After a forlorn, wounded puppy act in court, Oracle took an incredulous moral victory against SAP earlier this week.
The judge awarded $1.3b in damages against SAP after it accepted theft of Oracle copyright material. SAP accepted its subsidiary TomorrowNow used illegal access to Oracle material in order to entice Oracle clients to take its own cut price Oracle support and maintenance services.
The record breaking damages will have Oracle reaching for the champagne. However, this was a victory worth far more even than the financial spoils alone:
- Admittedly, the damages award itself is sweet victory - $1.3b will fund another couple of acquisitions, Oracle has made 67 since 2002, the latest earlier this month was ecommerce giant ATG for $1b.
- It depletes SAP of critical funding. SAP had argued for a $40m settlement, while provisioning for a worst case scenario of $120m. This whopper will leave a material hole in its $4bn cash reserves.
- Reputation is a priceless commodity. The loss puts a major dent in SAP’s moral character, especially in Oracle’s US homeland where the global ERP market share barometers are calibrated.
- In a shrewd move Oracle supremo Larry Ellison had called his HP CEO rival CEO Leo Apotheker as a witness. Apotheker was CEO of SAP at the time of the systematic theft and although HP hid Apotheker from the trial, Ellison claimed he had proof that Apotheker had endorsed the abuse. The accusations leave HP floundering as its newly appointed CEO is implicated in grand theft just after it jettisoned Mark Hurd for merely mis-claiming expenses.
- Oracle’s support and maintenance represent the vast majority of its profits, and the outcome of the case sends a warning to potential imitators and analysts that Oracle can and will defend its cash cow with the full force of the law behind it. The markets agreed with the verdict, and Oracle shares closed 2% points higher, while SAP share dropped by 1%.
It’s likely that SAP will consider contesting the damages. However, there would be little reason for the German ERP giant to hold out much hope of overturning the US court verdict after explicitlyadmitting to software theft which intended to harm Oracle’s assets.
Further damaging publicity may also incentivise SAP to retire quietly and lick its reputational and financial wounds.
HP will be relieved if SAP does indeed take its medicine quietly as it can’t keep hiding Leo indefinitely and a retrial would inevitably see Ellison call him to the stand.
Meanwhile the Oracle legal team can regroup to defend itself against the US Justice department on a whistleblower claim alleging that Oracle massively overcharged Government. The case is expected in 2011.