.
Consequently, we are only exposed to significant foreign currency exchange rate fluctuations with regard to:
Derivatives held within a designated cash-flowcash flow hedge relationship
Foreign currency embedded derivatives
The foreign currency options held as at December 31, 2011, in connection with the acquisition of SuccessFactors.
With respect to the nominal amounts of derivatives held within a designated cash-flow hedge relationship, the foreign currency options and foreign currency embedded derivatives, the data at year-end is not representative of the exposure during the year as a whole. On average, our exposure to foreign currency exchange rate risk in 2011 was based on nominal amounts of €1.3 billion, with a range of exposure on nominal amounts from a low of €815 million to a high of €2.4 billion, which was also the year-end exposure.
As mentioned above, (excluding the interest element, which is not part of the assigned cash flow hedge relationship and is recognized in profit or loss, is not affected byrelationships)
Foreign currency fluctuations. embedded derivatives.
As we do
not have a significant exposure totoward a single currency, in our derivatives held within a designated cash flow hedge relationship, we disclose our exposuresensitivity to our major foreign currencies (as described(described in Note (26)(25)) in total. If, on
Foreign Currency Sensitivity
Effects on Other Non-Operating Expense, Net | Effects on Other Comprehensive Income | |||||||||||||||||||||||
€ millions | 2014 | 2013 | 2012 | 2014 | 2013 | 2012 | ||||||||||||||||||
Derivatives held within a designated cash flow hedge relationship | ||||||||||||||||||||||||
All major currencies –10% | 74 | 57 | 60 | |||||||||||||||||||||
All major currencies +10% | –74 | –57 | –60 | |||||||||||||||||||||
Embedded derivatives | ||||||||||||||||||||||||
All currencies –10% | 32 | 35 | 41 | |||||||||||||||||||||
Swiss franc +20%/other currencies +10% (2013, 2012: all currencies +10%) | –62 | –35 | –41 |
Our foreign currency exposure as at December 31 2011, the euro had gained (lost) 10% against all(and if year-end exposure is not representative, also our major currencies, the effective portion of the foreign currency cash-flow hedge recorded in other comprehensive income would have been €70 million higher (lower) (December 31, 2010: €46 million higher (lower); December 31, 2009: €55 million higher (lower)) than presented.average/high/low exposure) was as follows:
With respect toForeign Currency Exposure
€ billions | 2014 | 2013 | ||||||
Year-end exposure towards all our major currencies | 1.0 | 0.9 | ||||||
Average exposure | 2.7 | 1.0 | ||||||
Highest exposure | 7.7 | 1.1 | ||||||
Lowest exposure | 1.0 | 0.9 |
During 2014, our foreign currency embedded derivatives, any changes in the value of such derivatives is recognized in profit or loss. If, on December 31, 2011, the euro had gained (lost) 10% against the Swiss franc (which is the currency accounting for the majority of our exposure from foreign currency embedded derivatives), Other non-operating expense, net would have been €41 million higher (lower) (December 31, 2010: €42 million higher (lower); December 31, 2009: €38 million higher (lower)) than presented.
The foreign currency options held to hedge the cash flow risk from the consideration to be paid in U.S. dollars for the acquisition of SuccessFactors, were not designated as cash flow hedges. Therefore, any change in the value of these derivatives is recognized in profit or loss. If, on December 31, 2011, the euro had gained (lost) 10% against the U.S. dollar, Other non-operating expense, net would have been €6 million higher (€50 million lower) than presented.
Our sensitivity to foreign currency exchange rate fluctuations has increased duringcompared to the year ended December 31, 2011,2013 mainly due to the increase of the nominal amounts hedged in a cash-flow hedge relationship and the nominal amounts underlying the foreign currency options held in connection withhedging transactions for the acquisition of SuccessFactors.Concur. However, due to our hedging strategy, this comparatively high exposure was only one-sided; there was no substantial downside risk.
Interest-RateInterest Rate Risk Management
The primary aim of our interest-rateinterest rate risk management is to reduce profit or loss volatility and optimize our interest result by creating a balanced structure of fixed and variable cash flows. We therefore manage interest rate risks by adding interest rate-related derivative instruments to a given portfolio of investments and debt financing.
As at December 31, 2011,2014, a cash flow interest rate risk existed with regard to our cash at banks of €1.8 billion, our investing activities in money market instruments with variable yields in the amount of €1.4€633 million and our variable rate financing transactions of €5.03 billion.
While the majority of our financial debt carries a fixed A fair value interest rate €648 million in financial liabilities carry floating interest rates. To hedgerisk arises from the cash-flow risk resulting from fluctuations in future interest payments forfixed yield time deposits as well as the variable-rate tranches of the German promissory notes (SSD), which have a nominal value of €548 million, we entered into interest rate payer swaps. With these instruments, we are economically converting the underlying floating rate into a fixed rate as the changes in the cash flows of the hedged items resulting from changes in EURIBOR are offset against the changes in the cash flows of the interest rate swaps. On December 31, 2011, the nominal volume of the interest rate payer swaps covered the total volume of the variable-rate tranches of the SSD. The cash flow risk resulting from fluctuations in future payments relating to the outstanding balance of €100 million of the additional term loan asfinancing transactions held at December 31, 2011, was not hedged. Interest rate swaps included, approximately 97% (2010: 75%amortized cost.
55% (2013: 100%) of our total interest-bearing financial liabilities outstanding as at December 31, 2011,2014, had a fixed interest rate whereas 69% (2010: 65%29% (2013: 40%) of our interest-bearing investmentscash, cash equivalents, time deposits, and available-for-sale financial assets had a fixed interest rate.
Therefore, weDerivatives Designated as Hedging Instruments (Fair Value Hedges)
The majority of our investments are mainly exposed to an interest-ratebased on variable rates and/or short maturities while most of our financing transactions are based on fixed rates and long maturities. To match the interest rate risk from our variable-yield money market instruments.financing transactions to our investments we use receiver interest rate swaps to convert certain of our fixed rate financial liabilities to floating and by this means secure the fair value of the swapped financing transactions. The desired fix-floating mix of our net debt is set by
Derivatives with Designated Hedge Relationship (Cash Flow Hedges)
Asthe Treasury Committee. Including interest rate swaps, 30% (2013: 44%) of our total interest-bearing financial liabilities outstanding as at December 31, 2011, we held interest rate derivatives with a designated hedge relationship that2014, had a negativefixed interest rate.
None of the fair value of €8 million (2010: €10 million), for whichadjustment from the receiver swaps, the basis adjustment on the underlying hedged items held in 2011 net losses of €3 million (2010: €10 million net losses; 2009: €14 million net losses) were
recordedfair value hedge relationships, and the difference between the two recognized in other comprehensive income due to the designation as cash-flow hedge instruments. In 2011, we reclassified net losses of €4 million (2010: net losses of €6 million; 2009: €26 million) out of other comprehensive income to financefinancial income, net due to the hedged items affecting income. We did not recordis material in any ineffectiveness for these hedges for the fiscal years 2011, 2010, and 2009.
The following table shows the contractual maturities of the cash flows for the SSD interest payments:years presented.
Contractual Maturities of the Cash Flows for SSD Interest Payments
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Interest Rate Exposure
A sensitivity analysis is provided to show the impact of our interest rate risk exposure on December 31, 2011,profit or loss and equity in accordance with IFRS 7, considering the following:
Changes in interest rates only affect the accounting for non-derivative fixed-ratefixed rate financial instruments if they are recognized at fair value. Therefore, wesuch interest rate changes do not have a fair value risk inchange the carrying amounts of ournon-derivative fixed rate financial liabilities as we account for them at amortized cost. On December 31, 2011, we had fixed-rate government bonds classified as available-for-sale as describedInvestments in Note (25). We therefore consider interestfixed rate changes relating to the fair value measurement of such fixed-rate non-derivative financial assets classified as available-for-sale were not material at each year-end reported. Thus, we do not consider any fixed rate instruments in the equity-related sensitivity calculation.
As our investment portfolio did not contain fixed-rate financial assets throughout the whole of 2011, the data at year-end is not representative of the year as a whole. On average, our exposure to fair value interest rate risk from investing activities in 2011 was based on interest-bearing assets of €250 million, with a range of exposure from a high of
€500 million to a low of €0 million. The year-end exposure was €400 million.
Income or expenses recorded in connection with non-derivative financial instruments with variable interest rates are subject to interest rate risk if they are not hedged items in an effective hedge relationship. Since we have entered into interest rate payer swaps for the variable components of the SSD, we therefore have no significant interest-rate risk arising from our SSD. Thus, we take into consideration interest rate changes relating to our additional term loanvariable rate financing and our investments in money market instruments in the profit-related sensitivity calculation.
With respect to the invested amounts, the data at year-end is not representative of the year as a whole. On average, our exposure to cash flow interest rate risk from investments in 2011 was based on investments of €1.3 billion, with a range of exposure on investments from a low of €875 million to a high of €1.4 billion which was also the year-end exposure. With respect to the financed amounts, the data at year-end is not representative of the year as a whole. Significant debt
amounts from the acquisition term loan raised in connection with the acquisition of Sybase were refinanced in 2011. On average, our exposure to cash flow interest rate risk from financing activities in 2011 was based on interest-bearing liabilities of €308 million, with a range of exposure from a high of €1.1 billion to a low of €100 million which was also the year-end exposure.
Due to theThe designation of interest rate payerreceiver swaps toin a cash flowfair value hedge relationship theleads to interest rate changes affect the respective amounts recorded in other comprehensive income.affecting financial income, net. The fair value movements related to the interest rate swaps’ variable legswaps are not reflected in the sensitivity calculation, as they offset the variable-interest-ratefixed interest rate payments for the SSD. We therefore only considerbonds and private placements as hedged items. However, changes in market interest rate sensitivity in discountingrates affect the amount of interest rate swaps’ fixed leg cash flows in the equity-related sensitivity calculation forpayments from the interest rate swaps designated to be in a hedge relationship. With respect to the borrowing and related hedged amounts, the data at year-end is representative for the year as a whole.
rate swap. As a consequence, they are included in the profit-related sensitivity calculation. |
Due to the current lowuneven development expectations of interest rate levelrates, we base our sensitivity analyses on a yield curve upward shift of +100/–20+50 basis points to avoid negative interest rates.for the U.S. dollar/euro area (2013, 2012: +100 bps) and a yield curve downward shift of –50 basis points for both the U.S. dollar/euro area (2013, 2012: –20 bps).
If, on December 31, 2011, 2010,2014, 2013, and 20092012, interest rates had been 100 basis points higher (20 basis points lower),higher/ lower as described above, this would not have had a material effect on:
The gains/losses on available-for-sale financial assets positions in other comprehensive income
Finance income, net for our variable-interest-ratevariable interest rate investments and would have had the following effects on financial debtincome, net:
Interest-Rate Sensitivity
Effects on Financial Income, Net | ||||||||||||
€ millions | 2014 | 2013 | 2012 | |||||||||
Derivatives held within a designated fair value hedge relationship | ||||||||||||
Interest rates +100 bps in U.S. dollar area/ +50 bps in euro area (2013, 2012: +100 bps in U.S. dollar/euro area) | –116 | –24 | 0 | |||||||||
Interest rates –50 bps in U.S. dollar/euro area (2013, 2012: –20 bps in U.S. dollar/euro area) | 70 | 5 | 0 | |||||||||
Variable rate financing | ||||||||||||
Interest rates +50 bps in euro area | –65 | 0 | 0 | |||||||||
Interest rates –50 bps in euro area | 65 | 0 | 0 |
Our interest rate exposure as at December 31 (and if year-end exposure is not representative, also our average/high/low exposure) was as follows:
Interest-Rate Risk Exposure
€ billion | 2014 | 2013 | ||||||||||||||||||||||||||||||
Year-End | Average | High | Low | Year-End | Average | High | Low | |||||||||||||||||||||||||
Fair value interest-rate risk | ||||||||||||||||||||||||||||||||
From investments | 0.04 | 0.05 | 0.08 | 0.04 | 0.04 | 0.06 | 0.13 | 0.04 | ||||||||||||||||||||||||
Cash flow interest rate risk | ||||||||||||||||||||||||||||||||
From investments (incl. cash) | 2.45 | 2.48 | 2.74 | 2.13 | 1.73 | 2.23 | 2.71 | 1.73 | ||||||||||||||||||||||||
From financing | 5.03 | 0.75 | 5.03 | 0.00 | 0.00 | 0.31 | 1.00 | 0.00 | ||||||||||||||||||||||||
From interest rate swaps | 2.55 | 2.44 | 2.55 | 2.39 | 2.39 | 0.60 | 2.40 | 0.00 |
The effective portion of the interest rate cash flow hedge in other comprehensive income
Equity-PriceEquity Price Risk Management
Our investments in equity instruments with quoted market prices in active markets (2011: €39(2014: €209 million; 2010: €282013: €83 million) are monitored based on the current market value that is affected by the fluctuationfluctuations in the volatile stock markets worldwide. An assumed 20% increase (decrease) in equity prices as at December 31, 2011 (2010)2014 (2013), would not have a material impact on the value of our investments in marketable equity
securities and the corresponding entries in other comprehensive income.
We are exposed to equity price risk with regard to our share-based payment plans.payments. In order to reduce resulting profit or loss volatility, we hedge certain cash flow exposures associated with these plans through the purchase of derivative instruments, but do not establish a designated hedge relationship. While the underlying share-based payment plans are not within the scope of IFRS 7 and thus the resulting equity price risk is not required to be analyzed, the derivative instruments used to hedge these plans are. Nevertheless, inIn our sensitivity analysis we include the underlying share-based payment planspayments and the hedging instruments. Thus, we base the
calculation on our net exposure to equity prices as we believe taking only the derivative instrument into account would not properly reflect our equity price risk exposure. An assumed 20% increase (decrease) in equity prices as at December 31, 2011,2014, would have increased (decreased) our share-based compensationpayment expenses by €27€158 million (€2580 million) (2010: €53 million; 2009: €46(2013: increased by €126 million (decreased by €90 million); 2012: increased by €139 million (decreased by €117 million)).
Credit Risk Management
To mitigate the credit risk forfrom our investing activities and derivative financial assets, we conduct all our activities only with approved major financial institutions and issuers that carry high external ratings, as required by our internal treasury guideline. Among its stipulations, the guideline requires that we invest only in assets from issuers with a minimum rating of at least A–.We“BBB flat”. We only make investments atin issuers with a lower rating in exceptional cases. However, suchSuch investments were not material in 2011.2014. The
weighted average rating of our financial assets is in the range AA+ to A-.A. We pursue a policy of cautious investments characterized by predominantly current investments, standard investment instruments, as well as a wide portfolio diversification by doing business with a variety of counterparties.
To further reduce our credit risk, we require collateral for certain investments in the full amount of the investment volume which we would be allowed to make use of in the case of default of the counterparty to the investment. As such collateral, we only accept bonds of non-financial corporations with at least investment grade rating level.
In addition, the concentration of credit risk that exists when counterparties are involved in similar activities by instrument, sector, or geographic area is further mitigated by diversification of counterparties throughout the world and adherence to an internal limit system for each counterparty. This internal limit system stipulates that the business volume with individual counterparties is restricted to a defined limit, which depends on the lowest official long-term credit rating available by at least one of the major rating agencies, the Tier 1 capital of the respective financial institution, or participation in the German Depositors’ Guarantee Fund or similar protection schemes. We continuously monitor strict compliance with these counterparty limits. As the premium for credit default swaps mainly depends on the market participants’ assessments of the
creditworthiness of a debtor, we also closely observe the development of CDScredit default swap spreads in the market to evaluate probable risk developments to timely react to changes if these should manifest.
The default risk of our trade receivables is managed separately, mainly based on assessing the creditworthiness of customers through external ratings and our historical experience with respective customers, and it is partially covered by merchandise credit insurance.
customers. Outstanding receivables are continuously monitored locally. Credit risks are accounted for through individual and portfolio allowances (described in detail inFor more information, see Note (3)). The impact of
default on our trade receivables from individual customers is mitigated by our large customer base and its distribution across many different industries, company sizes, and countries worldwide. For furthermore information about our trade receivables, see Note (14). For information about the maximum exposure to credit risk, see Note (25).
Liquidity Risk Management
Our liquidity is managed by our global treasury department with the primary aim of maintaining liquidity at a level that is adequate to meet our financial obligations.
Our primary source of liquidity is funds generated from our business operations, which have historically been the primary source of the liquid funds needed to maintain our investing and financing strategy. The majority of our subsidiaries pool their cash surplus to our global treasury department, which then arranges to fund other subsidiaries’ requirements or invest any net surplus in the market, seeking to optimize yields, while ensuring liquidity, by investing only with counterparties and issuers of high credit quality, as explained above. Hence, high levels of liquid assets and marketable securities provide a strategic reserve, helping keep SAP flexible, sound, and independent.
Apart from effective working capital and cash management, we have reduced the liquidity risk inherent in managing our day-to-day operations and meeting our financing responsibilities by arranging an adequate volume of available credit facilities with various financial institutions on which we can draw if necessary.
In order to retain high financial flexibility, as at December 15, 2010,on November 13, 2013, SAP AGSE entered into a €1.5€2.0 billion syndicated credit facility agreement with an initial term of five years ending in December 2015, effectively replacingplus two one-year extension options. In 2014, the €1.5 billion syndicated revolving creditoriginal term of this facility signed in September 2009.was extended for an additional period
of one year to November 2019. The use of the facility is not restricted by any financial covenants. Borrowings under the facility bear interest of EURIBOR or LIBOR for the respective currency plus a margin of 4522.5 basis points to 75 basis
points, depending on the amount drawn.points. We are also required to pay a commitment fee of 15.757.88 basis points per annum on the unused available credit. As at December 31, 2011, there were no borrowings outstanding under the facility. Furthermore, as at December 15, 2011, SAP AG secured a forward loan in the amount of €200 million bearing fixed interest with the exact borrowing rate determined at the date of drawdown at the applicable EURIBOR plus a margin of 35 basis points per annum.
To partially finance the forecasted acquisition of SuccessFactors, as at December 3, 2011, SAP AG entered into a €1.0 billion syndicated term loan facility agreement with an initial term of one year ending in December 2012, which may be extended by six months. The use of the facility is not restricted by any financial covenants. Borrowings under the facility bear interest of EURIBOR plus a margin of 60 to 85 basis points, dependingWe have never drawn on the point in time during the term when the credit facility is used. We are also required to pay a commitment fee of 12.5 basis points per annum increasing to a maximum of 20 basis points , depending on the amount drawn. As at December 31, 2011, there were no borrowings outstanding under the
facility; however in connection with closing the acquisition of SuccessFactors on February 21, 2012, we drew €1 billion under the facility.
Additionally, as at December 31, 2011,2014, and 2010,2013, SAP AGSE had available lines of credit totaling €490€471 million and €545€487 million, respectively. As at December 31, 2011,2014, and 2010,2013, there were no borrowings outstanding under these lines of credit. As at December 31, 2011,2014, and 2010,2013, certain subsidiaries had lines of credit available that allowed them to borrow in local currencies at prevailing interest rates up to €54 million and €60€36 million, respectively. Total aggregate borrowingsBorrowings outstanding under these lines of credit were immaterialfacilities as at December 31, 2011,2014 were immaterial, and 2010.there were no borrowings from any of our foreign subsidiaries as at December 31, 2013.
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Fair Value of Financial Instruments
We use various types of financial instrumentsinstrument in the ordinary course of business, which are grouped into the following categories: loans and receivables (L&R), available-for-sale (AFS), held-for-trading (HFT), and amortized cost (AC). For those financial instruments measured at fair value or for which fair value must be disclosed, we have categorized the financial instruments into a three-level fair value hierarchy depending on the inputs used to determine fair value and their significance for the valuation techniques. Where financial assets and liabilities are shown as measured at fair value, this is done on a recurring basis.
