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SAP Admits to `Inappropriate\' Oracle Code Downloads
From Bloomburg -
SAP AG, the world's largest maker of business-management software, said it made ``inappropriate'' downloads of Oracle Corp. code, responding to a lawsuit that claims the German company stole programs from the competitor.
``We regret very much that this occurred,'' SAP Chief Executive Officer Henning Kagermann said on a conference call today. ``Even a single inappropriate download is unacceptable.'' SAP, whose shares fell as much as 2.6 percent today, denied it had access to Oracle's intellectual property.
The admission hurts SAP's reputation in the battle with Larry Ellison's Oracle in the $56 billion market for software that manages tasks such as payroll. The rivalry between SAP and Oracle escalated when Oracle filed its March 22 lawsuit claiming SAP workers hacked into a Web site and stole software codes on a ``grand scale.''
``It's very embarrassing for SAP, which has always been seen as a technology leader and also in issues such as compliance,'' said Ernst Konrad, the Munich-based head of equities at BayernInvest, which oversees $35 billion including SAP shares.
Shares of Walldorf, Germany-based SAP fell 73 cents, or 1.9 percent, to 37.26 euros at 4:07 p.m. in Frankfurt, after dropping as low as 37.01 euros. The stock has fallen 10 percent in the past year, the only decline among the 30 members of Germany's benchmark DAX Index. Redwood City, California-based Oracle rose 5 cents to $19.97 in Nasdaq Stock Market trading in New York.
SAP said it will ``fully cooperate'' with the U.S. Department of Justice, which requested documents from the company and TomorrowNow.
`Illegal Scheme'
A settlement with Oracle may cost SAP $100 million, Credit Suisse Group analyst James Clark and colleagues wrote in a note today. The case may last years, said Frankfurt Trust analyst Matthias Maus.
SAP said its Bryan, Texas-based TomorrowNow unit, which provides software support to clients, was authorized to download materials from Oracle's Web site on behalf of TomorrowNow customers. The unit made ``some inappropriate'' downloads of fixes and support documents, SAP said.
In its lawsuit, Oracle said TomorrowNet used identities of Oracle customers and phony users to gain access to its systems. Customers for whom SAP allegedly conducted illegal downloads include Merck & Co. and Bear Stearns & Co., according to the March 22 lawsuit. Oracle didn't say how much the damage cost the company.
Some downloads ``may have erroneously exceeded the customer's right of access'' and were ``in violation'' of TomorrowNet's policy, SAP said in today's response.
Dropped Pants
``SAP CEO Henning Kagermann has now admitted to the repeated and illegal downloading of Oracle's intellectual property,'' Geoff Howard, a lawyer for Oracle at Bingham McCutchen LLP in San Francisco, said in an e-mailed statement. ``Oracle filed suit to discover the magnitude of the illegal downloads and fully understand how SAP used Oracle's intellectual property in its business.''
SAP, scheduled to report earnings July 19, may say second- quarter revenue rose 10 percent to 2.42 billion euros ($3.3 billion), the average estimate of 19 analysts surveyed by Bloomberg. Oracle, the world's third-largest software maker after Microsoft Corp. and International Business Machines Corp., said last week its sales may rise as much as 21 percent in the quarter ending Aug. 31.
Since 2005, Oracle has spent $20 billion buying rivals, the biggest run of acquisitions in the industry. The lawsuit underlines the intensifying competition that goes back to before 1996, when SAP co-founder Hasso Plattner dropped his pants in front of Ellison's support vessel during a yacht race.
Market Share
In September, an exchange of verbal blows erupted, with Oracle CEO Ellison saying the German company was losing market share and ``rethinking'' its strategy. SAP, in return, accused Oracle of publishing ``misleading'' views on the market leader.
SAP said its share in the market for business-management software, measured by software and related service revenue, rose to 25.1 percent in the year ended March 31 from 24.5 percent in the 12 months through Dec. 31.
SAP and Oracle offer software maintenance services for each other's products. Oracle's June 1 amended complaint in U.S. District Court in San Francisco alleged SAP improperly obtained software-support documentation from an Oracle Web site and that TomorrowNow violated copyright law by distributing the material to customers.
