Oracle vs. SAP: Larry Ellison Testimony – Advantage SAP

Years ago I did a lot of litigation work and covered a number of trials over the last several decades for major media outlets. 

One of the historic problems when you put a CEO on the stand is they often feel they are vastly more convincing than they actually are.

And the end result is that they usually  hurt their own side more than help it. 

This may very well be the case after the first testimony by Larry Ellison at the SAP trial this week. 

Background on the Trial

If you’ve haven’t been following this litigation, it resulted from SAP buying a company named TomorrowNow which specialized in third party PeopleSoft support to mine the PeopleSoft installed base when Oracle executed a hostile takeover of that company.  

Unfortunately for SAP, TomorrowNow pirated information off of the PeopleSoft computers; these systems by then belonged to Oracle. 

SAP, after losing a substantial amount of money on TomorrowNow and being sued by Oracle, shut down the operation and admitted to the theft but argued the damages to Oracle were minor.

Of course, Oracle places it own value for the damages at $4B but now has to prove that number.  This week Larry has been testifying to justify the $4B and it hasn’t been going well.

Oracle’s Problem

The issue for Oracle is that they actually did surprisingly well in terms of holding customers after the PeopleSoft acquisition and the TomorrowNow subsidiary that SAP was largely unprofitable.   

Obviously in any takeover, particularly a hostile one where the customers were turned against the acquiring company, you are going to lose some customers to competitors and that clearly happened here.

However, SAP would only be liable for the customers lost as a result of what their subsidiary did.  

Internal documents that have been introduced through discovery showcase that Oracle did better than expected and likely verify that SAP’s effort was largely unsuccessful which support the argument that Oracle may not have actually lost anything more than they would have anyway, in fact due to TomorrowNow’s poor execution, they might have actually lost less and evidence was introduced suggesting this was a position that was taken inside of Oracle.  

The quoted email is from Safra Catz, Oracle’s Co-President and CFO saying that “I don’t believe we have lost any large customers”  and the head of Oracle’s Global support who said the threat from TomorrowNow had been eliminated.  

While Ellison highlighted undocumented concerns with regard to TomorrowNow, he testified that he didn’t document them on purpose. The implication seemed to be that the reason he didn’t was because he was covering up the concerns.  

Having been on a few juries; this either makes it look like he is lying or outright dishonest or tends to discount much of what the witness has to say.  In short, it is hard to believe someone where the documents that contradict their position do exist but the ones that support it don’t because they didn’t want to document damaging information. 

It can come across like they are basically testifying they are inherently dishonest.   

This is a jury trial and juries tend to be made up of folks who are either on a fixed income, disability, or between jobs. Larry is a multi-billionaire suggesting that the jurors may have trouble feeling his alleged pain even if the facts had supported his conclusion, and the facts didn’t appear to.  

Wrapping Up: Advantage SAP

This initial exchange appears to have put SAP at an advantage but this will likely go back and forth a bit before the trial finishes. However, if Larry is now no longer trusted by the jury who then projects this mistrust on all of Oracle’s evidence then they are likely to set a very low judgment even though SAP has stipulated to the crime.  

Right now, that remains the likely outcome given there is no hard evidence supporting Oracle’s position that has been reported to be introduced yet and Larry’s testimony may have worked to SAP’s advantage. 

Safra Catz is next and she may do better, though Larry kind of called her stupid for the email above. That’s probably not going to help. One thing is sure, trials are a lot more fun to talk about then be in. 

Rob Enderle is one of the last Inquiry Analysts. Inquiry Analysts are paid to stay up to date on current events and identify trends and either explain the trends or make suggestions, tactical and strategic, on how to best take advantage of them. Currently, he provides his services to most of the major technology and media companies. The opinions expressed in this commentary are solely those of the writer.