The table below shows the carrying amounts and fair values of financial assets and liabilities by category of financial instrument as well as by category of IAS 39. Since the line items “Trade receivables,” “Trade payables” and “Other financial assets” contain both financial and non-financial assets or liabilities (such as other taxes or advance payments), the non-financial assets or liabilities are shown in the column headed “Not in scope of IFRS 7” to allow a reconciliation to the corresponding line items in the Consolidated Statements of Financial Position. The carrying amounts and fair values of our financial instruments as at December 31 were as follows:
Fair Values of Financial Instruments
€ millions | 2011 | 2010 | ||||||||||||||||||||||||||||||||||||||||||||||||
Book Value 12/31 | Measurement Categories | Fair Value 12/31 | Not in Scope of IFRS 7 | Book Value 12/31 | Measurement Categories | Fair Value 12/31 | Not in Scope of IFRS 7 | |||||||||||||||||||||||||||||||||||||||||||
Category | At Amortized Cost | At Cost | At Fair Value | At Amortized Cost | At Cost | At Fair Value | ||||||||||||||||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | L&R | 4,965 | 4,965 | 4,965 | 3,518 | 3,518 | 3,518 | |||||||||||||||||||||||||||||||||||||||||||
Trade receivables | L&R | 3,577 | 3,431 | 3,431 | 145 | 3,177 | 3,031 | 3,031 | 146 | |||||||||||||||||||||||||||||||||||||||||
Other financial assets | 1,355 | 633 | ||||||||||||||||||||||||||||||||||||||||||||||||
Debt securities | L&R/AFS | 400 | 400 | |||||||||||||||||||||||||||||||||||||||||||||||
Equity securities | AFS | 122 | 39 | 39 | 47 | 79 | 28 | 28 | 40 | |||||||||||||||||||||||||||||||||||||||||
Other nonderivative financial assets | L&R | 396 | 396 | 186 | 188 | 188 | 182 | |||||||||||||||||||||||||||||||||||||||||||
Derivative assets | ||||||||||||||||||||||||||||||||||||||||||||||||||
with hedging relationship | — | 4 | 4 | 3 | 3 | |||||||||||||||||||||||||||||||||||||||||||||
without hedging relationship | HFT | 161 | 161 | 113 | 113 | |||||||||||||||||||||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||
Trade payables | AC | –980 | –727 | –727 | –253 | –952 | –699 | –699 | –253 | |||||||||||||||||||||||||||||||||||||||||
Financial liabilities | –4,256 | –4,591 | ||||||||||||||||||||||||||||||||||||||||||||||||
Nonderivative financial liabilities | AC | –4,034 | –4,107 | –4,445 | –4,463 | |||||||||||||||||||||||||||||||||||||||||||||
Derivatives | ||||||||||||||||||||||||||||||||||||||||||||||||||
with hedging relationship | — | –43 | –43 | –37 | –37 | |||||||||||||||||||||||||||||||||||||||||||||
without hedging relationship | HFT | –179 | –179 | –109 | –109 | |||||||||||||||||||||||||||||||||||||||||||||
Total financial instruments | 4,661 | 4,031 | 122 | 382 | 4,340 | 125 | 1,785 | 1,593 | 79 | –2 | 1,573 | 115 | ||||||||||||||||||||||||||||||||||||||
Aggregation according to IAS 39 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Financial assets | ||||||||||||||||||||||||||||||||||||||||||||||||||
at fair value through profit or loss | HFT | 161 | 161 | 161 | 113 | 113 | 113 | |||||||||||||||||||||||||||||||||||||||||||
available-for-sale | AFS | 561 | 122 | 439 | 439 | 107 | 79 | 28 | 28 | |||||||||||||||||||||||||||||||||||||||||
loans and receivables | L&R | 8,937 | 8,792 | 8,792 | 145 | 6,883 | 6,737 | 6,737 | 146 |
Financial liabilities at fair value through profit or loss at amortized cost Out of IAS 39 Financial instruments related to employee benefit plans Investment in associates Derivatives with hedging relationship Total financial instruments 2011 2010 Book
Value
12/31 Measurement
Categories Fair
Value
12/31 Not in
Scope
of
IFRS 7 Book
Value
12/31 Measurement
Categories Fair
Value
12/31 Not in
Scope
of
IFRS 7 € millions Category At
Amortized
Cost At
Cost At
Fair
Value At
Amortized
Cost At
Cost At
Fair
Value HFT –179 –179 –179 –109 –109 –109 AC –5,014 –4,761 –4,834 –253 –5,397 –5,144 –5,162 –253 186 186 182 182 47 47 40 40 –39 –39 –39 –34 –34 –34 4,660 4,031 122 382 4,340 125 1,785 1,593 79 –2 1,573 115
Determination of Fair Values
IAS 39 defines fair value asand the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. Accordingly, best evidence of fair value provides quoted prices in an active market. Where market prices are not readily available, valuation techniques haveallocation to be used to establish fair value. We have classified our financial instruments into those that are measured at fair value and those that are measured at cost or amortized cost.
Financial Instruments Measured at Fair Value
Depending on the inputs used for determining fair value, we have categorized our financial instruments at fair value into a three-level fair value hierarchy as mandated by IFRS 7.13 as at December 31.
The fair value hierarchy givesFair Values of Financial Instruments and Classification Within the highest priorityFair Value Hierarchy
2014 | ||||||||||||||||||||||||||||||
Carrying Amount | Measurement Categories | Fair Value | ||||||||||||||||||||||||||||
€ millions | Category | At Amortized Cost | At Fair Value | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||
Cash and cash equivalents1 | L&R | 3,328 | 3,328 | |||||||||||||||||||||||||||
Trade and other receivables | 4,430 | |||||||||||||||||||||||||||||
Trade receivables1 | L&R | 4,242 | 4,242 | |||||||||||||||||||||||||||
Other receivables2 | – | 188 | ||||||||||||||||||||||||||||
Other financial assets | 1,699 | |||||||||||||||||||||||||||||
Available-for-sale financial assets | ||||||||||||||||||||||||||||||
Debt investments | AFS | 40 | 40 | 40 | 40 | |||||||||||||||||||||||||
Equity investments | AFS | 597 | 597 | 108 | 101 | 388 | 597 | |||||||||||||||||||||||
Investments in associates2 | – | 49 | ||||||||||||||||||||||||||||
Loans and other financial receivables | ||||||||||||||||||||||||||||||
Financial instruments related to employee benefit plans2 | – | 136 | ||||||||||||||||||||||||||||
Other loans and other financial receivables | L&R | 324 | 324 | 324 | 324 | |||||||||||||||||||||||||
Derivative assets | ||||||||||||||||||||||||||||||
Designated as hedging instrument | ||||||||||||||||||||||||||||||
FX forward contracts | – | 10 | 10 | 10 | 10 | |||||||||||||||||||||||||
Interest rate swaps | – | 77 | 77 | 77 | 77 | |||||||||||||||||||||||||
Not designated as hedging instrument | ||||||||||||||||||||||||||||||
FX forward contracts | HFT | 411 | 411 | 411 | 411 | |||||||||||||||||||||||||
Call options for share-based payments | HFT | 43 | 43 | 43 | 43 | |||||||||||||||||||||||||
Call option on equity shares | HFT | 13 | 13 | 13 | 13 | |||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||
Trade and other payables | –1,061 | |||||||||||||||||||||||||||||
Trade payables1 | AC | –756 | –756 | |||||||||||||||||||||||||||
Other payables2 | – | –305 | ||||||||||||||||||||||||||||
Financial liabilities | –11,542 | |||||||||||||||||||||||||||||
Non-derivative financial liabilities | ||||||||||||||||||||||||||||||
Loans | AC | –4,261 | –4,261 | –4,261 | –4,261 | |||||||||||||||||||||||||
Bonds | AC | –4,628 | –4,628 | –4,810 | –4,810 | |||||||||||||||||||||||||
Private placements | AC | –2,195 | –2,195 | –2,301 | –2,301 | |||||||||||||||||||||||||
Other non-derivative financial liabilities | AC | –124 | –124 | –124 | –124 | |||||||||||||||||||||||||
Derivatives | ||||||||||||||||||||||||||||||
Designated as hedging instrument | ||||||||||||||||||||||||||||||
FX forward contracts | – | –22 | –22 | –22 | –22 | |||||||||||||||||||||||||
Interest rate swaps | – | –1 | –1 | –1 | –1 | |||||||||||||||||||||||||
Not designated as hedging instrument | ||||||||||||||||||||||||||||||
FX forward contracts | HFT | –310 | –310 | –310 | –310 | |||||||||||||||||||||||||
Total financial instruments, net | –3,146 | –4,072 | 858 | –4,662 | –6,054 | 400 | –10,315 |
Assets Cash and cash equivalents1 Trade and other receivables Trade receivables1 Other receivables2 Other financial assets Available-for-sale financial assets Debt investments Equity investments Investments in associates2 Loans and other financial receivables Financial instruments related to employee benefit plans2 Other loans and other financial receivables Derivative assets Designated as hedging instrument FX forward contracts Interest rate swaps Not designated as hedging instrument FX forward contracts Call options for share-based payments Call option on equity shares Liabilities Trade and other payables Trade payables1 Other payables2 Financial liabilities Non-derivative financial liabilities Bonds Private placements Other non-derivative financial liabilities Derivatives Designated as hedging instrument FX forward contracts Interest rate swaps Not designated as hedging instrument FX forward contracts Total financial instruments, net 2013 Carrying
Amount Measurement
Categories Fair Value € millions Category At Amortized
Cost At Fair
Value Level 1 Level 2 Level 3 Total L&R 2,748 2,748 3,963 L&R 3,816 3,816 – 147 858 AFS 38 38 38 38 AFS 322 322 52 31 239 322 – 36 – 119 L&R 214 214 214 214 – 30 30 30 30 – 5 5 5 5 HFT 26 26 26 26 HFT 58 58 58 58 HFT 10 10 10 10 –895 AC –640 –640 – –255 –4,506 AC –2,291 –2,291 –2,340 –2,340 AC –1,977 –1,977 –2,031 –2,031 AC –68 –68 –68 –68 – –3 –3 –3 –3 – –23 –23 –23 –23 HFT –144 –144 –144 –144 2,168 1,802 319 –2,250 –1,905 249 –3,906
1 | We do not disclose the fair value for cash and cash equivalents, trade receivables, and accounts payable as their carrying amounts are a reasonable approximation of their fair values. |
2 | Since the line items trade receivables, trade payables, and other financial assets contain both financial and non-financial assets or liabilities (such as other taxes or advance payments), the carrying amounts of non-financial assets or liabilities are shown to allow a reconciliation to the corresponding line items in the Consolidated Statements of Financial Position. |
Fair Values of Financial Instruments Classified According IAS 39
€ millions | 2014 | |||||||||||||||||
Carrying Amount | At Amortized Cost | At Fair Value | Out of scope of IFRS 7 | |||||||||||||||
Financial assets | ||||||||||||||||||
At fair value through profit or loss | HFT | 467 | 467 | |||||||||||||||
Available-for-sale | AFS | 637 | 637 | |||||||||||||||
Loans and receivables | L&R | 7,893 | 7,893 | |||||||||||||||
Financial liabilities | ||||||||||||||||||
At fair value through profit or loss | HFT | –310 | –310 | |||||||||||||||
At amortized cost | AC | –11,965 | –11,965 | |||||||||||||||
Outside scope of IAS 39 | ||||||||||||||||||
Financial instruments related to employee benefit plans | 136 | 136 | ||||||||||||||||
Investments in associates | 49 | 49 | ||||||||||||||||
Other receivables | 188 | 188 | ||||||||||||||||
Other payables | –305 | –305 | ||||||||||||||||
Derivatives designated as hedging instrument | 64 | 64 | ||||||||||||||||
Total financial instruments, net | –3,146 | –4,072 | 858 | 68 |
2013 | ||||||||||||||||||
€ millions | Carrying Amount | At Amortized Cost | At Fair Value | Out of scope of IFRS 7 | ||||||||||||||
Financial assets | ||||||||||||||||||
At fair value through profit or loss | HFT | 94 | 94 | |||||||||||||||
Available-for-sale | AFS | 360 | 360 | |||||||||||||||
Loans and receivables | L&R | 6,778 | 6,778 | |||||||||||||||
Financial liabilities | ||||||||||||||||||
At fair value through profit or loss | HFT | –144 | –144 | |||||||||||||||
At amortized cost | AC | –4,976 | –4,976 | |||||||||||||||
Outside scope of IAS 39 | ||||||||||||||||||
Financial instruments related to employee benefit plans | 119 | 119 | ||||||||||||||||
Investments in associates | 36 | 36 | ||||||||||||||||
Other receivables | 147 | 147 | ||||||||||||||||
Other payables | –255 | –255 | ||||||||||||||||
Derivatives designated as hedging instrument | 9 | 9 | ||||||||||||||||
Total financial instruments, net | 2,168 | 1,802 | 319 | 47 |
Determination of Fair Values
It is our policy to quoted prices in active markets for identical assets or liabilities (Level 1) andrecognize transfers between the
lowest priority to unobservable inputs (Level 3). The inputs used to measure fair value for one single instrument may fall into different levels of the fair value hierarchy. In such cases,hierarchy at the levelbeginning of the period of the event or change in circumstances that caused the transfer. A description of the valuation techniques and the inputs used in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
The levels of the fair value hierarchy, its application to our financial assets and liabilities, and the respective determination of fair value are describedgiven below:
Financial Instruments Measured at Fair Value on a Recurring Basis
Level 1: Quoted prices in active markets for identical assets or liabilities.
Available-for-sale debt and equity investments: The fair values of these marketable securities are based on quoted market prices as at December 31.
Level 2: Inputs other than those that can be observed, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Derivative financial instruments: The fair value of foreign exchange forward contracts is based on discounting the expected future cash flows over the respective remaining term of the contracts using the respective deposit interest rates and spot rates. The fair value of our foreign currency options is calculated taking into account current spot rates and strike prices, the volatility of the respective currencies, the remaining term of the options as well as market interest rates. The fair value of the derivatives entered into to hedge our share-based compensation programs are
Type | Fair Value Hierarchy | Determination of Fair Value/ Valuation Technique | Significant Unobservable Inputs | Interrelationship Between Significant Unobservable Inputs and Fair Value Measurement | ||||
Other financial assets | ||||||||
Debt investments | Level 1 | Quoted prices in an active market | NA | NA | ||||
Listed equity investments | Level 1 | Quoted prices in an active market | NA | NA | ||||
Level 2 | Quoted prices in an active market deducting a discount for the disposal restriction derived from the premium for a respective put option. | NA | NA | |||||
Unlisted equity investments | Level 3 | Market approach. Comparable company valuation using revenue multiples derived from companies comparable to the investee. |
• Revenues of investees • Discounts for lack of marketability (20%) | The estimated fair value would increase (decrease) if: • The revenue multiples were higher (lower) • The investees’ revenues were higher (lower) • The liquidity discounts were lower (higher). | ||||
Market approach. Venture capital method evaluating a variety of quantitative and qualitative factors like actual and forecasted results, cash position, recent or planned transactions, and market comparable companies. | NA | NA | ||||||
Last financing round valuations | NA | NA | ||||||
Liquidation preferences | NA | NA | ||||||
Net asset value/ Fair market value as reported by the respective funds | NA | NA | ||||||
Call options for share-based payments plans | Level 2 | Monte-Carlo Model. Calculated considering risk-free interest rates, the remaining term of the derivatives, the dividend yields, the stock price, and the volatility of our share. | NA | NA | ||||
Call option on equity shares | Level 3 | Market approach. Company valuation using EBITDA multiples based on actual results derived from the investee. | • EBITDA multiples used • EBITDA of the investee | The estimated fair value would increase (decrease) if: • The EBITDA multiples were higher (lower) • The investees’ EBITDA were higher (lower) |
Type | Fair Value Hierarchy | Determination of Fair Valuation Technique | Significant Unobservable Inputs | Interrelationship Between Significant Unobservable Inputs and Fair Value Measurement | ||||
Other financial assets/ Financial liabilities | ||||||||
Foreign exchange (FX) forward contracts | Level 2 | Discounted cash flow using Par-Method. Expected future cash flows | NA | NA | ||||
Interest rate swaps | Level 2 | Discounted cash flow. Expected future cash flows are estimated based on forward interest rates from observable yield curves and contract interest rates, discounted at a rate that reflects the credit risk of the counterparty. | NA | NA |
Financial Instruments Not Measured at Fair Value
Type | Fair Value Hierarchy | Determination of Fair Value/Valuation Technique | ||
Financial liabilities | ||||
Fixed rate bonds (financial liabilities) | Level 1 | Quoted prices in an active market | ||
Fixed rate private placements/ loans (financial liabilities) | Level 2 | Discounted cash flows. Future cash outflows for fixed interest and principal are discounted over the term of the respective contracts using the market interest rates as |
Available-for-sale equity investments in public companies: Certain of our equity investments in public companies were restricted from being sold for a limited period. Therefore, fair value is determined based on quoted market prices as at December 31, deducting a discount for the disposal restriction based on the premium for a respective put option.
Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The following table allocates those financial assets and liabilities that are measured at fair value in accordance with IAS 39 either through profit or loss or other comprehensive income as at December 31, 2011, to the three levels of the fair value hierarchy according to IFRS 7.
Classification of Financial Instruments
2011 | 2010 | |||||||||||||||||||||||||||||||
€ millions | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||
Financial assets | ||||||||||||||||||||||||||||||||
Debt investments | 400 | 0 | 0 | 400 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||
Equity investments | 18 | 21 | 0 | 39 | 1 | 27 | 0 | 28 | ||||||||||||||||||||||||
Available-for-sale financial assets | 418 | 21 | 0 | 439 | 1 | 27 | 0 | 28 | ||||||||||||||||||||||||
Derivative financial assets | 0 | 165 | 0 | 165 | 0 | 116 | 0 | 116 | ||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
Total | 418 | 186 | 0 | 604 | 1 | 143 | 0 | 144 | ||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
Financial liabilities | ||||||||||||||||||||||||||||||||
Derivative financial liabilities | 0 | 222 | 0 | 222 | 0 | 146 | 0 | 146 | ||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
Total | 0 | 222 | 0 | 222 | 0 | 146 | 0 | 146 | ||||||||||||||||||||||||
|
Financial Instruments Measured at Cost/at Amortized Cost
The fair values of these financial instruments are determined as follows:
Cash and cash equivalents, trade receivables,For other non-derivative financial assets: Because theassets/liabilities and variable rate financial assets are primarily short-term,debt, it is assumed that their carrying values approximatevalue reasonably approximates their fair values. Non-interest-bearing or below market-rate non-current loans
Transfers Between Levels 1 and 2
Transfers of available-for-sale equity investments from Level 2 to third parties or employees are discountedLevel 1 which occurred because disposal restrictions lapsed and deducting a discount for such restriction was no longer necessary were not material in all years presented, while transfers from Level 1 to Level 2 did not occur at all.
Level 3 Disclosures
The following table shows the reconciliation from the opening to the present valueclosing balances for our unlisted equity investments and call options on equity shares classified as Level 3 fair values:
Reconciliation of estimated future cash flows using the original effective interest rate the respective borrower would have to pay to a bank for a similar loan.Level 3 Fair Values
€ millions | 2014 | 2013 | ||||||
January 1, | 239 | 0 | ||||||
Transfers | ||||||||
into Level 3 | 0 | 162 | ||||||
out of Level 3 | –29 | –30 | ||||||
Purchases | 141 | 79 | ||||||
Sales | –36 | –16 | ||||||
Gains/losses | ||||||||
included in financial income, net in profit and loss | 27 | 7 | ||||||
included in available-for-sale financial assets in other comprehensive income | 21 | 46 | ||||||
included in exchange differences in other comprehensive income | 37 | –9 | ||||||
December 31, | 400 | 239 |
Available-for-sale equity investments in private companies: For these investments in equity instruments primarily consisting of venture capital investments, fair values cannot readily be observed as they doChanging the unobservable inputs to reflect reasonably possible alternative assumptions would not have a quoted market price in an active market. Also, calculatingmaterial impact on the fair value by discounting estimated future cash flows is not possiblevalues of our unlisted equity investments held as a determinationavailable-for-sale as of cash flows is not reliable. Therefore, such investments are accounted for at cost approximating fair value, with impairment being assessed based on revenue multiples of similar companies and review of each investment’s cash position, financing needs, earnings and revenue outlook, operational performance, management and ownership changes, and competition.the reporting date.
Accounts payable and non-derivative financial liabilities: Non-derivative financial liabilities include financial debt and other non-derivative financial liabilities. Accounts payable and other
|
(28) |
SAP has granted awards under various cash-settled and equity-settled share-based payment planspayments to its directors and employees. Most of these awards are described in detail below. SAP has other share-based payment plans, none ofpayments, which are, individually orand in the aggregate, are materialimmaterial to theour Consolidated Financial Statements.
a) | Cash-Settled Share-Based |
SAP’s stock appreciation rights are cash-settled share-based payment plans andpayments include the following programs, which are described in detail below: Virtual Stock Optionprograms: Employee Participation Plan (SOP 2007 (2007/2008 tranche)), SOP Performance(EPP) and Long-Term Incentive Plan 2009 (SOP PP), Virtual(LTI Plan for the Global Managing Board) 2015, Stock Option Plan 2010 (SOP 2010 (2010/2011 tranche)(2010–2014 tranches)), and BORestricted Stock Unit Plan (RSU (2013–2014 tranches)), acquired SFSF Rights (former Business ObjectsSuccessFactors awards assumed in connection with the Business ObjectsSuccessFactors acquisition in 2008). SAP purchased various call options to hedge part of2012), acquired Ariba Rights (former Ariba awards assumed in connection with the anticipated cash flow exposure relating to its share-based payment plans. The call options have been structured to replicate the payouts required, if any, under the terms of the rights. Through the hedging program, the changeAriba acquisition in fair value of the call options offsets the compensation expense on the options recognized.2012).