Kagermann said today he was ``personally surprised'' that Oracle didn't contact SAP ``as soon as they felt something was wrong.'' The download of materials didn't cause ``significant harm'' to Oracle and Oracle's claims in its complaints ``appear to be unfounded,'' Kagermann said.
Firewall
SAP didn't have access to Oracle's intellectual property because of a so-called firewall between SAP and TomorrowNow, the German company said.
Kagermann wouldn't rule out a settlement, saying ``all options'' are open.
``There's no question it's more likely that they'll settle now than a week ago,'' said Ross Dannenberg, a lawyer at Banner & Witcoff Ltd. in Washington, D.C., which specializes in intellectual property law. ``In trial, Oracle is going to repeat SAP's admission to the jury as often and loudly as possible. It's going to be hard to ignore.''
A conference between the companies and Judge Martin Jenkins is scheduled for Sept. 4, according to a Web site SAP set up for the lawsuit, at http://www.tnlawsuit.com .
Unit Chairman Named
``The whole issue tarnishes SAP's reputation with clients and potential new customers,'' said Jochen Klusmann, an analyst at BHF-Bank AG, who has a ``reduce'' rating on SAP shares. ``Oracle will probably try to keep it in the public spotlight for as long as possible. That will be quite unpleasant for SAP.''
SAP today appointed Mark White, chief operating officer of the America unit, as TomorrowNow's executive chairman to manage the division's operations, including compliance. TomorrowNow CEO Andrew Nelson will report to White. There was no sign that Nelson had knowledge of the inappropriate downloads, Kagermann said.
SAP acquired TomorrowNow in 2004 as part of its Safe Passage program designed to take customers from companies that Oracle bought, including PeopleSoft Inc. and J.D. Edwards & Co., by providing software support. TomorrowNow has annual sales of 15.7 million euros and 157 workers.
``Although many will see the legal teams as the cavalry in this battle, the troops that really matter are the PR special forces contingent,'' Ovum Plc analyst David Mitchell said. ``PR is where this battle will be won or lost.''
From Bloomburg -
SAP AG, the world's largest maker of business-management software, said it made ``inappropriate'' downloads of Oracle Corp. code, responding to a lawsuit that claims the German company stole programs from the competitor.
``We regret very much that this occurred,'' SAP Chief Executive Officer Henning Kagermann said on a conference call today. ``Even a single inappropriate download is unacceptable.'' SAP, whose shares fell as much as 2.6 percent today, denied it had access to Oracle's intellectual property.
The admission hurts SAP's reputation in the battle with Larry Ellison's Oracle in the $56 billion market for software that manages tasks such as payroll. The rivalry between SAP and Oracle escalated when Oracle filed its March 22 lawsuit claiming SAP workers hacked into a Web site and stole software codes on a ``grand scale.''
``It's very embarrassing for SAP, which has always been seen as a technology leader and also in issues such as compliance,'' said Ernst Konrad, the Munich-based head of equities at BayernInvest, which oversees $35 billion including SAP shares.
Shares of Walldorf, Germany-based SAP fell 73 cents, or 1.9 percent, to 37.26 euros at 4:07 p.m. in Frankfurt, after dropping as low as 37.01 euros. The stock has fallen 10 percent in the past year, the only decline among the 30 members of Germany's benchmark DAX Index. Redwood City, California-based Oracle rose 5 cents to $19.97 in Nasdaq Stock Market trading in New York.
SAP said it will ``fully cooperate'' with the U.S. Department of Justice, which requested documents from the company and TomorrowNow.
`Illegal Scheme'
A settlement with Oracle may cost SAP $100 million, Credit Suisse Group analyst James Clark and colleagues wrote in a note today. The case may last years, said Frankfurt Trust analyst Matthias Maus.
SAP said its Bryan, Texas-based TomorrowNow unit, which provides software support to clients, was authorized to download materials from Oracle's Web site on behalf of TomorrowNow customers. The unit made ``some inappropriate'' downloads of fixes and support documents, SAP said.
