November 9, 2010 1:04 am

Stakes raised in Oracle and SAP download battle

Larry Ellison, Oracle chief executive, has put a value of $4bn on software from his company that was downloaded illicitly by a subsidiary of German rival SAP.

The amount is 100 times larger than the damages that SAP has argued it should pay for the infringement, and raises the stakes in a courtroom showdown that has brought a rare public confrontation between the software rivals.

Called on Monday as a witness for Oracle, Mr Ellison also abandoned his characteristically dismissive public stance towards SAP, instead describing as “brilliant” a strategy that the German company had used to try to outflank his own company.

The trial, which began last week, stems from SAP’s admission that a US subsidiary, TomorrowNow, downloaded documents and software from Oracle’s servers, despite not having authorisation.

TomorrowNow was bought by SAP at the start of 2005 as a way of countering Oracle’s acquisition of PeopleSoft, a deal that catapulted Oracle into stronger contention with SAP in the business applications market.

By offering support and maintenance services to PeopleSoft customers through TomorrowNow, SAP hoped to lure them away from Oracle and eventually convert them to its own software.

The strategy eventually flopped, with only 358 of PeopleSoft’s 10,000 customers making the switch. SAP was later forced to admit that TomorrowNow had illicitly downloaded data from Oracle to offer its support services, leading to a trial to agree the scale of damages it should pay.

In spite of the failure of SAP’s plan, Mr Ellison went out of his way on Monday to stress the threat he once believed it posed to Oracle.

He said: “The acquisition of TomorrowNow was a brilliant idea and we were at grave risk, depending on what they did with it”.

The Oracle chief executive added that he had personally believed at the time that SAP stood “to get at least 20 per cent, as much as 30 per cent of our [PeopleSoft] customers”.

Oracle’s lawyers have argued that the scale of the threat to the US group should be used as a yardstick for the size of the damages award. Because it paid $11bn for PeopleSoft, the loss of customers could have cost it $3.3bn, with another $600m in damages caused by similar customer losses from another acquisition, that of Siebel Systems.

A lawyer for SAP challenged Mr Ellison’s claim that he had been deeply concerned about the threat and said that no written evidence had emerged pointing to his fears.

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