The following parameters and assumptions were used for the computation of the fair value at grant date:
Fair Value and Parameters at Grant Date by Cash-Settled Plan
2011 | 2010 | 2009 | ||||||||||
Plan | SOP 2010 2011 Tranche | SOP 2010 2010 Tranche | SOP PP | |||||||||
Grant date | 6/9/2011 | 9/9/2010 | 5/6/2009 | |||||||||
Weighted average fair value | €8.24 | €6.46 | €5.62 | |||||||||
Expected life in years | 5.8 | 5.8 | 4.6 | |||||||||
Risk-free interest rate (depending on maturity) | 2.64 | % | 1.63 | % | 2.39 | % | ||||||
Grant price of SAP share | €42.03 | €35.48 | €28.00 | |||||||||
Price of SAP share | €41.73 | €35.45 | €28.23 | |||||||||
Expected volatility of SAP shares | 27.1 | % | 26.9 | % | 35.0 | % | ||||||
Expected dividend yield of SAP shares | 1.66 | % | 1.65 | % | 1.76 | % | ||||||
Grant price of reference index | n. a. | n. a. | €97.54 | |||||||||
Share price of reference index | n. a. | n. a. | €108.82 | |||||||||
Expected volatility of reference index | n. a. | n. a. | 25.2 | % | ||||||||
Expected dividend yield of reference index | n. a. | n. a. | 1.06 | % | ||||||||
Expected correlation SAP share/reference index | n. a. | n. a. | 36.5 | % |
As at December 31, 2011,2014, the valuation of our outstanding cash-settled plans was based on the following parameters and assumptions:
Fair Value and Parameters Used at Year EndYear-End 2014 for Cash-Settled Plans
SOP 2007 (2007/2008 Tranche) | SOP PP | SOP 2010 (2010/2011 Tranche) | BO Rights | |||||||||||||
Option pricing model used | Binomial | Monte-Carlo | Monte-Carlo | Binomial | ||||||||||||
Range of grant dates | | 3/21/2007 4/3/2008 | | 5/6/2009 | | 9/9/2010 6/9/2011 | | | 2/10/1998 1/21/2008 | | ||||||
Quantity of awards issued in thousands | 15,664 | 10,321 | 10,589 | 5,162 | ||||||||||||
Weighted average fair value as at Dec 31, 2011 | €5.20 | €3.12 | €7.84 | €27.41 | ||||||||||||
Weighted average intrinsic value as at Dec 31, 2011 | €3.82 | 0 | €0.80 | €22.90 | ||||||||||||
Expected life as at Dec 31, 2011 in years | 0.8 | 2.2 | 4.9 | 1.3 | ||||||||||||
Risk-free interest rate (depending on maturity) | 0.00% | 0.18% | 0.70% to 1.20% | 0.30% | ||||||||||||
Expected volatility SAP shares | 25.5% to 27.1% | 28.6% | 27.4% to 29.1% | 32.0% | ||||||||||||
Expected dividend yield SAP shares | 1.70% | 1.70% | 1.70% | 1.70% | ||||||||||||
Share price of reference index | n. a. | 173.06 | n. a. | n. a. | ||||||||||||
Expected volatility reference index | n. a. | 18.0% | n. a. | n. a. | ||||||||||||
Expected dividend yield reference index | n. a. | 1.11% | n. a. | n. a. | ||||||||||||
Expected correlation SAP share/reference index | n. a. | 40.4% | n. a. | n. a. |
LTI Plan (2012 – 2014 | EPP 2015 (2014 tranche) | SOP 2010 (2010 – 2014 | RSU (2013 – 2014 | SFSF Rights | Ariba Rights | |||||||||||||||||||
Weighted average fair value as | € | 56.40 | € | 58.26 | €10.17 | €54.09 | € | 32.95 | € | 37.06 | ||||||||||||||
Information how fair value was measured at measurement date | ||||||||||||||||||||||||
Option pricing model used | Other | 1) | Other | 1) | Monte-Carlo | Other | 1) | NA | NA | |||||||||||||||
Share price | €58.26 | €57.37 | NA | NA | ||||||||||||||||||||
Risk-free interest rate (depending on maturity) | –0.1 | % | NA | | –0.1% to 0.02% | | | –0.1% to –0.01% | | NA | NA | |||||||||||||
Expected volatility | NA | NA | | 19.9% to 23.4% | | NA | NA | NA | ||||||||||||||||
Expected dividend yield | 1.74 | % | NA | 1.74% | 1.76% | NA | NA | |||||||||||||||||
Weighted average remaining life of options outstanding as at December 31, 2014 (in years) | 1.8 |
| 0.1 |
| 3.5 | 1.1 | 0.5 | 0.8 |
1) | For these awards the fair value is calculated by subtracting the net present value of expected future dividend payments, if any, until maturity of the respective award from the prevailing share price as of the valuation date. |
As at December 31, 2013, the valuation of our outstanding cash-settled plans was based on the following parameters and assumptions:
Fair Value and Parameters Used at Year-End 2013 for Cash-Settled Plans
LTI Plan 2015 (2012/2013 tranches) | EPP 2015 (2013 tranche) | SOP 2010 (2010 – 2013 | RSU (2013 tranche) | SFSF Rights | Ariba Rights | |||||||||||||||||||
Weighted average fair value as at December 31, 2013 | €59.80 | € | 62.31 | €15.71 | €61.55 | € | 29.00 | € | 32.63 | |||||||||||||||
Information how fair value was measured at measurement date | ||||||||||||||||||||||||
Option pricing model used | Other1) | Other1) | Monte-Carlo | Other1) | NA | NA | ||||||||||||||||||
Share price | €62.31 | €63.19 | NA | NA | ||||||||||||||||||||
Risk-free interest rate (depending on maturity) | | 0.26% to 0.46% | | NA | | 0.08% to 0.92% | | | 0.01% to 0.44% | | NA | NA | ||||||||||||
Expected volatility | NA | NA | | 21.3% to 27.6% | | NA | NA | NA | ||||||||||||||||
Expected dividend yield | 1.67% | NA | 1.67% | 1.65% | NA | NA | ||||||||||||||||||
Weighted average remaining life of options outstanding as at December 31, 2013 (in years) | 2.4 | 0.1 | 3.3 | 1.2 | 0.8 | 0.7 |
1) | For these awards the fair value is calculated by subtracting the net present value of expected future dividend payments, if any, until maturity of the respective award from the prevailing share price as of the valuation date. |
Expected volatility of the SAP share price is based on a mixtureblend of implied volatility from traded options with corresponding lifetimes and exercise prices as well as historical volatility with the same expected life as the options granted. For the SOP PP valuation, the expected volatility of the Tech Peer Group Index (ISIN DE000A0YKR94) (TechPGI) is based on the
historical volatility derived from the index price history.
Expected remaining life of the options reflects both the contractual term and the expected, or historical, exercise behavior. The risk-free interest rate is derived from German government bonds with a similar duration. Dividend yield is based on expectations of future dividends.
The number of awards under our cash-settled plans developed as follows in the years ended December 31, 2011, 2010,2014, and 2009:2013:
Changes in Numbers of Outstanding Awards under ourUnder Our Cash-Settled Plans
(000) | SOP 2007 (2007/2008 | SOP PP | SOP 2010 (2010/2011 | BO Rights | ||||||||||||
Outstanding as at 12/31/2008 | 14,486 | N/A | N/A | 2,963 | ||||||||||||
Granted in 2009 | 0 | 10,321 | N/A | 0 | ||||||||||||
Exercised/paid in 2009 | 0 | 0 | N/A | –704 | ||||||||||||
Expired in 2009 | 0 | 0 | N/A | 0 | ||||||||||||
| ||||||||||||||||
Forfeited in 2009 | –998 | –243 | N/A | –372 | ||||||||||||
| ||||||||||||||||
Outstanding as at 12/31/2009 | 13,488 | 10,078 | N/A | 1,887 | ||||||||||||
Granted in 2010 | 0 | 0 | 5,397 | 0 | ||||||||||||
Exercised/paid in 2010 | –167 | 0 | 0 | –571 | ||||||||||||
Expired in 2010 | 0 | 0 | 0 | 0 | ||||||||||||
Forfeited in 2010 | –323 | –503 | –24 | –216 | ||||||||||||
| ||||||||||||||||
Outstanding as at 12/31/2010 | 12,998 | 9,575 | 5,373 | 1,100 | ||||||||||||
| ||||||||||||||||
Granted in 2011 | 0 | 0 | 5,192 | 0 | ||||||||||||
Exercised/paid in 2011 | –8,172 | 0 | 0 | –432 | ||||||||||||
Expired in 2011 | 0 | 0 | 0 | 0 | ||||||||||||
Forfeited in 2011 | –832 | –632 | –515 | –130 | ||||||||||||
| ||||||||||||||||
Outstanding as at 12/31/2011 | 3,994 | 8,943 | 10,050 | 538 | ||||||||||||
| ||||||||||||||||
Additional information | ||||||||||||||||
Awards exercisable as at 12/31/2009 | 5,965 | 0 | N/A | 1,390 | ||||||||||||
Awards exercisable as at 12/31/2010 | 12,998 | 0 | 0 | 1,060 | ||||||||||||
| ||||||||||||||||
Awards exercisable as at 12/31/2011 | 3,994 | 8,943 | 0 | 538 | ||||||||||||
| ||||||||||||||||
Aggregate intrinsic value of vested awards in € million, as at 12/31/2009 | 0 | 0 | N/A | 19 | ||||||||||||
Aggregate intrinsic value of vested awards in € million, as at12/31/2010 | 15 | 0 | 0 | 22 | ||||||||||||
| ||||||||||||||||
Aggregate intrinsic value of vested awards in € million, as at 12/31/2011 | 15 | 0 | 0 | 10 | ||||||||||||
| ||||||||||||||||
Weighted average exercise price in € | 37.03 | 47.58 | 42.88 | 21.29 | ||||||||||||
Provision as at 12/31/2009 in € millions | 53 | 14 | N/A | 29 | ||||||||||||
Provision as at 12/31/2010 in € millions | 59 | 36 | 4 | 24 | ||||||||||||
| ||||||||||||||||
Provision as at 12/31/2011 in € millions | 20 | 28 | 27 | 17 | ||||||||||||
| ||||||||||||||||
Expense recognized in 2009 in € millions | 20 | 5 | N/A | 6 | ||||||||||||
Expense recognized in 2010 in € millions | 0 | 21 | 4 | 6 | ||||||||||||
| ||||||||||||||||
Expense recognized in 2011 in € millions | –4 | –8 | 28 | 5 | ||||||||||||
|
thousands | LTI Plan 2015 (2012 – 2014 tranches) | EPP 2015 (2012 – 2014 | RSU (2013 – 2014 tranches) | SOP 2010 (2010 – 2014 | SFSF Rights | Ariba Rights | ||||||||||||||||||
Outstanding as at 12/31/2012 | 466 | 3,502 | NA | 17,427 | 2,403 | 2,360 | ||||||||||||||||||
Granted in 2013 | 311 | 2,087 | 1,559 | 7,421 | NA | NA | ||||||||||||||||||
Adjustment based upon KPI target achievement in 2013 | –18 | –139 | 0 | NA | NA | NA | ||||||||||||||||||
Exercised in 2013 | –196 | –3,502 | 0 | –2,215 | –797 | –1,362 | ||||||||||||||||||
Forfeited in 2013 | –48 | –103 | –96 | –967 | –531 | –90 | ||||||||||||||||||
Outstanding as at 12/31/2013 | 515 | 1,845 | 1,463 | 21,666 | 1,075 | 908 | ||||||||||||||||||
Granted in 2014 | 242 | 2,177 | 1,256 | 8,965 | NA | NA | ||||||||||||||||||
Adjustment based upon KPI target achievement in 2014 | –41 | –458 | –88 | NA | NA | NA | ||||||||||||||||||
Exercised in 2014 | –70 | –1,845 | –738 | –2,730 | –520 | –737 | ||||||||||||||||||
Forfeited in 2014 | –55 | –104 | –301 | –1,619 | –224 | –45 | ||||||||||||||||||
Outstanding as at 12/31/2014 | 591 | 1,615 | 1,592 | 26,282 | 331 | 126 | ||||||||||||||||||
Outstanding awards exercisable as at | ||||||||||||||||||||||||
12/31/2013 | 0 | 0 | 0 | 1,609 | 0 | 0 | ||||||||||||||||||
12/31/2014 | 0 | 0 | 0 | 3,313 | 0 | 0 | ||||||||||||||||||
Total carrying amount (in € millions) of liabilities as at | ||||||||||||||||||||||||
12/31/2013 | 41 | 115 | 32 | 183 | 20 | 24 | ||||||||||||||||||
12/31/2014 | 45 | 94 | 55 | 167 | 8 | 5 | ||||||||||||||||||
Total intrinsic value of vested awards (in € millions) as at | ||||||||||||||||||||||||
12/31/2013 | 43 | 115 | 0 | 37 | 0 | 0 | ||||||||||||||||||
12/31/2014 | 38 | 94 | 0 | 49 | 0 | 0 | ||||||||||||||||||
Weighted average share price (in €) for share options exercised in | ||||||||||||||||||||||||
2013 | 54.96 | 59.90 | NA | 55.47 | 30.12 | 33.89 | ||||||||||||||||||
2014 | 54.96 | 57.48 | 56.62 | 56.65 | 30.10 | 33.86 | ||||||||||||||||||
Total expense (in € millions) recognized in | ||||||||||||||||||||||||
2012 | 53 | 216 | NA | 74 | 38 | 21 | ||||||||||||||||||
2013 | –11 | 118 | 34 | 83 | 10 | 21 | ||||||||||||||||||
2014 | 13 | 82 | 57 | 29 | 1 | 4 |
a.1) | Employee Participation Plan (EPP) and Long-Term Incentive Plan (LTI Plan) 2015 |
a.1) SAP Stock Optionimplemented two new share-based payments in 2012: an Employee Participation Plan 2007 (SOP 2007 (2007/2008 Tranche)(EPP) 2015 for employees and a Long-Term Incentive (LTI) Plan 2015 for members of the Global Managing Board.
The plans are focused on SAP’s share price and the achievement of two financial key performance indicators (KPIs): non-IFRS total revenue and non-IFRS operating profit, which are derived from the Company’s 2015 financial KPIs. Under these plans, virtual shares, called restricted share units (RSUs), are granted to participants. Participants are paid out in cash based on the number of RSUs that vest.
The RSUs were granted and allocated at the beginning of each year through 2015, with EPP 2015 RSUs subject to annual Executive Board approval. Participants in the LTI Plan 2015 have already been granted a budget for the years 2012 to 2015 (2014 to 2015 for new plan participants in 2014). All participants in the LTI Plan 2015 are members of the Global Managing Board.
The RSU allocation process will take place at the beginning of each year based on SAP’s share price after the publication of its preliminary annual results for the last financial year prior to the performance period.
At the end of the given year, the number of RSUs that finally vest with plan participants depends on SAP’s actual performance for the given year, and might be higher or lower than the number of RSUs originally granted. If performance against both KPI targets reaches at least the defined 60% (80% for 2012 and 2013 tranches) threshold, the RSUs vest. Depending on performance, the vesting can reach a maximum of 150% of the budgeted amount. If performance against either or both of those KPI targets does not reach the defined threshold of 60% (80% for 2012 and 2013 tranches), no RSUs vest and RSUs granted for that year will be forfeited. The adjustment to the threshold of those performance indicators was made to reflect our updated expectations due to the accelerated shift to the cloud. For the year 2014, the RSUs granted at the beginning of the year vested with 77.89% (2013: 92.97%) achievement of the KPI targets.
Under the SAP Stock OptionEPP 2015, the RSUs are paid out in the first quarter of the year after the one-year
performance period, whereas the RSUs for members of the Global Managing Board under the LTI Plan 2007,2015 are subject to a three-year-holding period before payout, which occurs starting in 20072016.
The plans include a “look-back” provision, due to the fact that these plans are based on reaching certain KPI targets in 2015. If the overall achievement in 2015 is higher or lower than represented by the number of RSUs vested from 2012 to 2014, the number of RSUs granted in 2015 can increase or decrease accordingly. However, RSUs that were already fully vested in prior years cannot be forfeited. For the EPP, the application of the “look-back”-provision is subject to approval by the Executive Board in 2015.
The final financial effect of each tranche of the EPP 2015 and 2008 we granted top executives and top performers cash-based virtual stock options, the value of which was dependentLTI Plan 2015 will depend on the multi-year performancenumber of the SAP share.
The virtual stock options granted under the SOP give the employees the right to receive a certain amount of money by exercising the options under the termsvested RSUs and conditions of this plan. After a vesting period of two years, the plan provides for 11 predetermined exercise dates every calendar year (one date per month except in April) until the rights lapse five years after the grant date.
The exercise price is 110% of the grant base value, which is derived from the average fair market value of one common share over the 20 business days following the announcement date of the Company’s preliminary results for the preceding fiscal year. The awards granted in 2008 and 2007 have a grant-base value of €32.69 and €35.71, respectively.
Monetary benefits under the SOP are capped at 100% of the exercise price (€39.28 for options granted in 2007, and €35.96 for options granted in 2008).
a.2) SOP Performance Plan 2009 (SOP PP)
Under the SOP Performance Plan 2009, we granted to top executives and top performers cash-based virtual stock options, the value of which depends on the multi-year performance of the SAP share relative to an industry-specific share price index, the TechPGI.
The future payout at the exercise date will be based on the outperformance of the SAP share price, overwhich is set directly after the TechPGI. Exercise is only possible if the SAP share price has outperformed the TechPGI. For that purpose, the SOP PP 2009 agreement defines the initial valueannouncement of the TechPGI (€97.54) as well aspreliminary fourth quarter and full-year results for the SAP initial exercise price (€28.00 per share). After a vestinglast financial year under the EPP 2015 (of the respective three-year holding period of two years,under the plan provides for
12 predetermined exercise dates every calendar year (one date per month) untilLTI Plan 2015), and thus may be significantly above or below the rights lapse five years after the grant date.budgeted amounts.
Monetary benefits are capped at 110% of the exercise price (€30.80).
a.3) SAP Stock Option Plan 2010 (SOP 2010 (2010/2011 Tranche))
a.2) | SAP Stock Option Plan 2010 (SOP 2010 (2010–2014 Tranches)) |
Under the SAP Stock Option Plan 2010, in 2010 and 2011 we granted members of the Senior Leadership Team / Global Executives, SAP’s Top Rewards (employees with an exceptional rating)rating / high potentials) between 2010 and 2014 and only in 2010 and 2011 members of the Executive Board cash-based virtual stock options, the value of which depends on the multi-year performance of the SAP share.
The grant-base value is based on the average fair market value of one commonordinary share over the five business days prior to the Executive Board resolution date.
The virtual stock options granted under the SOP 2010 give the employees the right to receive a certain amount of money by exercising the options under the terms and conditions of this plan. After a three-year vesting period (four years for members of the Executive Board), the plan provides for 11 predetermined exercise dates every calendar year (one date per month except in April) until the rights lapse six years after the grant date (seven years for members of the
Executive Board). Employees can only exercise their virtual stock options providedonly if they are employed by SAP; if they leave the company,Company, they forfeit them. Executive Board members’ options are non-forfeitable once granted —– if the service agreement ends in the grant year, the number of options is reducedpro rata temporis.temporis. Any options not exercised at the end of the respectivetheir term expire.
The exercise price is 110% of the grant base value (115% for members of the Executive Board) which is €39.03 (€40.80) for the 2010 tranche, €46.23 (€48.33) for the 20102011 tranche, €49.28 for the 2012 tranche, €59.85 for the 2013 tranche, and €39.03 (€40.80)€60.96 for the 20112014 tranche.
Monetary benefits will be capped at 100% of the exercise price (150% for members of the Executive Board).
a.3) | Restricted Stock Unit Plan (RSU Plan (2013–2014 tranches)) |
We maintain share-based payment plans that allow for the issuance of restricted stock units (RSU) to retain and motivate executives and certain employees.
Under the RSU Plan, we granted a certain number of RSUs throughout 2013 and 2014 representing a contingent right to receive a cash payment determined by the market value of the same number of SAP SE shares (or SAP SE American Depositary Receipts on the New York Stock Exchange) and the number of RSUs that ultimately vest. Granted RSUs will vest in different tranches, either:
Over a one-to-three year service period only, or
Over a one-to-three year service period and upon meeting certain key performance indicators (KPIs).
The number of RSUs that could vest under the 2014 tranche with performance-based grants was contingent upon a weighted achievement of the following performance milestones for the fiscal year ended December 31, 2014:
Specific indicator of growth in cloud subscriptions and support revenue (50%) and
Cloud subscription and support revenue (50%)
Depending on performance, the number of RSUs vesting could have ranged between 80% and 150% of the number initially granted.
Performance against the KPI targets was 90.27% (2013: 100%) in fiscal year 2014.
a.4) Business Objects
a.4) | SuccessFactors Cash-Settled Awards Replacing Pre-Acquisition SuccessFactors Awards (SFSF Rights) |
In conjunction with the acquisition of SuccessFactors in 2012, under the terms of the acquisition agreement, SAP exchanged unvested Restricted Stock Awards Replacing Pre-Acquisition Business Objects Awards (BO Rights)
Prior to being acquired(RSAs), Restricted Stock Units (RSUs), and Performance Stock Units (PSUs) held by SAP, the employees of Business Objects companies were granted equity-settled awards giving rights to Business Objects shares. Following the Business Objects acquisition in 2008, the Business Objects shares were no longer publicly traded and mechanisms were implemented to allow the employees to cash out their awards either by receiving cash instead of Business Objects shares (cash payment mechanism or CPM) or by receiving Business Objects shares that they subsequently sell to SAP France (liquidity agreement mechanism or LAM). In substance, the implementation of CPM and LAM resulted in a conversion of the equity-settled awards toSuccessFactors for cash-settled share-based payment awards (replacing awards) that replacedof SAP (SFSF Rights).
