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January 26, 2011 9:27 am
German software maker SAP said it would file a motion to a US court asking to reduce the $1.3bn in damages it has been forced to pay to arch-rival Oracle over copyright infringements.
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The damages awarded last November have triggered a sharp drop in profit at the world’s largest business software maker by sales in the fourth quarter, as it was forced to lift its provisions for the case by €933m ($1.27bn).
Operating profit under international accounting standards dropped by almost half year-on-year to €543m in last three months, SAP said on Wednesday.
Oracle last year successfully sued its German rival over the illegal downloading of software by SAP’s former US subsidiary.
The damages awarded by the US court had been eight times higher than the provisions SAP had previously made in its balance sheet.
The arch-rivals are engaged in one of the fiercest corporate competitions in the software industry and have repeatedly locked horns on a variety of issues.
SAP said it believed the amount awarded by the court was “disproportionate and wrong”. It said it would wait for the court’s final judgment and then file a motion asking it to either reduce the damage sum or order a new trial.
“Depending on the outcome of the post-trial motion process, SAP may consider an appeal,” Europe’s largest software maker said.
It added that the continuing dispute over the amount of damages could trigger another change in provisions and in its preliminary results for 2010.
Excluding the effects of the litigation, the German software group reported a sharp profit rise. The group’s operating profit under non-IFRS rules climbed by 42 per cent year-on-year to €1.6bn.
SAP has placed an emphasis in its financial reporting on non-international standards, which excludes acquisition-related charges and other special effects.
Bill McDermott, SAP’s co-chief executive, said: “We have excellent momentum and we are confident in 2011 and beyond.”
Mr McDermott and his co-chief executive, Jim Hagemann Snabe, took SAP’s helm almost a year ago, after the group had been rattled by a drop in customer and employee confidence as well as falling sales.
They have since improved morale within the group, increased the speed and customer involvement in software development and broadened the group’s technological range with the $5.8bn takeover of mobile software specialist Sybase.
“Our results prove that SAP is back to being a growth company,” Mr McDermott said.
He said SAP aimed for double-digit revenue growth and a further profit margin expansion this year.
The group proposed to lift the dividend by a fifth to €0.60 per share.
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