RSAs, RSUs, and PSUs unvested at the stock optionsclosing of the acquisition were converted into the right to receive, at the originally agreed vesting dates, an amount in cash equal to the number of rights held at the vesting date multiplied by US$40.00 per share.
a.5) | Ariba Cash-Settled Awards Replacing Pre-Acquisition Ariba Awards (Ariba Rights) |
The terms of the acquisition agreement under which SAP acquired Ariba in 2012 required SAP to exchange unvested Restricted Stock Awards (RSAs) and Restricted Stock Units (RSUs) originally granted (replaced awards)held by employees of Ariba for cash-settled share-based payment awards of SAP (Ariba Rights).
The replaced awards had vesting periods inRSAs and RSUs unvested at the range of two to five years, and contractual terms in the range of two to ten years.
The replacing awards closely mirror the termsclosing of the replaced awards (including conditions such as exercise price and vesting) except that:
The replaced awardsacquisition were plannedconverted into the right to be settled by issuing equity instruments whereas the replacing awards are settledreceive an amount in cash either viaequal to the CPM or via the LAM.
The replaced awards were indexed to Business Objects’ share price whereas the replacing awards are indexed to SAP’s share price as follows: SAP’s offering price for Business Objects shares during the tender offer (€42) is divided by SAP AG’s share pricenumber of RSAs and RSUs held at the tender offer closingvesting date (€32.28) and
|
The benefit resulting frommultiplied by US$45.00 per share in accordance with the stock option exercise or the RSUrespective vesting is either paid directly to the employees (in countries where the CPM applies) or the employees continue to receive shares of Business Objects on stock options exercise or RSU vesting (in countries where the LAM applies). In these cases, the employees have a put option to resell the shares to SAP within three months from exercise, while SAP has a call option on these shares.
In both cases, these awards are accounted for as a cash-settled award because the obligation to the employee is ultimately settled in cash, both under the CPM and the LAM mechanism.terms.
b) | Equity-Settled Share-Based |
Equity-settled plans include primarily the Share Matching Plan (SMP).
Under the Share Matching Plan (SMP) implemented in 2010, SAP offers its employees the opportunity to purchase SAP AGSE shares at a discount of 40%. The number of SAP shares an eligible employee may purchase through the SMP
is limited to a percentage of the employee’s annual base salary. After a three-year holding period, such plan participants will receive one (in 2012: five) free matching share of SAP for every three SAP shares acquired.
The terms for the members of the Senior Leadership Team (SLT)/ Global Executives are slightly
different than those for the other employees.
Members of the SLT They do not receive a discount when purchasing the shares. However, after a three-year holding period, members of the SLTthey receive two (in 2012: five) free matching shares of SAP stockshares for every three SAP shares acquired. This plan is not open to members of the SAP Executive Board.
The following table shows the parameters and assumptions used at grant date to determine the fair value of free-matchingfree matching shares, as well as the quantity of shares purchased and free-matchingfree matching shares granted through this program in 20112014, 2013, and 2010:2012:
Fair Value and Parameters at Grant Date for SMP
2011 | 2010 | |||||||
Grant date | 6/8/2011 | 9/8/2010 | ||||||
Share price at grant date | €41.73 | €35.45 | ||||||
Purchase price set by the Executive Board | €44.07 | €35.12 | ||||||
Risk-free interest rate | 1.95% | 0.82% | ||||||
Expected dividend yield of SAP shares | 1.70% | 1.65% | ||||||
Expected life of free-matching shares in years | 3.0 | 3.0 | ||||||
Free-matching share fair value at grant date | €39.69 | €33.71 | ||||||
Number of shares purchased in thousands | 1,334 | 1,591 | ||||||
Number of free-matching shares granted to employees in thousands | 408 | 489 | ||||||
Number of free-matching shares granted to SLT in thousands | 73 | 82 | ||||||
Total free-matching shares granted in thousands | 481 | 571 |
2014 | 2013 | 2012 | ||||||||||
Grant date | 6/4/2014 | 9/4/2013 | 6/6/2012 | |||||||||
Fair value of granted awards | €52.49 | €51.09 | €42.54 | |||||||||
Information how fair value was measured at grant date | ||||||||||||
Option pricing model used | Other1) | |||||||||||
Share price | €55.61 | €54.20 | €45.43 | |||||||||
Risk-free interest rate | 0.13% | 0.43% | 0.12% | |||||||||
Expected dividend yield | 1.87% | 1.92% | 2.13% | |||||||||
Weighted average remaining contractual life of awards outstanding at year-end (in years) | 0.9 | 1.6 | 2.2 | |||||||||
Number of investment shares purchased (in thousands) | 1,550 | 1,559 | 1,926 |
1) | For these awards the fair value is calculated by subtracting the net present value of expected future dividend payments, if any, until maturity of the respective award from the prevailing share price as of the valuation date. |
The number of awards under our SMP developed as follows in the years ended December 31, 2014, and 2013:
Changes in Numbers of Outstanding Awards Under SMP
thousands | SMP | |||
Outstanding as at 12/31/2012 | 4,071 | |||
Granted in 2013 | 573 | |||
Exercised in 2013 | –462 | |||
Forfeited in 2013 | –196 | |||
Outstanding as at 12/31/2013 | 3,986 | |||
Granted in 2014 | 568 | |||
Exercised in 2014 | –432 | |||
Forfeited in 2014 | –187 | |||
Outstanding as at 12/31/2014 | 3,935 |
The following table shows the breakdown of the expense recognized for this program in 20112014, 2013, and 2010 and the unrecognized expense at year end in € millions:2012:
Recognized and Unrecognized Expense at Year EndYear-End for SMP
2011 | 2010 | |||||||
Expense recognized relating to discount | 18 | 21 | ||||||
Expense recognized relating to amortization of free-matching shares | 9 | 2 | ||||||
Additional discount granted under the Share Award Program | 4 | 3 | ||||||
| ||||||||
Total expense relating to SMP | 31 | 26 | ||||||
| ||||||||
Unrecognized expense as at December 31, | 22 | 15 | ||||||
Average remaining vesting period in years as at December 31, | 2.2 | 2.7 |
€ millions, unless otherwise stated | 2014 | 2013 | 2012 | |||||||||
Expense recognized relating to discount | 35 | 32 | 34 | |||||||||
Expense recognized relating to vesting of free matching shares | 54 | 51 | 34 | |||||||||
Total expense relating to SMP | 89 | 83 | 68 |
(29) |
General Information
Our internal reporting system produces reports in which information regarding our business activities areis presented in a variety of ways, for example, by line of business, geography, and areas of responsibility of the individual Executive Board members (Board areas).members. Based on these reports, the
Executive Board, which is responsible for assessing the performance of various company componentsour Company and for making resource allocation decisions as our Chief Operating Decision Maker (CODM), evaluates business activities in a number of different ways. Until
In the secondfirst quarter 2014, we took significant steps to drive forward our strategy and our ambition to become THE Cloud Company powered by SAP HANA. To execute this strategy, we merged areas of the Company that performed similar tasks (for example, the on-premise sales forces with the cloud sales forces, and the on-premise support units with the cloud support units) to achieve a seamless organization of SAP. We run our operations as a single business operation due to the functional organization. Since this integration our cloud-related activities are no longer dealt with by separate components in our Company. There are no parts of our Company that qualify as operating segments under IFRS 8 and our Executive Board assesses the financial performance of our Company on an integrated basis only.
Consequently, with effect from the first quarter of 20102014 SAP has a single operating segment.
Measurement and Presentation
We are in the process of redefining our organizational structure in the light of the Concur acquisition, and we had only threehave not yet finished this work due to the short time since the acquisition. We have not yet finished adapting our management reporting. Concur’s results are not included in
present segment information but are presented in a reconciliation of segment revenue and results to the related number in the consolidated income statements.
Most of our depreciation and amortization expense affecting operating segments, which were organized accordingsegment profit is allocated to our linessingle segment as part of business. Afterbroader infrastructure allocations and is thus not tracked separately on the acquisition of
Sybase in July 2010, we implemented a dedicated Sybase business unit nextoperating segment level. Depreciation and amortization expense that is directly allocated to our existing segments Product, Consulting, and Training. Consequently, a new segment was added to our segment reporting. Although the newsingle operating segment is called Sybase, it is not identical to the acquired Sybase business. Certain activities of the acquired business are integrated and thus reported in our Product, Consulting, and Training segments while certain activities that existed in SAP prior to the Sybase business combination have been transferred to the Sybase segment. In our segment reporting, the revenue is presented according to the sales responsibilities rather than the product being sold. As such, the Sybase segment is able to generate revenue selling SAP products as well as Sybase products, while the revenue shown in the other segments can also be attributable to both SAP and Sybase products, which have been sold by sales personnel of SAP.immaterial.
The Product segment is primarily engaged in marketing and licensing our software products and providing support services for our software products. The Consulting segment performs various professional services, mainly relating to the implementation of our software products. The Training segment provides educational services on the use of our software products and related topics for customers and partners. The Sybase segment derives its revenue from licensing a range of software products, including enterprise and mobile databases, middleware, synchronization, encryption and device management software, from performing support services, professional services, and training services associated with these software products, and from providing mobile messaging services.
Our management reporting system reports our inter-segment services as cost reductions and does not track them as internal revenue. Inter-segment services mainly represent utilization of manpower resources of one segment by another segment on a project-by-project basis. Inter-segment services are charged based on internal cost rates including certain indirect overhead costs but without profit margin.
The accounting policies applied in the internal reporting to our CODMmeasurements of the operating segment’s revenues and results differ from IFRS accounting principles described in Note (3) as follows:
The internal reporting to our CODMmeasurements of the operating segment revenues and results generally attributesattribute revenue to the segment that is responsible forbased on the related transactionnature of the business regardless of revenue classification in our income statement. Thus, for example, the Training segment’s revenue includes certain amounts classified as software revenue in our Consolidated Income Statements. Additionally revenue for Sybase products might be reported under any of the four segments.
The internal reporting to our CODM excludes share-based compensation expenses and—since 2009—restructuring costs atmeasurements of the operating segment level. For all years presented, these expenses were managedrevenues and reviewed at Group level only.
Differences in foreign currency translations result in deviations betweenresults includes the amounts reported internally to our CODM and the amounts reported in the Consolidated Financial Statements.
The revenue numbers in the internal reporting to our CODM include the support revenuerecurring revenues that would have been reflected by acquired entities had itthey remained a stand-alone entityentities but which are not reflected as revenue under IFRS as a result of purchasedue to fair value accounting for supportcustomer contracts in effect at the time of an acquisition.
The income measures inmeasurements of the internal reporting to our CODM include the full amount of support revenue andoperating segment results exclude the following acquisition-relatedexpenses:
Acquisition-related charges as well as discontinued activities:
Amortization expense/impairment charges of intangibles acquired in business combinations and certain stand-alone acquisitions of intellectual property (including purchased in-process research and development)
Settlements of pre-existing relationships in connection with a business combination
Acquisition-related third-party costs
Expenses from purchased in-process researchthe TomorrowNow litigation and developmentthe Versata litigation
Share-based payment expenses
Restructuring expenses and settlements of pre-existing relationships
Acquisition-related third-party costs that are required to be expensed
ResultsThe measurements of the discontinued operations that qualify as such under IFRS in all respects except that they do not represent a major line of business. For 2011, 2010,operating segment results exclude research and 2009, this relates exclusively todevelopment expense and general and administration expense at segment level. These expenses are managed and reviewed at the operations of TomorrowNow.Group level only.
Segment Revenue and Results
€ millions | Product | Consulting | Training | Sybase | Total | |||||||||||||||
2011 | ||||||||||||||||||||
External revenue from reportable segment | 10,025 | 2,955 | 376 | 873 | 14,229 | |||||||||||||||
Segment result | 5,940 | 864 | 147 | 226 | 7,177 | |||||||||||||||
Depreciation and amortization directly attributable to each segment | –14 | –11 | –1 | –16 | –42 | |||||||||||||||
| ||||||||||||||||||||
2010 | ||||||||||||||||||||
External revenue from reportable segment | 9,020 | 2,714 | 362 | 387 | 12,483 | |||||||||||||||
Segment result | 5,395 | 746 | 136 | 127 | 6,404 | |||||||||||||||
Depreciation and amortization directly attributable to each segment | –17 | –8 | –2 | –7 | –34 | |||||||||||||||
| ||||||||||||||||||||
2009 | ||||||||||||||||||||
External revenue from reportable segment | 7,846 | 2,498 | 332 | N/A | 10,676 | |||||||||||||||
Segment result | 4,731 | 781 | 115 | N/A | 5,627 | |||||||||||||||
Depreciation and amortization directly attributable to each segment | –53 | –7 | –2 | N/A | –62 |
Reconciliation of RevenueRevenues and Segment Results
€ millions | 2011 | 2010 | 2009 | |||||||||
External revenue from reportable segments | 14,229 | 12,483 | 10,676 | |||||||||
External revenue from activities outside of the reportable segments | 31 | 55 | 7 | |||||||||
Adjustment support revenue | –27 | –74 | –11 | |||||||||
| ||||||||||||
Total revenue | 14,233 | 12,464 | 10,672 | |||||||||
| ||||||||||||
Segment result from reportable segments | 7,177 | 6,404 | 5,627 | |||||||||
External revenue from activities outside of the reportable segments | 31 | 55 | 7 | |||||||||
Development expense—management view | –1,746 | –1,800 | –1,801 | |||||||||
Administration and other corporate expenses—management view | –751 | –651 | –659 | |||||||||
Share-based payment expense | –68 | –58 | –54 | |||||||||
Restructuring | –4 | -2 | –194 | |||||||||
Acquisition-related restructuring expenses | 0 | 5 | –4 | |||||||||
Acquisition-related charges | –448 | –305 | –267 | |||||||||
Adjustment support revenue | –27 | –74 | –11 | |||||||||
TomorrowNow litigation | 717 | –983 | –56 | |||||||||
| ||||||||||||
Operating profit | 4,881 | 2,591 | 2,588 | |||||||||
Other non-operating expense, net | –75 | –186 | –73 | |||||||||
| ||||||||||||
Financial income, net | –38 | –67 | –80 | |||||||||
Profit before tax | 4,768 | 2,338 | 2,435 |
€ millions | 2014 | 2013 | 2012 | |||||||||
Total revenue of operating segment | 17,525 | 16,897 | 16,304 | |||||||||
Adjustment recurring revenue | –19 | –82 | –81 | |||||||||
Revenue from unallocated acquisitions | 55 | 0 | 0 | |||||||||
Total revenue | 17,560 | 16,815 | 16,223 | |||||||||
Results of operating segment | 8,623 | 8,428 | 8,082 | |||||||||
Adjustment recurring revenues | –19 | –82 | –81 | |||||||||
Research and development expense | –2,204 | –2,162 | –2,132 | |||||||||
General and administration expense | –806 | –796 | –784 | |||||||||
Other operating income/expense, net | 4 | 12 | 23 | |||||||||
Restructuring | –126 | –70 | –8 | |||||||||
Share-based payments | –290 | –327 | –522 | |||||||||
TomorrowNow and Versata litigation | –309 | 31 | 0 | |||||||||
Acquisition-related charges | –562 | –555 | –537 | |||||||||
Result from unallocated acquisitions (which are not included in other reconciliation line items) | 21 | 0 | 0 | |||||||||
Operating profit | 4,331 | 4,479 | 4,041 | |||||||||
Other non-operating income/expense, net | 49 | –17 | –173 | |||||||||
Financial income, net | –25 | –66 | –72 | |||||||||
Profit before tax | 4,355 | 4,396 | 3,796 |
Segment Revenue
External revenue from activities outside of the reportable segments mainly represents revenue incidental to our main business activitiesThe research and minor currency translation differences.
Segment Result
The segment results of our segments Product, Consulting, and Training reflect operating expenses directly attributable or reasonably allocable to the segments, including costs of revenue, and sales and marketing expenses. Costs that are not directly attributable
or reasonably allocable to the segments such as administration and other corporate expenses are not included in the segment result. Development expense is excluded from the segment result because our CODM reviews segment performance without taking development expense into account.
The measurement of the segment result for the Sybase segment differs from the measurement for the other segments, as the Sybase segment result includes development, administration and other corporate expenses while these expenses are excluded from the measurement of the segment results of the other segments.
Depreciation and amortization expenses reflected in the segment result include the amounts directly attributable to each segment.
Development expensegeneral and administration and other corporate expense disclosedpresented in the reconciliation abovediffer from the corresponding expenses in the consolidated income statements because expenses relating to share-based payments and acquisition-related expenses are presented as separate reconciling items.
Geographic Information
We have aligned our revenue by region disclosures with the changes made to the structure of our
income statement as outlined in Note (3b). With the full integration of our cloud activities, we furthermore refined the method of allocating cloud subscription revenues to the different geographies. Comparative prior period data has been adjusted accordingly.
The amounts for revenue by region in the following tables are based on a management view and do not equal the amounts under the corresponding caption in the Consolidated Income Statements. The differences are mainly due to the fact that the development expense which is attributed to Sybase is included in the Sybase segment expenses, and that our management view focuses on organizational structures and cost centers rather than the classification of cost by functional area.
Segment Assets/Liabilities
Segment asset/liability information is not regularly provided to our CODM. Goodwill by reportable segment is disclosed in Note (16).
The following tables present revenue by location of customers and information about non-current assets detailed by geographic region. Noncurrent assets comprise goodwill, intangible assets, property, plant, and equipment, tax assets and other nonfinancial assets.customers.
Total Revenue by Location of CustomersRegion
Cloud Subscriptions and Support Revenue by Region
€ millions | 2011 | 2010 | 2009 | |||||||||
Germany | 2,347 | 2,195 | 2,029 | |||||||||
Rest of EMEA1) | 4,644 | 4,068 | 3,614 | |||||||||
| ||||||||||||
Total EMEA | 6,991 | 6,263 | 5,643 | |||||||||
| ||||||||||||
United States | 3,699 | 3,243 | 2,695 | |||||||||
Rest of Americas | 1,392 | 1,192 | 925 | |||||||||
| ||||||||||||
Total Americas | 5,091 | 4,435 | 3,620 | |||||||||
| ||||||||||||
Japan | 652 | 513 | 476 | |||||||||
Rest of Asia Pacific Japan | 1,499 | 1,253 | 933 | |||||||||
| ||||||||||||
Total Asia Pacific Japan | 2,151 | 1,766 | 1,409 | |||||||||
| ||||||||||||
SAP Group | 14,233 | 12,464 | 10,672 |
€ millions | 2014 | 2013 | 2012 | |||||||||
EMEA | 277 | 176 | 82 | |||||||||
Americas | 709 | 457 | 161 | |||||||||
APJ | 101 | 64 | 27 | |||||||||
SAP Group | 1,087 | 696 | 270 |
Software and Software-Related Service Revenue by Location of CustomersRegion
€ millions | 2011 | 2010 | 2009 | |||||||||
Germany | 1,726 | 1,564 | 1,439 | |||||||||
Rest of EMEA1) | 3,803 | 3,319 | 2,897 | |||||||||
| ||||||||||||
Total EMEA | 5,529 | 4,883 | 4,336 | |||||||||
| ||||||||||||
United States | 2,870 | 2,497 | 2,018 | |||||||||
Rest of Americas | 1,088 | 930 | 700 | |||||||||
| ||||||||||||
Total Americas | 3,958 | 3,427 | 2,718 | |||||||||
| ||||||||||||
Japan | 579 | 448 | 404 | |||||||||
Rest of Asia Pacific Japan | 1,253 | 1,036 | 740 | |||||||||
| ||||||||||||
Total Asia Pacific Japan | 1,832 | 1,484 | 1,144 | |||||||||
| ||||||||||||
SAP Group | 11,319 | 9,794 | 8,198 | |||||||||
|
|
€ millions | 2014 | 2013 | 2012 | |||||||||
EMEA | 7,028 | 6,616 | 6,126 | |||||||||
Americas | 5,489 | 5,097 | 4,789 | |||||||||
APJ | 2,337 | 2,237 | 2,250 | |||||||||
SAP Group | 14,855 | 13,950 | 13,165 |
SoftwareTotal Revenue by Location of CustomersRegion
€ millions | 2011 | 2010 | 2009 | |||||||||
Total EMEA1) | 1,774 | 1,471 | 1,304 | |||||||||
Total Americas | 1,482 | 1,247 | 855 | |||||||||
Total Asia Pacific Japan | 715 | 547 | 449 | |||||||||
| ||||||||||||
SAP Group | 3,971 | 3,265 | 2,607 | |||||||||
|
|
€ millions | 2014 | 2013 | 2012 | |||||||||
Germany | 2,570 | 2,513 | 2,382 | |||||||||
Rest of EMEA | 5,813 | 5,462 | 5,130 | |||||||||
EMEA | 8,383 | 7,975 | 7,512 | |||||||||
United States | 4,898 | 4,487 | 4,413 | |||||||||
Rest of Americas | 1,591 | 1,746 | 1,647 | |||||||||
Americas | 6,489 | 6,233 | 6,060 | |||||||||
Japan | 600 | 631 | 791 | |||||||||
Rest of APJ | 2,088 | 1,975 | 1,860 | |||||||||
APJ | 2,688 | 2,606 | 2,650 | |||||||||
SAP Group | 17,560 | 16,815 | 16,223 |
Non-Current Assets by Region
€ millions | 2011 | 2010 | ||||||
Germany | 2,162 | 1,896 | ||||||
Rest of EMEA1) | 5,537 | 4,808 | ||||||
| ||||||||
Total EMEA | 7,699 | 6,704 | ||||||
| ||||||||
United States | 4,513 | 5,565 | ||||||
Rest of Americas | 96 | 60 | ||||||
| ||||||||
Total Americas | 4,609 | 5,625 | ||||||
| ||||||||
Japan | 12 | 4 | ||||||
Rest of Asia Pacific Japan | 196 | 117 | ||||||
| ||||||||
Total Asia Pacific Japan | 208 | 121 | ||||||
| ||||||||
SAP Group | 12,516 | 12,450 | ||||||
|
€ millions | 2014 | 2013 | ||||||
Germany | 2,399 | 2,337 | ||||||
The Netherlands | 2,814 | 1,695 | ||||||
France | 2,116 | 2,110 | ||||||
Rest of EMEA | 2,477 | 2,468 | ||||||
EMEA | 9,806 | 8,609 | ||||||
United States | 17,847 | 9,823 | ||||||
Rest of Americas | 152 | 123 | ||||||
Americas | 18,000 | 9,946 | ||||||
APJ | 290 | 223 | ||||||
SAP Group | 28,096 | 18,778 |
|
The table above shows non-current assets excluding financial instruments, deferred tax assets, post-employment benefits, and rights arising under insurance contracts.
For information about the breakdown of our full-time equivalent employee numbersworkforce by region, see Note (8).
(30) |
Executive Board | Memberships on supervisory boards and other comparable governing bodies of enterprises, other than subsidiaries of SAP on December 31, | |
Bill McDermott
Labor Relations Director Strategy, Governance, Business Development, Corporate Development,
Communications and Marketing, Human Resources, Business Network | Board of Directors, ANSYS, Inc., Canonsburg, Board of Directors, Under Armour, Inc., Baltimore, Maryland, United States
| |
End-to-End Customer Experience |
| |
Products & Innovation Global Development Organization, Analytics, Applications, Cloud, Database & Technology, Mobile, SAP Labs Network (joint leadership with Gerhard Oswald) | ||
Luka Mucic(from July 1, 2014) Chief Financial Officer, Finance and Administration including Investor Relations and Data Protection & Privacy, Process Office |
| |
Gerhard Oswald
SAP Active Global Support, Quality Governance & Production, SAP Labs Network (joint leadership with Bernd Leukert) |
| ||
Executive Board Members Who Left During |
Dr. Werner Brandt(until June 30, 2014)
Dr. Vishal Sikka(until May 4, 2014)
Jim Hagemann Snabe(until May 21, 2014)
Dr. Angelika Dammann (until July 8, 2011)
Supervisory Board | Memberships on supervisory boards and other comparable governing bodies of enterprises, other than subsidiaries of SAP on December 31, | |
Prof. Dr. Chairman | Supervisory Board, Oligo Lichttechnik GmbH, Hennef, Germany (until August 28, 2014) | |
Deputy
| ||
Pekka Ala-Pietilä Chairman of the Board | Board of Directors, Pöyry Plc, Vantaa, Finland Chairman of the Board of Directors, CVON Group Limited, London, UK Board of Directors, CVON Limited, London, UK
Chairman of the Board of Directors, CVON Innovation Services Oy, Turku, Finland Board of Directors, CVON Future Limited, London, UK Chairman of the Board of Directors, Blyk Chairman of the Board of Directors,
Board of Directors,
| |
| ||
| ||
| ||
|
Supervisory Board | Memberships on supervisory boards and other comparable governing bodies of enterprises, other than subsidiaries of SAP on December 31, | |
| ||
Bid & Proposal Manager | ||
Prof. Anja Feldmann4), 8) Professor at the Electrical Engineering and Computer Science Faculty at the Technische Universität Berlin | ||
Prof. Dr. Wilhelm Haarmann2), 5), 7), 8) Attorney-at-law, certified public auditor, certified tax advisor Linklaters LLP, Rechtsanwälte, Notare, Steuerberater, Frankfurt am Main, Germany | Chairman of the Supervisory Board, CinemaxX AG, Hamburg, Germany (until April 25, 2014) Supervisory Board, Celesio AG, Stuttgart, Germany (from March 14, 2014) | |
Margret Klein-Magar1), Vice President, Head of People Principles | ||
Lars Lamadé1), 2), 7), 8) Head of Customer & Events GSS COO Managing Director, Rhein Neckar-Loewen GmbH, Kronau, Germany | Deputy | |
Steffen Leskovar(from July 7, 2014)1), 3), 4) Resource Manager | ||
Bernard Liautaud General Partner Balderton Capital, London, UK |
Board of Directors, nlyte Software Ltd., London, UK Board of Directors, Talend SA, Suresnes, France Board of Directors,
Board of Directors, SCYTL Secure Electronic Voting SA, Barcelona, Spain Board of Directors, Abiquo Group Inc., Redwood City, California, United States (until February 27, 2014) Board of Directors, Vestiaire Board of Directors, Dashlane, Inc., New York, New York, United States Board of Directors, Recorded Future, Inc., Cambridge, Massachusetts, United States Board of Directors, eWise Group, Inc., Redwood City, California, United States Board of Directors, Qubit Digital Ltd., London, UK Board of Directors, Stanford University, Stanford, California, United States Board of Directors, Citymapper Ltd., London, UK Board of Directors, Sunrise Atelier, Inc., New York, New York, United States (from August 2, 2014) Board of Directors, Opbeat Inc., San Francisco, California, United States (from September | |
Dr.
| ||
| Advisory Board, Fiege-Gruppe, Greven, Germany Board of Directors, RZD | |
Dr.
| ||
|
Supervisory Board
| Memberships on supervisory boards and other comparable governing bodies of enterprises, other than subsidiaries of SAP on December 31,
| |
2014 | ||
Dr. Erhard Schipporeit3), Independent Management Consultant | Supervisory Board, Talanx AG, Hanover, Germany Supervisory Board, Deutsche Börse AG, Frankfurt am Main, Germany Supervisory Board, HDI V.a.G., Hanover, Germany Supervisory Board, Hannover Rückversicherung Supervisory Board, Fuchs Petrolub Supervisory Board, BDO AG, Hamburg, Germany Board of Directors, TUI Travel PLC, London, UK (until December 11, 2014) Board of Directors, Fidelity Funds SICAV, Luxembourg Supervisory Board, Rocket Internet AG, Berlin, Germany (from August 22, 2014) |
Stefan Schulz1), Development | Supervisory Board, ORTEC International B.V., Zoetermeer, the Netherlands | ||
Jim Hagemann Snabe(from July 7, 2014)2), 5) Supervisory Board Member | Board of Directors, Bang & Olufsen A/S, Struer, Denmark Board of Directors, Danske Bank A/S, Copenhagen, Denmark Supervisory Board, Allianz SE, Munich, Germany (from May 7, 2014) Supervisory Board, Siemens AG, Munich, Germany | ||
Prof. Dr.-Ing. Dr.-Ing. E. h. Klaus Wucherer Managing Director of Dr. Klaus Wucherer Innovations- und Technologieberatung GmbH, Erlangen, Germany | Deputy Chairman of the Supervisory Board, Supervisory Board, Dürr AG, Bietigheim-Bissingen, Germany
Deputy Chairman of the Supervisory Board, LEONI AG, Nuremberg, Germany Chairman of the Supervisory Board, Festo AG & Co. KG, Esslingen, Germany |
Supervisory Board Members Who Left During 2014 |
Inga Wiele(until July 6, 2014)
Information as at December 31, 20112014
1) | Elected by the employees |
2) | Member of the Company’s General and Compensation Committee |
3) | Member of the Company’s Audit Committee |
4) |
Member of the Company’s Technology and Strategy Committee |
Member of the Company’s Finance and Investment Committee |
Member of the Company’s Nomination Committee |
Member of the Company’s Special Committee |
8) | Member of the Company’s People and Organization Committee |
The total compensation of the Executive Board members for the years 2011, 2010,2014, 2013, and 20092012 was as follows:
Executive Board Compensation
€ thousands | 2011 | 2010 | 2009 | |||||||||
Short-term employee benefits | 20,175.5 | 13,254.4 | 30,470.4 | |||||||||
Share-based payment | 4,015.7 | 3,919.5 | 4,412.0 | |||||||||
| ||||||||||||
Subtotal | 24,191.2 | 17,173.9 | 34,882.4 | |||||||||
| ||||||||||||
Post-employment benefits | 1,546.5 | 1,999.0 | 1,479.0 | |||||||||
—thereof defined-benefit | 696.2 | 797.0 | 1,171.0 | |||||||||
—thereof defined-contribution | 850.3 | 1,202.0 | 308.0 | |||||||||
Termination benefits | 4,124.9 | 10,947.5 | 2,326.8 | |||||||||
Other long-term benefits | 4,031.0 | 3,407.0 | 0 | |||||||||
| ||||||||||||
Total | 33,893.6 | 33,527.4 | 38,688.2 |
€ thousands | 2014 | 2013 | 2012 | |||||||||
Short-term employee benefits | 16,196 | 24,728 | 17,054 | |||||||||
Share-based payment1) | 8,098 | 8,603 | 14,855 | |||||||||
Subtotal1) | 24,294 | 33,331 | 31,909 | |||||||||
Post-employment benefits | 3,249 | 1,324 | 3,263 | |||||||||
Thereof defined-benefit | 2,276 | 189 | 1,711 | |||||||||
Thereof defined-contribution | 973 | 1,135 | 1,552 | |||||||||
Total1) | 27,543 | 34,655 | 35,172 |
1) | Portion of total executive compensation allocated to the respective year |
The share-based compensationpayment amounts disclosed above are based on the grant date fair
value of the virtual stock optionsrestricted share units (RSUs) issued to Executive Board members during the year.
The Executive Board members already received, in 2012, the LTI grants for the years 2012 to 2015 subject to continuous service as member of the Executive Board in the respective years. Although these grants are linked to and thus, economically, compensation for the Executive Board members in the respective years, section 314 of the German Commercial Code (HGB) requires them to be included in the total compensation number for the year of grant. Due to the appointments of Robert Enslin, Bernd Leukert, and Luka Mucic to the Executive Board in 2014, additional grants were allocated to them related to 2014 and 2015. Vesting of the LTI grants is dependent on the respective Executive Board member’s continuous service for the Company.
The share-based payment as defined in section 314 of the German Commercial Code (HGB) amounts to €8,720,200 (2013: €3,149,600) based on the allocations for 2014 and 2015 for Robert Enslin, Bernd Leukert, and Luka Mucic which were granted in 2014 in line with their appointment to the Executive Board. Including these amounts, the sum of short-term employee benefits and share-based payment amounts to €23,216,200 (2013: €24,109,600) and the total Executive Board compensation amounts to €26,464,700 (2013: €25,433,400). These amounts differ from the respective amounts shown in the table above, since the amounts in the table above consider the LTI tranches that were allocated to each of the respective years, rather than considering the LTI tranches based on the grant date as defined under section 314 of the German Commercial Code (HGB).
Share-Based CompensationPayment for Executive Board Members
2011 | 2010 | 2009 | ||||||||||
Number of stock options granted | 475,227 | 559,926 | 785,060 | |||||||||
Total expense in € thousands | 4,420.3 | 2,987.5 | 2,830.0 |
2014 | 2013 | 2012 | ||||||||||
Number of RSUs granted | 153,909 | 152,159 | 326,432 | |||||||||
Number of stock options granted | 0 | 0 | 0 | |||||||||
Total expense in € thousands | 11,133 | –8,596 | 57,429 |
In the table above, the share-based compensationpayment expense is the amount recorded in
profit or loss under IFRS 2 in the respective period.
The projecteddefined benefit obligation (PBO)(DBO) for pensions to Executive Board members and the annual pension entitlement of the members of the Executive Board on reaching age 60 based on entitlements from performance-based and salary-linked plans were as follows:
Retirement Pension Plan for Executive Board Members
€ thousands | 2011 | 2010 | 2009 | 2014 | 2013 | 2012 | ||||||||||||||||||
PBO December 31 | 7,290.7 | 7,326.9 | 6,529.9 | |||||||||||||||||||||
DBO December 31 | 11,273 | 9,077 | 8,889 | |||||||||||||||||||||
Annual pension entitlement | 437.3 | 466.2 | 466.6 | 475 | 452 | 429 |
Subject to the adoption of the dividend resolution by the shareholders at the Annual General Meeting of Shareholders on May 23, 2012,20, 2015, the total annual compensation of the Supervisory Board members for 20112014 is as follows:
Supervisory Board Compensation
€ thousands | 2011 | 2010 | 2009 | |||||||||
Total compensation | 3,027.4 | 2,875.0 | 1,842.1 | |||||||||
—thereof fixed compensation | 874.1 | 870.0 | 650.0 | |||||||||
—thereof committee remuneration | 465.0 | 325.0 | 92.1 | |||||||||
—thereof variable compensation | 1,688.3 | 1,680.0 | 1,100.0 |
€ thousands | 2014 | 2013 | 2012 | |||||||||
Total compensation | 3,227 | 2,966 | 2,981 | |||||||||
Thereof fixed compensation | 924 | 870 | 901 | |||||||||
Thereof committee remuneration | 515 | 416 | 340 | |||||||||
Thereof variable compensation | 1,788 | 1,680 | 1,741 |
The Supervisory Board members do not receive any share-based compensationpayment for their services. As far as members who are employee representatives on the Supervisory Board receive share-based compensation
payment such compensation is for their services as employees only and is unrelated to their status as members of the Supervisory Board.
The total compensation of all Supervisory Board members in 2011 for work for SAP excluding compensation relating to the office of Supervisory Board member was €1,688.3 thousands (2010: €1,028.0 thousands; 2009: €1,095.1 thousands).
During the fiscal year 2011,2014, payments to and DBO for former Executive Board members were as follows:
Payments to / DBO for Former Executive Board Members
€ thousands | 2011 | 2010 | 2009 | |||||||||
Pension benefits | 1,346.0 | 1,290.0 | 764.0 | |||||||||
PBO | 25,267.0 | 24,878.0 | 15,777.0 |
€ thousands | 2014 | 2013 | 2012 | |||||||||
Payments | 3,462 | 1,387 | 1,360 | |||||||||
DBO | 33,764 | 29,181 | 30,551 |
SAP did not grant any compensation advance or credit to, or enter into any commitment for the
benefit of, any member of
the Executive Board or Supervisory Board in 2011, 2010,2014, 2013, or 2009.2012.
On December 31 2011,of each of 2014, 2013 and 2012, the shareholdings of SAP’s board members were as follows:
Shareholdings of Executive and Supervisory Board Members
Number of SAP shares | 2011 | 2010 | 2009 | 2014 | 2013 | 2012 | ||||||||||||||||||
Executive Board | 20,560 | 13,747 | 15,336 | 36,426 | 30,201 | 35,271 | ||||||||||||||||||
Supervisory Board | 121,524,139 | 122,156,130 | 127,193,136 | 107,467,372 | 119,316,444 | 121,363,858 |
Detailed information on the different elements of the compensation as well as on the number of shares owned by members of the Executive Board and the Supervisory Board are disclosed in the Compensation Report which is part of our Management Report and of our Annual Report on Form 20-F, both of which are available on SAP’s Web site.
(31) |
Certain Executive Board and Supervisory Board members of SAP AGSE currently hold, or held within the last year, positions of significant responsibility with other entities, as presented in Note (30). We have relationships with certain of these entities in the ordinary course of business, whereby we buy and sell a wide variety of products, assets and services at prices believed to be consistent with those negotiated at arm’s length between unrelated parties.
After his move from SAP’s Executive Board to SAP’sCompanies controlled by Hasso Plattner, chairman of our Supervisory Board and Chief Software Advisor of SAP, engaged in May 2003, Hasso Plattner entered into a contractthe following transactions with SAP AG under which he providesSAP: providing consulting services for SAP. The contract provides for the reimbursement of out-of-pocket expenses only, which were immaterial to SAP, receiving sport sponsoring from SAP, making purchases of SAP products and services. In the prior year, the transactions also included purchasing a piece of land from a company indirectly held by Hasso Plattner.
Christiane Kuntz-Mayr, vice chairperson of the SAP Supervisory Board, acts as a managing director of family & kids @ work gemeinnützige UG (“family & kids @ work”).
Wilhelm Haarmann practices as a partner in all periods presented.the law firm Linklaters LLP in Frankfurt am Main, Germany. SAP occasionally purchased and purchases legal and similar services from Linklaters.
Hasso Plattner isAll amounts related to the sole proprietor of H.P. Beteiligungs GmbH, which itself holds 90% of Bramasol, Inc., Palo Alto, California, United
States. Bramasol is an SAP partner with which we generated revenue which was immaterial to SAP in all periods presented. The amounts charged to SAP for the services of Bramasolabove mentioned transactions were immaterial to SAP in all periods presented.
In 2011, SAPtotal, we sold products and services to companies controlled by members of the
Supervisory Board in the amount of €4 million (2013: €3 million), we bought products and services from such companies in the amount of €1 million (2013: €1 million), we purchased land from Campus am Jungfernsee GmbH & Co. KG, a company that is wholly owned by Hasso Plattner. The purchase price agreed is €2.6 million to be paid in 2012.
SAP supports the family & kids @ work gemeinnützige UG organization (“family & kids @ work”). Family & kids @ work looks after children whose parents work for SAPproperty and other employersassets from such companies in the vicinityamount of our St. Leon-Rot facility€0 million (2013: €2 million) and we provided sponsoring and other financial support to such companies in Germany. Christiane Kuntz-Mayr, whothe amount of €7 million (2013: €4 million). Outstanding balances at year-end from transactions with such companies were €2 million (2013: €2 million) for amounts owed to such companies and €1 million (2013: €1 million) for amounts owed by such companies. All these balances are unsecured and interest free and settlement is a memberexpected to occur in cash. Commitments (the longest of which is for 11 years) made by us to purchase further goods or services from these companies and to provide further sponsoring and other financial support amount to €13 million as at December 31, 2014 (2013: €14 million).
In total, we received services from members of the SAP Supervisory Board is engaged by family & kids @ work(including services from employee representatives on the Supervisory Board in their capacity as a manager. In 2011, SAP supported family & kids @ work with a totalemployees of €2.3 millionSAP) in the formamount of a one-time payment, a loan,€2 million (2013: €2 million). Amounts owed to Supervisory Board members from these transactions were €0 million as at December 31, 2014 (2013: €0 million). All these balances are unsecured and an annual fee.interest free and settlement is expected to occur in cash. Commitments made by us to purchase further services from Supervisory Board members amount to €0 million as at December 31, 2014 (2013: €0 million).
Wilhelm Haarmann practices as a partner of the law firm HAARMANN Partnerschaftsgesellschaft in Frankfurt am Main, Germany. The amounts charged to SAP for the services of HAARMANN Partnerschaftsgesellschaft were immaterial to SAP in all periods presented.
Please refer to Note (30) for disclosures ofFor information about the compensation of our Executive Board and Supervisory Board members.members, see Note (30).
(32) Principal Accountant Fees and Services
At SAP AG’sthe Annual General Meeting of Shareholders held on May 25, 2011, SAP’s21, 2014, our shareholders mandatedelected KPMG AG Wirtschaftsprüfungsgesellschaft to serve as SAP AG’sSAP’s independent auditor for 2011.2014. KPMG AG Wirtschaftsprüfungsgesellschaft and other firms in the global KPMG network charged the following fees to SAP for audit and other professional services related to 20112014 and the previous years:
Fees for Audit and Other Professional Services
2011 | 2010 | 2009 | 2014 | 2013 | 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
€ millions | KPMG AG (Germany) | Foreign KPMG Companies | Total | KPMG AG (Germany) | Foreign KPMG Companies | Total | KPMG AG (Germany) | Foreign KPMG Companies | Total | KPMG AG (Germany) | Foreign KPMG Firms | Total | KPMG AG (Germany) | Foreign KPMG Firms | Total | KPMG AG (Germany) | Foreign KPMG Firms | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Audit fees | 2 | 7 | 9 | 2 | 8 | 10 | 2 | 6 | 8 | 2 | 6 | 8 | 2 | 7 | 9 | 2 | 8 | 10 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Audit-related fees | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 0 | 1 | 2 | 0 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tax fees | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
All other fees | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2 | 7 | 9 | 2 | 8 | 10 | 2 | 6 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | 2 | 6 | 8 | 3 | 7 | 10 | 4 | 8 | 12 |
Audit fees are the aggregate fees charged by KPMG for the audit of our Consolidated Financial Statements as well as audits of statutory financial statements of SAP AGSE and its subsidiaries. Audit-related fees are fees charged by KPMG for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported
under audit fees. Tax fees are fees for professional services rendered by KPMG for tax advice on transfer pricing, restructuring, and tax compliance on current, past, or contemplated transactions. The all other fees category includes other support services, such as training and advisory services on issues unrelated to accounting and taxes.
(33) Events After the Reporting Period
No events that have occurred since December 31, 2014, have a material impact on the Company’s Consolidated Financial Statements.
(34) Subsidiaries, Associates, and Other Equity Investments
As at December 31, 2014 | Ownership | Total Revenue in 20141) | Profit/Loss (-) after Tax for 20141) | Total Equity as at 12/31/20141) | Number of Employees as at 12/31/20142) | |||||||||||||||
Name and Location of Company | % | €(000) | €(000) | €(000) | ||||||||||||||||
I. Fully Consolidated Subsidiaries | ||||||||||||||||||||
GERMANY | ||||||||||||||||||||
Concur (Germany) GmbH, Frankfurt am Main | 100.0 | 804 | 70 | 696 | 70 | |||||||||||||||
hybris GmbH, Munich | 100.0 | 57,609 | –859 | 31,377 | 271 | |||||||||||||||
OutlookSoft Deutschland GmbH, Walldorf | 100.0 | — | –72 | –68 | — | |||||||||||||||
SAP Beteiligungs GmbH, Walldorf | 100.0 | 3 | 3 | 55 | — | |||||||||||||||
SAP Business Compliance Services GmbH, Siegen | 100.0 | 4,885 | 223 | 1,326 | 41 | |||||||||||||||
SAP Deutschland SE & Co. KG, Walldorf5),7) | 100.0 | 3,139,049 | 530,288 | 1,360,344 | 4,799 | |||||||||||||||
SAP Dritte Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf6),7) | 100.0 | — | –19,655 | 521,687 | — |
SAP Erste Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf6),7) SAP Foreign Holdings GmbH, Walldorf SAP Fünfte Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf7) SAP Hosting Beteiligungs GmbH, St. Leon-Rot SAP Portals Europe GmbH, Walldorf SAP Portals Holding Beteiligungs GmbH, Walldorf SAP Projektverwaltungs- und Beteiligungs GmbH, Walldorf6),7) SAP Puerto Rico GmbH, Walldorf SAP Retail Solutions Beteiligungsgesellschaft mbH, Walldorf SAP Sechste Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf7) SAP Ventures Investment GmbH, Walldorf7) SAP Vierte Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf SAP Zweite Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf6),7) TechniData GmbH, Markdorf TRX Germany GmbH, Berlin REST OF EUROPE, MIDDLE EAST, AFRICA Ambin Properties (Proprietary) Limited, Johannesburg, South Africa Ariba Czech s.r.o., Prague, Czech Republic Ariba France, SAS, Paris, France Ariba Iberia, S.L., Madrid, Spain Ariba International Sweden AB, Stockholm, Sweden Ariba Middle East & North Africa FZ-LLC, Dubai, United Arab Emirates Ariba Slovak Republic s.r.o., Kosice, SlovakiaAs at December 31, 2014 Ownership Total
Revenue in
20141) Profit/Loss (-)
after Tax for
20141) Total Equity
as at
12/31/20141) Number of
Employees as
at 12/31/20142) Name and Location of Company % €(000) €(000) €(000) 100.0 — –22,037 782,807 — 100.0 — –11 1,064 — 100.0 — –2,010 2,621,438 — 100.0 — — 25 — 100.0 — 36 124,226 — 100.0 — –3 930,078 — 100.0 — 29,141 353,015 — 100.0 43,724 2,793 –5,055 18 100.0 — 388 9,903 — 100.0 — — 25 — 100.0 — –17 172,973 — 100.0 — –1 24 — 100.0 — 286,900 169,273 — 100.0 105 –94 28,990 — 100.0 — –15 1,618 — 100.0 — 364 1,727 — 100.0 10,766 360 2,005 193 100.0 13,700 539 3,974 47 100.0 1,878 75 790 11 100.0 1,478 53 372 5 100.0 321 –7 317 1 100.0 1,668 53 449 32
Ariba Technologies Ireland Ltd., Dublin, Ireland Ariba Technologies Netherlands B.V., Amsterdam, the Netherlands Ariba UK Limited, Egham, United Kingdom8) b-process, Paris, France Business Objects (UK) Limited, London, United Kingdom8) Business Objects Holding B.V.,‘s-Hertogenbosch, the Netherlands Business Objects Software Limited, Dublin, Ireland Christie Partners Holding C.V., Rotterdam, the Netherlands ClearTrip Inc. (Mauritius), Ebene, Mauritius Cleartrip MEA FZ LLC, Dubai, United Arab Emirates Concur (Austria) GmbH, Vienna, Austria Concur (France) SAS, Paris, France Concur (Italy) S.r.l., Milan, Italy Concur (Switzerland) GmbH, Zurich, Switzerland Concur Czech (s.r.o.), Prague, Czech Republic Concur Denmark ApS, Frederiksberg, Denmark Concur Holdings (France) SAS, Paris, France Concur Holdings (Netherlands) B.V., Amsterdam, the Netherlands Concur International Holdings (Netherlands) CV, Amsterdam, the Netherlands Concur Technologies (UK) Ltd., London, United Kingdom ConTgo Consulting Limited, London, United Kingdom8) ConTgo Limited, London, United Kingdom ConTgo MTA Limited, London, United Kingdom Crossgate UK Ltd., Slough, United Kingdom8) Crystal Decisions (Ireland) Limited, Dublin, Ireland Crystal Decisions Holdings Limited, Dublin, Ireland Crystal Decisions UK Limited, London, United Kingdom8) EssCubed Procurement Pty. Ltd., Johannesburg, South AfricaAs at December 31, 2014 Ownership Total
Revenue in
20141) Profit/Loss (-)
after Tax for
20141) Total Equity
as at
12/31/20141) Number of
Employees as
at 12/31/20142) Name and Location of Company % €(000) €(000) €(000) 100.0 998 70 437 — 100.0 3,735 64 6,293 6 100.0 11,183 670 184 — 100.0 12,107 –2,972 –7,528 38 100.0 — — 341 — 100.0 — –1 4,283 — 100.0 895,290 657,070 5,227,134 291 100.0 — –1 –21,829 — 54.2 54.2 100.0 10 — 38 1 100.0 1,237 –14 14,532 98 100.0 — — 13 — 100.0 33 1 12 2 100.0 938 44 1,617 242 100.0 — — 3 — 100.0 — –112 5,689 — 100.0 –479 –650 –26,441 14 100.0 –1,384 –2,744 1,022,116 — 100.0 3,472 154 –9,303 203 100.0 74 –139 –2,522 10 100.0 — — –2,384 — 100.0 — — — — 100.0 — — — — 100.0 — 5 44,548 — 100.0 — 7 77,732 — 100.0 — — 2,361 — 100.0 — — –816 —
Fieldglass Europe Limited, London, United Kingdom8) GlobalExpense (Consulting) Limited, London, United Kingdom GlobalExpense (UK) Ltd, London, United Kingdom hybris AG, Rotkreuz, Switzerland hybris Austria GmbH, Vienna, Austria hybris France SAS, Levallois-Perret, France hybris Netherlands BV, Amsterdam, the Netherlands hybris Software AB, Västerås, Sweden hybris Sp.z.o.o., Gliwice, Poland hybris UK Ltd., London, United Kingdom8) Joe D Partners C.V., Utrecht, the Netherlands KXEN Ltd., London, United Kingdom8) Limited Liability Company “SAP Labs”, Moscow, Russia Limited Liability Company “SAP CIS”, Moscow, Russia Limited Liability Company SAP Kazakhstan, Almaty, Kazakhstan Limited Liability Company SAP Ukraine, Kiev, Ukraine Merlin Systems Oy, Espoo, Finland OOO hybris Software, Moscow, Russia Quadrem Africa Pty. Ltd., Johannesburg, South Africa Quadrem Netherlands B.V., Amsterdam, the Netherlands Quadrem Overseas Cooperatief U.A., Amsterdam, the Netherlands SAP (Schweiz) AG, Biel, Switzerland SAP (UK) Limited, Feltham, United Kingdom8) SAP Belgium NV/SA, Brussels, Belgium SAP Bulgaria EOOD, Sofia, Bulgaria SAP Business Services Center Europe s.r.o., Prague, Czech Republic SAP Business Services Center Nederland B.V., Utrecht, the NetherlandsAs at December 31, 2014 Ownership Total
Revenue in
20141) Profit/Loss (-)
after Tax for
20141) Total Equity
as at
12/31/20141) Number of
Employees as
at 12/31/20142) Name and Location of Company % €(000) €(000) €(000) 100.0 8,606 145 83 53 100.0 — — — — 100.0 627 157 2,936 99 100.0 169,965 –23,583 1,064,162 33 100.0 3,552 17 –150 5 100.0 14,941 –302 1,204 43 100.0 5,961 –293 5,457 10 100.0 8,455 –180 8,031 9 100.0 8,478 444 959 166 100.0 34,934 122 22,474 76 100.0 147,005 4,601 379,538 — 100.0 113 1,534 102 — 100.0 23,219 –1,157 871 267 100.0 371,669 19,212 64,644 745 100.0 18,885 –1,369 2,211 23 100.0 27,739 –3,954 –5,674 100 100.0 9,805 –237 3,078 31 100.0 1,947 –79 86 13 100.0 6,420 301 –490 107 100.0 38,278 –144 62,319 4 100.0 — — — — 100.0 653,771 67,711 161,753 635 100.0 918,166 66,215 71,294 1,326 100.0 217,771 12,142 137,164 254 100.0 3,934 233 1,461 4 100.0 32,449 677 8,033 543 100.0 185,146 4,841 52,407 17
SAP Commercial Services Ltd., Valletta, Malta SAP ČR, spol. s r.o., Prague, Czech Republic SAP Cyprus Ltd, Nicosia, Cyprus SAP d.o.o., Zagreb, Croatia SAP Danmark A/S, Copenhagen, Denmark SAP East Africa Limited, Nairobi, Kenya SAP Egypt LLC, Cairo, Egypt SAP EMEA Inside Sales S.L., Barcelona, Spain SAP España – Sistemas, Aplicaciones y Productos en la Informática, S.A., Madrid, Spain SAP Estonia OÜ, Tallinn, Estonia SAP Finland Oy, Espoo, Finland SAP France Holding, Paris, France SAP France, Paris, France SAP Hellas S.A., Athens, Greece SAP Holdings (UK) Limited, Feltham, United Kingdom8) SAP Hungary Rendszerek, Alkalmazások és Termékek az Adatfeldolgozásban Informatikai Kft., Budapest, Hungary SAP Ireland Limited, Dublin, Ireland SAP Ireland US-Financial Services Ltd., Dublin, Ireland SAP Israel Ltd., Ra’anana, Israel SAP Italia Sistemi Applicazioni Prodotti in Data Processing S.p.A., Milan, Italy SAP Labs Bulgaria EOOD, Sofia, Bulgaria SAP Labs Finland Oy, Espoo, Finland SAP Labs France SAS, Mougins, France SAP Labs Israel Ltd., Ra’anana, Israel SAP Latvia SIA, Riga, Latvia SAP Malta Investments Ltd., Valletta, Malta SAP Middle East and North Africa L.L.C., Dubai, United Arab Emirates3) SAP Nederland B.V.,‘s-Hertogenbosch, the Netherlands SAP Nederland Holding B.V.,‘s-Hertogenbosch, the NetherlandsAs at December 31, 2014 Ownership Total
Revenue in
20141) Profit/Loss (-)
after Tax for
20141) Total Equity
as at
12/31/20141) Number of
Employees as
at 12/31/20142) Name and Location of Company % €(000) €(000) €(000) 100.0 — –9 –26 — 100.0 77,642 3,862 12,020 249 100.0 3,224 –591 637 2 100.0 7,073 –25 –595 13 100.0 198,122 20,137 26,961 174 100.0 9,765 1,065 3,571 47 100.0 12,064 –2,477 –14,316 51 100.0 13,262 489 3,627 128 100.0 272,734 14,456 239,459 421 100.0 2,082 44 332 1 100.0 121,412 11,867 50,820 110 100.0 1,086 116,189 5,285,256 3 100.0 962,341 220,000 1,562,780 1,431 100.0 30,644 658 15,159 55 100.0 — –22,538 806,037 — 100.0 48,571 1,959 11,384 522 100.0 –9 13 9,738 — 100.0 175 383,434 5,546,367 3 100.0 42,182 –1,359 2,241 57 100.0 412,905 23,511 319,741 567 100.0 27,105 1,221 6,248 535 100.0 7,085 272 41,827 47 100.0 61,658 1,929 20,335 359 100.0 52,455 2,418 20,395 289 100.0 2,463 192 7 3 100.0 — –9 –26 — 49.0 178,374 –31,274 –97,964 387 100.0 482,572 39,550 484,180 492 100.0 — 55 521,972 —
SAP Norge AS, Lysaker, Norway SAP Österreich GmbH, Vienna, Austria SAP Polska Sp. z o.o., Warsaw, Poland SAP Portals Israel Ltd., Ra’anana, Israel SAP Portugal – Sistemas, Aplicações e Produtos Informáticos, Sociedade Unipessoal, Lda., Porto Salvo, Portugal SAP Public Services Hungary Kft., Budapest, Hungary SAP Romania SRL, Bucharest, Romania SAP Saudi Arabia Software Services Ltd, Riyadh, Kingdom of Saudi Arabia SAP Saudi Arabia Software Trading Ltd, Riyadh, Kingdom of Saudi Arabia SAP Service and Support Centre (Ireland) Limited, Dublin, Ireland SAP sistemi, aplikacije in produkti za obdelavo podatkov d.o.o., Ljubljana, Slovenia SAP Slovensko s.r.o., Bratislava, Slovakia SAP Svenska Aktiebolag, Stockholm, Sweden SAP Training and Development Institute FZCO, Dubai, United Arab Emirates SAP Türkiye Yazilim Üretim ve Ticaret A.S., Istanbul, Turkey SAP UAB (Lithuania), Vilnius, Lithuania SAPV (Mauritius), Ebene, Mauritius4) SAP West Balkans d.o.o., Belgrade, Serbia SeeWhy (UK) Limited, Windsor, United Kingdom SuccessFactors (UK) Limited, London, United Kingdom8) SuccessFactors Ireland Limited, Dublin, Ireland SuccessFactors Netherlands B.V., Amsterdam, the Netherlands Sybase (UK) Limited, Maidenhead, United Kingdom8)As at December 31, 2014 Ownership Total
Revenue in
20141) Profit/Loss (-)
after Tax for
20141) Total Equity
as at
12/31/20141) Number of
Employees as
at 12/31/20142) Name and Location of Company % €(000) €(000) €(000) 100.0 89,223 2,683 23,147 80 100.0 200,712 21,244 26,047 350 100.0 82,131 6,928 18,508 122 100.0 67,283 22,357 99,695 201 100.0 82,651 8,079 26,294 280 100.0 3,043 450 1,673 7 100.0 38,742 7,242 12,504 374 100.0 59,241 5,959 49,068 52 75.0 45,716 –38,596 –69,848 97 100.0 92,360 859 35,455 1,104 100.0 14,822 879 4,447 25 100.0 37,361 1,775 10,193 175 100.0 179,009 10,332 10,791 164 100.0 6,836 463 –43 39 100.0 90,901 –4,128 6,418 189 100.0 3,048 95 38 1 0 — –139 23,882 — 100.0 15,153 1,437 4,778 32 100.0 1,073 –53 267 14 100.0 26,546 888 3,218 96 100.0 633 25 3 — 100.0 5,730 379 –7,288 20 100.0 — –2 348 —
Sybase Angola, Ltd., Luanda, Angola Sybase Iberia S.L., Madrid, Spain Syclo International Limited, Leatherhead, United Kingdom8) Systems Applications Products Africa Region (Proprietary) Limited, Johannesburg, South Africa Systems Applications Products Africa (Proprietary) Limited, Johannesburg, South Africa Systems Applications Products Nigeria Limited, Abuja, Nigeria Systems Applications Products South Africa (Proprietary) Limited, Johannesburg, South Africa The Infohrm Group Ltd., London, United Kingdom8) TRX Europe, Ltd., London, United Kingdom TRX Luxembourg, S.a.r.l., Luxembourg City, Luxembourg TRX UK, Ltd., London, United Kingdom AMERICAS 110405, Inc., Newtown Square, Pennsylvania, USA Ariba Canada, Inc., Mississauga, Canada Ariba, Inc., Sunnyvale, California, USA Ariba International Holdings, Inc., Wilmington, Delaware, USA Ariba International, Inc., Wilmington, Delaware, USA Ariba Investment Company, Inc., Wilmington, Delaware, USA Business Objects Option LLC, Wilmington, Delaware, USA Captura Software, Inc., Wilmington, Delaware, USA ClearTrip Inc., George Town, Cayman Islands CNQR Operations Mexico S. de. R.L. de. C.V., San Pedro Garza Garcia, MexicoAs at December 31, 2014 Ownership Total
Revenue in
20141) Profit/Loss (-)
after Tax for
20141) Total Equity
as at
12/31/20141) Number of
Employees as
at 12/31/20142) Name and Location of Company % €(000) €(000) €(000) 100.0 — — 1,607 — 100.0 — 17 65,937 — 100.0 — — — — 100.0 94,963 3,847 28,584 8 100.0 — –1 64,816 — 100.0 18,782 –1,492 1,334 64 89.5 235,092 –1,640 –7,881 446 100.0 22 –98 1,295 — 100.0 209 –45 509 20 100.0 — — 1,633 — 100.0 — — 554 — 100.0 — — 17,209 — 100.0 4,842 186 1,463 25 100.0 430,080 –97,920 3,436,913 1,242 100.0 — — — — 100.0 6,807 380 -3,681 — 100.0 373 5,327 244,911 — 100.0 — 852 73,290 — 100.0 — — — — 54.2 100.0 214 9 211 16
Concur (Canada), Inc., Toronto, Canada Concur Holdings (US) LLC, Wilmington, Delaware, USA Concur Perfect Trip Fund LLC, Wilmington, Delaware, USA Concur Technologies, Inc., Wilmington, Delaware, USA Extended Systems, Inc., Boise, Idaho, USA Fieldglass, Inc., Chicago, Illinois, USA Gelco Information Network, Inc., Bellevue, Washington, USA Gelco Information Network GSD, Inc., Wilmington, Delaware, USA H-G Holdings, Inc., Wilmington, Delaware, USA H-G Intermediate Holdings, Inc., Wilmington, Delaware, USA Financial Fusion, Inc., Concord, Massachusetts, USA FreeMarkets International Holdings Inc. de Mexico, de S. de R.L. de C.V., Mexico City, Mexico FreeMarkets Ltda., São Paulo, Brazil hybris Canada, Inc., Montréal, Canada hybris (US) Corp., Wilmington, Delaware, USA iAnywhere Solutions, Inc., Dublin, California, USA Inxight Federal Systems Group, Inc., Wilmington, Delaware, USA Jobs2Web, Inc., Minnetonka, Minnesota, USA Outtask LLC, Wilmington, Delaware, USA Plateau Systems LLC, Arlington, Virginia, USA Quadrem Brazil Ltda., Rio de Janeiro, Brazil Quadrem Canada Ltd., Mississauga, Canada Quadrem Chile Ltda., Santiago de Chile, Chile Quadrem Colombia SAS, Bogotá, Colombia Quadrem International Ltd., Hamilton, BermudaAs at December 31, 2014 Ownership Total
Revenue in
20141) Profit/Loss (-)
after Tax for
20141) Total Equity
as at
12/31/20141) Number of
Employees as
at 12/31/20142) Name and Location of Company % €(000) €(000) €(000) 100.0 371 11 3,782 31 100.0 — — 106 — 100.0 — — — — 100.0 30,998 –5,209 7,098,997 2,367 99.0 — –93 18,658 — 100.0 49,640 –72 802,515 362 100.0 — — 39,079 — 100.0 — — — — 100.0 — — 21,456 — 100.0 — — 21,456 — 100.0 — — — — 100.0 — — –61 — 100.0 65 –78 –546 — 100.0 37,214 –499 –523 256 100.0 70,808 –643 25,615 185 99.0 58,089 16,452 212,818 36 100.0 — — 75 — 100.0 54 27 5,760 — 100.0 — — — — 100.0 582 3,660 16,147 — 100.0 22,784 –488 6,946 157 100.0 827 32 563 7 100.0 13,958 –1,608 47 173 100.0 236 –21 –4 — 100.0 19,241 9,878 89,505 —
Quadrem Peru S.A.C., Lima, Peru San Borja Partricipadoes LTDA, São Paulo, Brazil SAP America, Inc., Newtown Square, Pennsylvania, USA SAP Andina y del Caribe C.A., Caracas, Venezuela SAP Argentina S.A., Buenos Aires, Argentina SAP Brasil Ltda, São Paulo, Brazil SAP Canada, Inc., Toronto, Canada SAP Chile Limitada, Santiago, Chile SAP Colombia SAS., Bogotá, Colombia SAP Costa Rica, S.A., San José, Costa Rica SAP Financial, Inc., Toronto, Canada SAP Global Marketing, Inc., New York, New York, USA SAP Industries, Inc., Newtown Square, Pennsylvania, USA SAP International, Inc., Miami, Florida, USA SAP International PANAMA S.A., Panama City, Panama SAP Investments, Inc., Wilmington, Delaware, USA SAP LABS, LLC, Palo Alto, California, USA SAP México S.A. de C.V., Mexico City, Mexico SAP National Security Services, Inc., Newtown Square, Pennsylvania, USA SAP PERU S.A.C., Lima, Peru SAP Public Services, Inc., Washington, D.C., USA SAP Technologies Inc., Palo Alto, California, USA Sapphire SAP HANA Fund of Funds, L.P., Wilmington, Delaware, USA4) Sapphire Ventures Fund I, L.P., Wilmington, Delaware, USA4) Sapphire Ventures Fund II, L.P., Wilmington, Delaware, USA4) SeeWhy Inc., Boston, Massachusetts, USAAs at December 31, 2014 Ownership Total
Revenue in
20141) Profit/Loss (-)
after Tax for
20141) Total Equity
as at
12/31/20141) Number of
Employees as
at 12/31/20142) Name and Location of Company % €(000) €(000) €(000) 100.0 4,204 –343 –2,600 91 100.0 — — — — 100.0 3,576,310 –273,031 13,579,632 5,777 100.0 11,749 5,597 –42,193 26 100.0 173,060 52,125 47,823 548 100.0 516,203 –3,965 38,209 1,488 100.0 639,306 37,393 501,468 2,287 100.0 — 1,460 –29,671 104 100.0 118,945 –22,486 –13,359 257 100.0 14,905 –5,757 –10,838 16 100.0 — 27,115 7,019 — 100.0 291,239 6,230 33,076 537 100.0 529,357 47,627 477,848 414 100.0 22,166 2,073 11,867 65 100.0 2,562 –52 322 1 100.0 — 24,418 783,739 — 100.0 487,404 24,832 282,077 1,931 100.0 298,901 3,078 –15,996 647 100.0 230,020 48,412 238,904 304 100.0 32,509 357 5,544 54 100.0 294,721 29,271 306,671 202 100.0 — — — — 0 — 1,957 4,171 — 0 — 3,875 224,288 — 0 — –7,348 –4,184 — 100.0 1,503 –1,153 25,409 12
SuccessFactors, Inc., San Mateo, California, USA SuccessFactors Canada Inc., Ottawa, Canada SuccessFactors Cayman, Ltd., Grand Cayman, Cayman Islands SuccessFactors International Holdings, LLC, San Mateo, California, USA SuccessFactors International Services, Inc., San Mateo, California, USA Surplus Record, Inc., Chicago, Illinois, USA Sybase 365 LLC, Dublin, California, USA Sybase 365 Ltd., Tortola, British Virgin Islands Sybase Argentina S.A., Buenos Aires, Argentina Sybase Global LLC, Dublin, California, USA Sybase Intl Holdings LLC, Dublin, California, USA Sybase, Inc., Dublin, California, USA Technology Licensing Company, LLC, Atlanta, Georgia, USA TomorrowNow, Inc., Bryan, Texas, USA Travel Technology, LLC, Atlanta, Georgia, USA TripIt LLC, Wilmington, Delaware, USA TRX, Inc., Atlanta, Georgia, USA TRX Data Service, Inc., Glen Allen, Virginia, USA TRX Fulfillment Services, LLC, Atlanta, Georgia, USA TRX Technology Services, L.P., Atlanta, Georgia, USA ASIA PACIFIC JAPAN Ariba India Pvt. Ltd., Gurgaon, India Ariba International Singapore Pte. Ltd., Singapore, Singapore Ariba Software Technology Services (Shanghai) Co. Ltd., Shanghai, China Ariba Technologies India Pvt. Ltd., Bangalore, IndiaAs at December 31, 2014 Ownership Total
Revenue in
20141) Profit/Loss (-)
after Tax for
20141) Total Equity
as at
12/31/20141) Number of
Employees as
at 12/31/20142) Name and Location of Company % €(000) €(000) €(000) 100.0 525,251 –60,752 2,736,785 1,320 100.0 8,477 292 430 39 100.0 — — –578 — 100.0 — — 6,966 — 100.0 496 132 244 — 100.0 3,040 533 9,377 13 100.0 97,752 2,640 67,436 103 100.0 — — –1,032 — 100.0 — 72 699 — 100.0 — — 8,024 — 100.0 — –1 12,887 — 100.0 502,464 233,850 5,087,314 789 100.0 — — — — 100.0 — –137,084 –46,194 3 100.0 — — — — 100.0 — — — — 100.0 1,303 –228 15,346 169 100.0 — — — — 100.0 — — — — 100.0 — — — — 100.0 6,937 937 3,556 42 100.0 4,400 –508 –5,865 18 100.0 2,067 779 1,504 4 100.0 30,289 2,679 9,710 665
Beijing Zhang Zhong Hu Dong Information Technology Co. Ltd., Beijing, China3) Business Objects Software (Shanghai) Co. Ltd., Shanghai, China ClearTrip Private Limited, Mumbai, India Concur (Japan) Ltd., Bunkyo-ku, Japan Concur (New Zealand) Limited, Wellington, New Zealand Concur (Philippines) Inc., Makati City, Philippines Concur Technologies (Australia) Pty. Limited, Sydney, Australia Concur Technologies (Hong Kong) Ltd, Hong Kong, China Concur Technologies (India) Private Limited, Bangalore, India Concur Technologies (Singapore) Pte. Ltd., Singapore, Singapore ConTgo Pty. Ltd., Sydney, Australia Fieldglass AsiaPac PTY Ltd, Brisbane, Australia hybris Australia Pty Limited, Surry Hills, Australia hybris Hong Kong Ltd., Hong Kong, China hybris Japan K.K., Tokyo, Japan Nihon Ariba K.K., Tokyo, Japan Plateau Systems Australia Ltd, Brisbane, Australia Plateau Systems Pte. Ltd., Singapore, Singapore PT SAP Indonesia, Jakarta, Indonesia PT Sybase 365 Indonesia, Jakarta, Indonesia Quadrem Asia Pte. Ltd., Singapore, Singapore Quadrem Australia Pty Ltd., Brisbane, Australia Quadrem China Ltd., Hong Kong, China Ruan Lian Technologies (Beijing) Co. Ltd., Beijing, China SAP (Beijing) Software System Co. Ltd., Beijing, China SAP Asia Pte Ltd, Singapore, Singapore SAP Asia (Vietnam) Co. Ltd., Ho Chi Minh City, Vietnam SAP Australia Pty Ltd, Sydney, Australia SAP Hong Kong Co. Limited, Hong Kong, ChinaAs at December 31, 2014 Ownership Total
Revenue in
20141) Profit/Loss (-)
after Tax for
20141) Total Equity
as at
12/31/20141) Number of
Employees as
at 12/31/20142) Name and Location of Company % €(000) €(000) €(000) 0 1,256 65 1,030 6 100.0 7,003 155 8,905 96 54.2 75.0 298 –287 3,610 43 100.0 — 1 –4 — 100.0 1,133 52 1,869 798 100.0 1,204 44 –888 73 100.0 279 12 304 18 100.0 712 61 394 400 100.0 377 19 829 13 100.0 –2 –2 –212 — 100.0 3,443 –69 –492 26 100.0 7,425 190 412 23 100.0 3,194 –53 503 11 100.0 2,697 36 –71 10 100.0 3,079 –16 1,400 15 100.0 — — –584 — 100.0 — — –473 — 99.0 50,444 4,140 7,600 55 100.0 — –19 — — 100.0 — –4 — — 100.0 3,448 205 3,343 — 100.0 — — — — 100.0 117 12 –1,007 — 100.0 574,096 –32,651 –9,435 4,231 100.0 314,717 –8,132 78,223 1,033 100.0 2,006 98 706 47 100.0 534,203 –9,262 231,758 866 100.0 48,083 –6,578 –13,540 106
SAP India (Holding) Pte Ltd, Singapore, Singapore SAP India Private Limited, Bangalore, India SAP Japan Co. Ltd., Tokyo, Japan SAP Korea Ltd., Seoul, South Korea SAP Labs India Private Limited, Bangalore, India SAP Labs Korea, Inc., Seoul, South Korea SAP Malaysia Sdn. Bhd., Kuala Lumpur, Malaysia SAP New Zealand Limited, Auckland, New Zealand SAP Philippines, Inc., Makati, Philippines SAP SYSTEMS, APPLICATIONS AND PRODUCTS IN DATA PROCESSING (THAILAND) LTD., Bangkok, Thailand SAP Taiwan Co. Ltd., Taipei, Taiwan Shanghai SuccessFactors Software Technology Co., Ltd., Shanghai, China SuccessFactors (Philippines), Inc., Pasig City, Philippines SuccessFactors Asia Pacific Limited, Hong Kong, China SuccessFactors Australia Holdings Pty Ltd., Brisbane, Australia SuccessFactors Australia Pty Limited, Brisbane, Australia SuccessFactors Business Solutions India Private Limited, Bangalore, India SuccessFactors Hong Kong Limited, Hong Kong, China SuccessFactors Japan K.K., Tokyo, Japan SuccessFactors Singapore Pte. Ltd., Singapore, Singapore Sybase Hong Kong Ltd, Hong Kong, China Sybase India Ltd., Mumbai, India Sybase Philippines, Inc., Makati City, Philippines Sybase Software (China) Co. Ltd., Beijing, China Sybase Software (India) Private Ltd, Mumbai, India TRX Technologies India Private Limited, Raman Nagar, IndiaAs at December 31, 2014 Ownership Total
Revenue in
20141) Profit/Loss (-)
after Tax for
20141) Total Equity
as at
12/31/20141) Number of
Employees as
at 12/31/20142) Name and Location of Company % €(000) €(000) €(000) 100.0 — 18,596 278 — 100.0 380,610 19,978 218,328 1,822 100.0 599,709 31,491 440,325 1,026 100.0 209,026 1,737 22,645 356 100.0 205,749 12,151 7,233 4,847 100.0 16,193 558 19,676 120 100.0 103,687 5,613 11,758 118 100.0 76,095 5,446 52,808 103 100.0 38,545 –2,832 –919 147 100.0 81,508 2,848 15,845 63 100.0 90,469 14,098 46,933 128 100.0 15,738 1,578 1,990 189 100.0 3,403 82 107 101 100.0 6 — –571 — 100.0 — –3,195 –17,912 — 100.0 21,976 837 8,825 109 100.0 12,128 215 684 219 100.0 2,013 83 1,634 — 100.0 3,025 –107 –94 14 100.0 4,240 179 342 19 100.0 — –2 — — 100.0 — 4 2,354 — 100.0 — 2 –7 — 100.0 22,405 –2,571 16,501 296 100.0 14,586 1,199 10,638 228 100.0 — –50 1,845 1
As at December 31, 2014 II. JOINT OPERATIONS AND INVESTMENTS IN ASSOCIATES Alteryx, Inc., Irvine, California, USA China DataCom Corporation Limited, Guangzhou, China Greater Pacific Capital (Cayman) L.P., Grand Cayman, Cayman Islands Procurement Negócios Eletrônicos S/A, Rio de Janeiro, Brazil SAP - NOVABASE, A.C.E., Porto Salvo, Portugal Yapta, Inc., Seattle, Washington, USA Ownership Total
Revenue
in 20141) Profit/Loss (-)
after Tax for
20141) Total Equity
as at
12/31/20141) Number of
Employees as
at 12/31/20142) Name and Location of Company % €(000) €(000) €(000) 13.89 30,045 –8,191 11,497 182 28.30 36,934 –3,658 37,418 880 5.35 315 –769 339,250 — 17.00 24,582 1,281 14,440 — 66.66 — — 5 — 46.60
Business Combinations
On February 21, 2012, SAP acquired SuccessFactors. Please see Note (4) for details.
In connection with the acquisition of SuccessFactors. we used the syndicated term loan facility to partially finance the purchase price. For more information, see Note (26).
New Share-Based Compensation Plans
In January 2012, our Supervisory Board implemented a new share-based payment plan (the LTI Plan 2015) for Executive Board members.
The Plan is designed to award members restricted share units (RSUs) each year from 2012 through 2015, with a budget of RSUs already awarded for each year at the beginning of the Plan. The number of RSUs that actually vest with the member after each year depends on our performance against objectives, defined at the beginning of the Plan, in terms of non-IFRS total revenue and non-IFRS operating profit. These objectives are derived from our Company strategy for the years through 2015. Each year, if SAP outperforms or underachieves against the objectives, the number of RSUs awarded is adjusted up or down to an actual number in the range between 80% and 150% of the initial target number. If the actual level of target achievement for a given year is below 80%, none of the initially allocated RSUs for that year vests. Each RSU that does vest entitles the beneficiary Executive Board member to a payout corresponding to the SAP share price after the end of a three-year holding period. For more information, see the Compensation Report section.
Also in January 2012, the Executive Board announced a new share-based payment plan for employees. The plan for employees, like the LTI Plan 2015 for Executive Board members, is designed to award restricted share units (RSUs). The number of RSUs that actually vest after the end of a year depends on the same objectives as are defined for the LTI Plan 2015 for Executive Board members. The Executive Board decided in December 2011 on the size of the 2012 tranche.
The total budget so far allocated for the LTI Plan 2015 and the employee plan is €179 million. The eventual financial effect cannot be estimated as it will depend on the number of vested RSUs that actually pay out and on the SAP share price, and thus the final amount paid may be above or below the budgeted amounts. All of the expense will be recorded in the period 2012 through 2015, most of it in 2012.
as at December 31, 2011 | Ownership | Total Revenue in 20111) | Profit/Loss (-) 20111) | Total Equity as at 12/31/20111) | Number of Employees as at 12/31/20112) | |||||||||||||||
Name and Location of Company | % | €(000) | €(000) | €(000) | ||||||||||||||||
I. Fully Consolidated Subsidiaries | ||||||||||||||||||||
GERMANY | ||||||||||||||||||||
Crossgate AG, Munich3) | 100.0 | 3,784 | –2,281 | 119,615 | 120 | |||||||||||||||
Crossgate Technologies AG, Göttingen—Rosdorf3),4) | 100.0 | 1,310 | 899 | –797 | 77 | |||||||||||||||
OutlookSoft Deutschland GmbH, Walldorf4) | 100.0 | 0 | –1 | –1 | 0 | |||||||||||||||
Right Hemisphere GmbH, Munich3),4) | 100.0 | 66 | 3 | 36 | 1 | |||||||||||||||
SAF Germany GmbH, Konstanz4) | 100.0 | 582 | 27 | 387 | 0 | |||||||||||||||
SAP Beteiligungs GmbH, Walldorf | 100.0 | 3 | 2 | 49 | 0 | |||||||||||||||
SAP Deutschland AG & Co. KG, Walldorf8)9) | 100.0 | 2,759,982 | 606,243 | 1,285,917 | 4,723 | |||||||||||||||
SAP Dritte Beteiligungs- und Vermögensverwaltung GmbH, Walldorf4),5),8) | 100.0 | 0 | 61,197 | 553,154 | 0 | |||||||||||||||
SAP Erste Beteiligungs- und Vermögensverwaltung GmbH, Walldorf5),8) | 100.0 | 0 | –23,158 | 804,545 | 0 | |||||||||||||||
SAP Foreign Holdings GmbH, Walldorf | 100.0 | 0 | 0 | –61 | 0 | |||||||||||||||
SAP Fünfte Beteiligungs- und Vermögensverwaltung GmbH, Walldorf4),8) | 100.0 | 0 | 0 | 2,318,309 | 0 | |||||||||||||||
SAP Hosting Beteiligungs GmbH, St. Leon-Rot | 100.0 | 0 | 0 | 26 | 0 | |||||||||||||||
SAP Portals Europe GmbH, Walldorf4) | 100.0 | 0 | 644 | 124,115 | 0 | |||||||||||||||
SAP Portals Holding Beteiligungs GmbH, Walldorf4) | 100.0 | 0 | –30 | 928,937 | 0 | |||||||||||||||
SAP Projektverwaltungs- und Beteiligungs GmbH, Walldorf4),5),8) | 100.0 | 0 | 32,248 | 323,902 | 0 | |||||||||||||||
SAP Puerto Rico GmbH, Walldorf | 100.0 | 27,447 | –2,991 | –2,366 | 34 | |||||||||||||||
SAP Retail Solutions Beteiligungsgesellschaft mbH, Walldorf | 100.0 | 0 | –679 | 13,822 | 0 | |||||||||||||||
SAP Sechste Beteiligungs- und Vermögensverwaltungs GmbH, Walldorf3),8) | 100.0 | 0 | 0 | 25 | 0 | |||||||||||||||
SAP Vierte Beteiligungs- und Vermögensverwaltung GmbH, Walldorf | 100.0 | 0 | 0 | 25 | 0 | |||||||||||||||
SAP Zweite Beteiligungs- und Vermögensverwaltung GmbH, Walldorf4).5),8) | 100.0 | 0 | 80,695 | 164,750 | 0 | |||||||||||||||
Sybase Germany GmbH, Düsseldorf4) | 100.0 | 34,226 | 1,854 | –1,119 | 156 | |||||||||||||||
TechniData BCS GmbH, Siegen | 100.0 | 4,162 | 86 | 831 | 31 | |||||||||||||||
TechniData GmbH, Markdorf | 100.0 | 503 | –17,005 | 80,013 | 0 |
Total in 20111) Profit/ Loss 20111) Total Equity 12/31/20111) REST OF EUROPE, MIDDLE EAST, AFRICA Ambin Properties (Proprietary) Limited, Johannesburg, South Africa4) Armstrong Laing Limited, London, United Kingdom4) Business Objects (UK) Limited, London, United Kingdom4) Business Objects Holding B.V., s-Hertogenbosch, the Netherlands4) Business Objects Software Limited, Dublin, Ireland Cartesis UK Limited, London, United Kingdom4) Christie Partners Holding CV, Rotterdam, the Netherlands4) Crossgate Italia S.p.A., Milan, Italy3),4) Crossgate S.a.r.l., Paris, France3),4) Crossgate UK Ltd., Slough, United Kingdom3),4) Crystal Decisions (Ireland) Limited, Dublin, Ireland4) Crystal Decisions France S.A.S., Levallois-Perret, France4) Crystal Decisions Holding Limited, Dublin, Ireland4) Crystal Decisions UK Limited, London, United Kingdom4) Edgewing Limited, London, United Kingdom4) Joe D Partners CV, Utrecht, the Netherlands4) Limited Liability Company SAP CIS, Moscow, Russia Limited Liability Company SAP Kazakhstan, Almaty, Kazakhstan Limited Liability Company SAP Ukraine, Kiev, Ukraine Merlin Systems Oy, Espoo, Finland4) S.A.P. Nederland B.V., s-Hertogenbosch, the Netherlandsas at December 31, 2011 Ownership
Revenue
(-) after
Tax for
as at Number of
Employees
as at
12/31/20112) Name and Location of Company % €(000) €(000) €(000) 100.0 0 243 –233 0 100.0 0 –1 3,065 0 100.0 0 –2,368 30,535 0 100.0 0 184 4,208 0 100.0 752,508 276,843 3,017,120 224 100.0 0 –30 1,119 0 100.0 0 –1 –21,824 0 100.0 364 –60 594 13 100.0 251 –378 –3,778 3 100.0 184 –278 –5,245 6 100.0 0 –85 44,527 0 100.0 0 5,497 6,655 0 100.0 0 152 77,708 0 100.0 0 12 2,202 0 100.0 0 0 –17 0 100.0 0 –16,229 621,539 0 100.0 349,593 31,405 109,845 619 100.0 33,086 3,955 5,567 15 100.0 16,599 –923 –2,551 93 100.0 9,463 692 2,569 29 100.0 376,155 47,926 380,050 398
Total in 20111) Profit/ 20111) Total Equity 12/31/20111) SAF Simulation, Analysis and Forecasting Slovakia s.r.o., Bratislava, Slovakia4) SAP—NOVABASE, A.C.E., Porto Salvo, Portugal4) SAP (Schweiz) AG, Biel, Switzerland SAP (UK) Limited, Feltham, United Kingdom SAP Belgium—Systems Applications and Products NV/SA, Brussels, Belgium4) SAP BULGARIA EOOD, Sofia, Bulgaria4) SAP Business Services Center Europe, s.r.o., Prague, Czech Republic SAP Commercial Services Ltd., Valletta, Malta SAP ČR, spol. s r.o., Prague, Czech Republic SAP CYPRUS Ltd, Nicosia, Cyprus4) SAP d.o.o., Zagreb, Croatia SAP Danmark A/S, Copenhagen, Denmark SAP Egypt LLC, Cairo, Egypt SAP EMEA Inside Sales S.L., Barcelona, Spain SAP España—Sistemas, Aplicaciones y Productos en la Informática, S.A., Madrid, Spain4) SAP Estonia OÜ, Tallinn, Estonia SAP Finland Oy, Espoo, Finland SAP France Holding, Paris, France SAP France, Paris, France4) SAP HELLAS S.A.—SYSTEMS, APPLICATIONS AND PRODUCTS IN DATA PROCESSING, Athens, Greece SAP Hungary Rendszerek, Alkalmazások és Termékek az Adatfeldolgozásban Informatikai Kft., Budapest, Hungary SAP Ireland Limited, Dublin, Irelandas at December 31, 2011 Ownership
Revenue
Loss (-)
after Tax
for
as at Number of
Employees
as at
12/31/20112) Name and Location of Company % €(000) €(000) €(000) 100.0 1,311 103 272 23 66.7 – – – 0 100.0 576,669 89,183 168,840 600 100.0 673,825 50,362 71,201 1,083 100.0 177,627 12,751 110,734 235 100.0 2,636 –142 653 10 100.0 21,750 772 7,028 316 100.0 0 –2 –12 0 100.0 85,560 9,276 29,971 237 100.0 2,731 –137 –1,961 2 100.0 6,413 –469 –883 13 100.0 147,497 16,985 31,776 158 100.0 4,633 –2,713 –4,622 35 100.0 16,399 525 2,178 124 100.0 233,879 22,918 200,433 356 100.0 1,507 –142 –126 1 100.0 100,698 5,154 70,063 106 100.0 1,382 89,758 4,969,849 4 100.0 743,215 189,451 1,602,884 1,430 100.0 28,669 1,620 9,233 53 100.0 43,825 –91 15,693 404 100.0 3,237 355 –825 0
Total in 20111) Profit/ Loss 20111) Total Equity 12/31/20111) SAP Ireland US-Financial Services Ltd., Dublin, Ireland4) SAP Israel Ltd., Ra’anana, Israel SAP Italia Sistemi Applicazioni Prodotti in Data Processing S.p.A., Milan, Italy4) SAP Labs Bulgaria EOOD, Sofia, Bulgaria SAP Labs Finland Oy, Espoo, Finland4) SAP LABS France S.A.S., Mougins, France SAP Labs Israel Ltd., Ra’anana, Israel SAP Latvia SIA, Riga, Latvia SAP Malta Investments Ltd., Valletta, Malta SAP Middle East and North Africa L.L.C., Dubai, United Arab Emirates SAP Nederland Holding B.V., s-Hertogenbosch, the Netherlands4) SAP Norge AS, Lysaker, Norway SAP Österreich GmbH, Vienna, Austria SAP Polska Sp. z o.o., Warsaw, Poland SAP Portals Israel Ltd., Ra’anana, Israel4) SAP Portugal—Sistemas, Aplicações e Produtos Informáticos, Sociedade Unipessoal, Lda., Porto Salvo, Portugal SAP Public Services Hungary Kft., Budapest, Hungary SAP Romania SRL, Bucharest, Romania SAP Saudi Arabia Software Services Limited, Riyadh, Kingdom of Saudi Arabia SAP Saudi Arabia Software Trading Limited, Riyadh, Kingdom of Saudi Arabia SAP Service and Support Centre (Ireland) Limited, Dublin, Irelandas at December 31, 2011 Ownership
Revenue
(-) after
Tax for
as at Number of
Employees
as at
12/31/20112) Name and Location of Company % €(000) €(000) €(000) 100.0 255 165,948 2,537,691 3 100.0 21,717 2,636 –706 56 100.0 328,025 25,211 267,781 508 100.0 21,310 1,040 3,115 457 100.0 6,617 213 45,993 45 100.0 41,258 1,947 19,731 277 100.0 40,131 1,276 13,238 291 100.0 1,979 34 –482 1 100.0 0 –2 –12 0 49.0 76,783 –16,460 4,596 198 100.0 0 2,548 521,529 0 100.0 74,740 6,172 23,724 83 100.0 174,889 20,005 33,508 339 100.0 69,864 7,602 33,206 119 100.0 61,924 19,502 35,182 311 100.0 54,549 3,235 11,647 96 100.0 1,314 108 431 5 100.0 16,153 2,235 7,588 100 100.0 23,828 2,069 33,470 26 51.0 18,829 –5,469 2,349 36 100.0 63,779 1,687 29,372 715
Total in 20111) Profit/ 20111) Total 12/31/20111) SAP sistemi, aplikacije in produkti za obdelavo podatkov d.o.o., Ljubljana, Slovenia SAP Slovensko s.r.o., Bratislava, Slovakia SAP Svenska Aktiebolag, Stockholm, Sweden SAP Türkiye Yazilim Üretim ve Ticaret A.S., Istanbul, Turkey SAP UAB (Lithuania), Vilnius, Lithuania SAPV (Mauritius), Ebene, Mauritius3),7) SAP West Balkans d.o.o., Belgrade, Serbia Sybase (Schweiz) GmbH, Zurich, Switzerland4) Sybase (UK) Limited, Maidenhead, United Kingdom4) Sybase 365 Limited, Maidenhead, United Kingdom4) Sybase ApS, Copenhagen, Denmark4) Sybase Europe B.V., Utrecht, the Netherlands4) Sybase France S.a.r.l., Paris, France4) Sybase Iberia S.L., Madrid, Spain4) Sybase Italia SRL, Milan, Italy4) Sybase Luxembourg S.a.r.l, Luxembourg4) Sybase Nederland B.V., Utrecht, the Netherlands4) Sybase Norge AS, Oslo, Norway4) Sybase Software BVBA/SPRL, Zaventem, Belgium4) Sybase South Africa (Proprietary) Limited, Johannesburg, South Africa4) Sybase Sverige AB, Kista, Sweden4) Systems Applications Products Africa Region (Proprietary) Limited, Johannesburg, South Africa4) Systems Applications Products Africa (Proprietary) Limited, Johannesburg, South Africaas at December 31, 2011 Ownership
Revenue
Loss (-)
after Tax
for
Equity as at Number of
Employees
as at
12/31/20112) Name and Location of Company % €(000) €(000) €(000) 100.0 16,352 749 7,332 24 100.0 35,364 2,631 20,754 160 100.0 140,440 12,119 23,763 119 100.0 51,901 –1,720 12,499 120 100.0 3,199 –104 233 3 0 0 –36 13,314 0 100.0 12,068 2,001 4,196 27 100.0 1,526 72 1,301 6 100.0 39,010 7,253 6,440 200 100.0 0 0 0 0 100.0 336 19 456 2 100.0 177,866 4,219 23,355 45 100.0 46,298 12,006 1,653 114 100.0 13,089 –22 –21,745 33 100.0 7,968 303 –150 32 100.0 213 0 –25 0 100.0 1,926 157 –1,535 12 100.0 613 71 895 2 100.0 2,833 89 947 16 100.0 21,609 1,424 –3,109 131 100.0 5,546 174 1,726 22 100.0 31,680 6,221 20,611 15 100.0 0 4,098 85,410 0
Total in 20111) Profit/ 20111) Total Equity 12/31/20111) Systems Applications Products Nigeria Limited, Abuja, Nigeria4) Systems Applications Products South Africa (Proprietary) Limited, Johannesburg, South Africa4) TomorrowNow (UK) Limited, Feltham, United Kingdom4) TomorrowNow Nederland B.V., Amsterdam, the Netherlands AMERICAS 110405, Inc., Newtown Square, Pennsylvania, USA Business Objects Argentina S.R.L., Buenos Aires, Argentina4) Business Objects Option, LLC, Wilmington, Delaware, USA Clear Standards, Inc., Sterling, Virginia, USA4) Crossgate Inc., Atlanta, USA3),4) Extended Systems, Inc., Boise, Idaho, USA4) Financial Fusion, Inc., Concord, Massachusetts, USA4) Frictionless Commerce, Inc., Newtown Square, Pennsylvania, USA4) iAnywhere Solutions Canada Ltd., Waterloo, Canada4) iAnywhere Solutions Inc., Dublin, California, USA4) INEA Corporation USA, Wilmington, Delaware, USA4) Inxight Federal Systems Group, Inc., Wilmington, Delaware, USA4) Khimetrics Canada, Inc., Montreal, Canada4) Liberia LLC, Wilmington, Delaware, USA4) Maxware, Inc., Newtown Square, Pennsylvania, USA4) Right Hemisphere Inc., San Ramon, California, USA3),4) SAP America, Inc., Newtown Square, Pennsylvania, USAas at December 31, 2011 Ownership
Revenue
Loss (-)
after Tax
for
as at Number of
Employees
as at
12/31/20112) Name and Location of Company % €(000) €(000) €(000) 100.0 13,435 955 2,690 34 89.5 191,933 7,618 33,369 317 100.0 0 –6 22 0 100.0 0 –67 –3,275 0 100.0 0 0 16,147 0 100.0 0 0 79 0 100.0 0 1,004 65,757 0 100.0 1,061 -1,189 15,251 0 100.0 313 -921 -7,335 24 100.0 0 -41 17,557 0 100.0 0 0 0 0 100.0 926 -671 36,524 0 100.0 1,367 1,313 3,385 142 100.0 30,102 66,396 177,422 67 100.0 0 3 333 0 100.0 0 -1 99 0 100.0 — — — 0 100.0 — — — 0 100.0 190 45 -377 0 100.0 756 -1,605 48,508 28 100.0 3,186,980 257,874 1,520,738 5,740
Total in 20111) Profit/ 20111) Total 12/31/20111) SAP Andina y del Caribe C.A., Caracas, Venezuela SAP ARGENTINA S.A., Buenos Aires, Argentina SAP Brasil Ltda, São Paulo, Brazil SAP Canada Inc., Toronto, Canada SAP Colombia S.A.S., Bogota, Colombia SAP Costa Rica, S.A., San José, Costa Rica SAP Financial Inc., Toronto, Canada4) SAP Global Marketing, Inc., New York, New York, USA SAP Government Support & Services, Inc., Newtown Square, Pennsylvania, USA4) SAP Industries, Inc., Newtown Square, Pennsylvania, USA4) SAP International, Inc., Miami, Florida, USA4) SAP Investments, Inc., Wilmington, Delaware, USA4) SAP LABS, LLC, Palo Alto, California, USA4) SAP México S.A. de C.V., Mexico City, Mexico SAP PERU S.A.C., Lima, Peru SAP Public Services, Inc., Washington, D.C., USA4) SAP Technologies Inc., Palo Alto, California, USA4) SAP Ventures Fund I, L.P., Wilmington, Delaware, USA3),7) Sybase 365 LLC, Dublin, California, USA4) Sybase 365 Ltd., Tortola, British Virgin Islands4) Sybase Argentina S.A., Buenos Aires, Argentina4) Sybase Canada Ltd., Waterloo, Canada4) Sybase de Mexico, S. De R.L. de C.V., Mexico City, Mexico4) Sybase do Brasil Software Ltda., Sâo Paulo, Brazil4)as at December 31, 2011 Ownership
Revenue
Loss (-)
after Tax
for
Equity as
at Number of
Employees
as at
12/31/20112) Name and Location of Company % €(000) €(000) €(000) 100.0 24,069 2,085 2,779 36 100.0 156,386 10,194 29,911 573 100.0 446,070 519 97,702 1,275 100.0 674,306 47,090 451,864 2,058 100.0 65,014 -6,671 -10,507 159 100.0 7,409 423 2,502 9 100.0 0 23,551 7,743 0 100.0 238,518 3,892 22,759 480 100.0 97,000 22,037 148,490 183 100.0 358,574 42,453 401,089 403 100.0 56,008 809 12,855 50 100.0 0 21,303 659,558 0 100.0 458,999 20,168 137,595 2,029 100.0 223,775 -11,504 -10,147 408 100.0 24,280 209 1,333 44 100.0 334,786 49,020 263,747 237 100.0 0 0 0 0 0 0 4,455 15,481 0 100.0 49,237 -6,371 92,932 128 100.0 0 0 -1,990 0 100.0 2,251 351 1,469 12 100.0 18,579 990 5,105 69 100.0 5,805 -1,586 -135 27 100.0 17,328 -1,178 -316 31
Total in 20111) Profit/ 20111) Total Equity 12/31/20111) Sybase Global LLC, Dublin, California, USA4) Sybase Intl Holdings LLC, Dublin, California, USA4) Sybase, Inc., Dublin, California, USA4) TomorrowNow, Inc., Bryan, Texas, USA4) ASIA PACIFIC JAPAN Beijing Zhang Zhong Hu Dong Information Technology Co. Ltd., Beijing, China4) Business Objects Malaysia Sdn. Bhd., Kuala Lumpur, Malaysia4) Business Objects Software (Shanghai) Co., Ltd., Shanghai, China4) iAnywhere Solutions K.K., Tokyo, Japan4) PT SAP Indonesia, Jakarta, Indonesia PT Sybase 365 Indonesia, Jakarta, Indonesia4) Right Hemisphere Ltd., Auckland, New Zealand3) Ruan Lian Technologies (Beijing) Co. Ltd., Beijing, China4) SAP (Beijing) Software System Co., Ltd., Beijing, China SAP Asia Pte Limited, Singapore, Singapore SAP Asia (Vietnam) Co. Ltd., Ho Chi Minh City, Vietnam3),4) SAP Australia Pty Limited, Sydney, Australia SAP HONG KONG CO. LIMITED, Hong Kong, China SAP INDIA (HOLDING) PTE LTD., Singapore, Singapore SAP INDIA PRIVATE LIMITED, Bangalore, India SAP JAPAN Co., Ltd., Tokyo, Japan SAP Korea Limited, Seoul, South Korea SAP Labs India Private Limited, Bangalore, Indiaas at December 31, 2011 Ownership
Revenue
Loss (-)
after Tax
for
as at Number of
Employees
as at
12/31/20112) Name and Location of Company % €(000) €(000) €(000) 100.0 0 0 7,529 0 100.0 0 0 12,047 0 100.0 355,879 23,167 4,509,013 1,225 100.0 16 421,025 -192,873 3 100.0 1,676 254 -603 6 100.0 0 0 261 0 100.0 7,444 1,715 7,102 108 100.0 8,845 -162 -2,903 21 100.0 44,166 5,090 13,989 49 100.0 94 -6 229 0 100.0 547 -1,365 4,953 39 100.0 0 -26 -1,164 1 100.0 307,921 -10,043 26,608 2,652 100.0 259,969 31,471 58,537 676 100.0 382 27 405 34 100.0 426,967 25,988 259,227 615 100.0 32,187 -937 1,163 50 100.0 0 -6 300 0 100.0 343,699 38,868 185,953 1,518 100.0 639,458 48,744 528,303 1,053 100.0 118,258 11,014 27,358 215 100.0 153,304 -4,379 3,569 4,138
Total in 20111) Profit/ 20111) Total 12/31/20111) SAP Malaysia Sdn. Bhd., Kuala Lumpur, Malaysia SAP New Zealand Limited, Auckland, New Zealand SAP PHILIPPINES, INC., Makati, Philippines SAP R&D Center Korea, Inc., Seoul, South Korea4) SAP SYSTEMS, APPLICATIONS AND PRODUCTS IN DATA PROCESSING (THAILAND) LTD., Bangkok, Thailand6) SAP TAIWAN CO., LTD., Taipei, Taiwan Sybase (N.Z.) Limited, Wellington, New Zealand4) Sybase (Singapore) Pte Limited, Singapore 4) Sybase 365 Ltd. (HK), Hong Kong, China4) Sybase Australia Pty Limited, Sydney, Australia4) Sybase Hong Kong Limited, Hong Kong, China4) Sybase India, Ltd., Mumbai, India4) Sybase K.K., Tokyo, Japan4) Sybase Korea, Ltd, Seoul, South Korea4) Sybase Philippines Inc., Makati City, Philippines4) Sybase Software (China) Co. Ltd., Beijing, China4) Sybase Software (India) Private Ltd, Mumbai, India4) Sybase Software (Malaysia) Sdn. Bhd., Kuala Lumpur, Malaysia4) Sybase Taiwan Co. Ltd., Taipei, Taiwan4) Technidata EHS Solutions Asia Pte Limited, Singapore4) TomorrowNow Australia Pty Limited, Sydney, Australia4) TomorrowNow Singapore Pte Limited, Singapore, Singapore4)as at December 31, 2011 Ownership
Revenue
Loss
(-)
after
Tax
for
Equity as
at Number of
Employees
as at
12/31/20112) Name and Location of Company % €(000) €(000) €(000) 100.0 59,606 6,610 18,383 122 100.0 42,207 4,324 33,945 42 100.0 28,426 879 9,090 38 100.0 9,009 347 15,944 90 49.0 45,622 2,396 35,215 50 100.0 58,408 6,271 26,331 71 100.0 2,564 750 4,389 5 100.0 9,539 -22 974 168 100.0 — — — 0 100.0 15,267 2,100 8,357 35 100.0 8,975 -150 223 69 100.0 0 161 2,675 0 100.0 20,690 510 1,597 66 100.0 9,364 326 2,877 47 100.0 0 1 -11 0 100.0 16,922 2,055 16,536 396 100.0 3,904 257 6,741 196 100.0 2,387 103 1,643 3 100.0 3,913 -430 1,019 19 100.0 0 -51 47 0 100.0 0 6 404 0 100.0 0 -10 79 0
Total in 20111) Profit/ 20111) Total 12/31/20111) II. INVESTMENTS IN ASSOCIATES Alteryx Inc., Orange, California, USA4) ArisGlobal Holdings, LLC, Stamford, Connecticut, USA4) China DataCom Corporation Limited, Guangzhou, China4) Greater Pacific Capital (Cayman), L.P., Grand Cayman, Cayman Islands Original1 GmbH, Frankfurt am Main, Germany Procurement Negócios Eletrônicos S/A, Rio de Janeiro, Brazil4) TechniData IT-Service GmbH, Markdorf, Germany4)as at December 31, 2011 Ownership
Revenue
Loss (-)
after
Tax for
Equity as
at Number of
Employees
as at
12/31/20112) Name and Location of Company % €(000) €(000) €(000) 9.20 18,338 -1,587 -4,456 132 16.00 32,837 -3,017 2,283 696 28.30 0 0 40,276 0 5.35 — — — 0 40.00 60 -4,405 3,494 17 17.00 19,484 1,451 15,773 0 26.00 12,300 600 1,254 101
These figures are based on our local IFRS financial statements prior to eliminations resulting from consolidation and therefore do not reflect the contribution of these companies included in the Consolidated Financial Statements. The translation of the equity into |
2) | As at December 31, |
3) | Agreements with the |
4) | SAP SE does not hold any ownership interests in four structured entities, SAPV (Mauritius), Sapphire SAP HANA Fund of |
5) | Entity whose personally liable partner is SAP SE. |
6) | Entity with profit and loss transfer |
Pursuant to HGB, section 264 (3) or section 264b, the |
Pursuant to sections 479A to 479C of the UK Companies Act 2006, the entity is exempt from having its financial statements audited on the basis that SAP |
As at December 31, 2014 | ||
Name and Location of Company | ||
III. OTHER EQUITY INVESTMENTS | ||
Alchemist Accelerator Fund I LLC, San Francisco, California, USA | ||
All Tax Platform - Solucoes Tributarias S.A., São Paulo, Brazil | ||
Amplify Partners L.P., Cambridge, Massachusetts, USA | ||
ArisGlobal Holdings LLC, Stamford, Connecticut, USA | ||
Convercent, Inc., Denver, Colorado, USA | ||
Costanoa Venture Capital II L.P., Palo Alto, California, USA | ||
Data Collective II L.P., San Francisco, California, USA | ||
Data Collective III L.P., San Francisco, California, USA |
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Name and Location of Company | ||||
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EIT ICT Labs GmbH, Berlin, Germany | ||||
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Five 9, Inc., | ||||
Follow Analytics, Inc., San Francisco, California, USA | ||||
GK Software AG, Schöneck, Germany | ||||
InnovationLab GmbH, Heidelberg, | ||||
iTAC Software AG, Dernbach, | ||||
iYogi Holdings Pvt. Ltd., Port Louis, Mauritius | ||||
Jibe, Inc., New York, New York, USA | ||||
Kaltura, Inc., New York, New York, USA | ||||
Krux Digital, Inc., San Francisco, California, USA | ||||
Lavante, Inc., San | ||||
MuleSoft, Inc., San Francisco, California, USA | ||||
MVP Strategic Partnership Fund GmbH & Co. KG, Grünwald, Germany | ||||
Narrative Science, Inc., Chicago, Illinois, USA | ||||
Nor1, Inc., Santa Clara, California, USA | ||||
On Deck Capital, Inc., New York, New York, USA | ||||
Onventis GmbH, Stuttgart, Germany | ||||
OpenX Software Limited, | ||||
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Point Nine Capital Fund II GmbH & Co. KG, Berlin, Germany | ||||
Post for Systems, Cairo, Egypt | ||||
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Realize Corporation, Tokyo, Japan | ||||
Retail Solutions, Inc. (legal name: T3C, Inc.), | ||||
Return Path, Inc., New York, New York, USA | ||||
RideCharge, Inc., Alexandria, Virginia, USA | ||||
Rome2rio Pty. Ltd., Albert Park, Australia | ||||
Room 77, Inc., Mountain View, California, USA | ||||
Scytl, S.A., Barcelona, Spain | ||||
Smart City Planning, Inc., Tokyo, Japan | ||||
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Storm Ventures V, L.P., Menlo Park, California, USA | ||||
SV Angel IV L.P., San Francisco, California, USA | ||||
TableNow, Inc., San Francisco, California, USA | ||||
Technologie- und Gründerzentrum Walldorf Stiftung GmbH, Walldorf, Germany | ||||
The SAVO Group Ltd., Chicago, Illinois, USA | ||||
Ticketfly, Inc., San Francisco, California, USA | ||||
TidalScale, Inc., Santa Clara, California, USA | ||||
Trover, Inc., Seattle, Washington, USA | ||||
Upfront V, LP, Santa Monica, California, USA | ||||
Visage Mobile, Inc., Larkspur, California, USA | ||||
Zend Technologies, Ltd., Ramat Gan, Israel |
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