In its lawsuit, Oracle said TomorrowNet used identities of Oracle customers and phony users to gain access to its systems. Customers for whom SAP allegedly conducted illegal downloads include Merck & Co. and Bear Stearns & Co., according to the March 22 lawsuit. Oracle didn't say how much the damage cost the company.
Some downloads ``may have erroneously exceeded the customer's right of access'' and were ``in violation'' of TomorrowNet's policy, SAP said in today's response.
Dropped Pants
``SAP CEO Henning Kagermann has now admitted to the repeated and illegal downloading of Oracle's intellectual property,'' Geoff Howard, a lawyer for Oracle at Bingham McCutchen LLP in San Francisco, said in an e-mailed statement. ``Oracle filed suit to discover the magnitude of the illegal downloads and fully understand how SAP used Oracle's intellectual property in its business.''
SAP, scheduled to report earnings July 19, may say second- quarter revenue rose 10 percent to 2.42 billion euros ($3.3 billion), the average estimate of 19 analysts surveyed by Bloomberg. Oracle, the world's third-largest software maker after Microsoft Corp. and International Business Machines Corp., said last week its sales may rise as much as 21 percent in the quarter ending Aug. 31.
Since 2005, Oracle has spent $20 billion buying rivals, the biggest run of acquisitions in the industry. The lawsuit underlines the intensifying competition that goes back to before 1996, when SAP co-founder Hasso Plattner dropped his pants in front of Ellison's support vessel during a yacht race.
Market Share
In September, an exchange of verbal blows erupted, with Oracle CEO Ellison saying the German company was losing market share and ``rethinking'' its strategy. SAP, in return, accused Oracle of publishing ``misleading'' views on the market leader.
SAP said its share in the market for business-management software, measured by software and related service revenue, rose to 25.1 percent in the year ended March 31 from 24.5 percent in the 12 months through Dec. 31.
SAP and Oracle offer software maintenance services for each other's products. Oracle's June 1 amended complaint in U.S. District Court in San Francisco alleged SAP improperly obtained software-support documentation from an Oracle Web site and that TomorrowNow violated copyright law by distributing the material to customers.
Kagermann said today he was ``personally surprised'' that Oracle didn't contact SAP ``as soon as they felt something was wrong.'' The download of materials didn't cause ``significant harm'' to Oracle and Oracle's claims in its complaints ``appear to be unfounded,'' Kagermann said.
Firewall
SAP didn't have access to Oracle's intellectual property because of a so-called firewall between SAP and TomorrowNow, the German company said.
Kagermann wouldn't rule out a settlement, saying ``all options'' are open.
``There's no question it's more likely that they'll settle now than a week ago,'' said Ross Dannenberg, a lawyer at Banner & Witcoff Ltd. in Washington, D.C., which specializes in intellectual property law. ``In trial, Oracle is going to repeat SAP's admission to the jury as often and loudly as possible. It's going to be hard to ignore.''
A conference between the companies and Judge Martin Jenkins is scheduled for Sept. 4, according to a Web site SAP set up for the lawsuit, at http://www.tnlawsuit.com .
Unit Chairman Named
``The whole issue tarnishes SAP's reputation with clients and potential new customers,'' said Jochen Klusmann, an analyst at BHF-Bank AG, who has a ``reduce'' rating on SAP shares. ``Oracle will probably try to keep it in the public spotlight for as long as possible. That will be quite unpleasant for SAP.''
SAP today appointed Mark White, chief operating officer of the America unit, as TomorrowNow's executive chairman to manage the division's operations, including compliance. TomorrowNow CEO Andrew Nelson will report to White. There was no sign that Nelson had knowledge of the inappropriate downloads, Kagermann said.
SAP acquired TomorrowNow in 2004 as part of its Safe Passage program designed to take customers from companies that Oracle bought, including PeopleSoft Inc. and J.D. Edwards & Co., by providing software support. TomorrowNow has annual sales of 15.7 million euros and 157 workers.
``Although many will see the legal teams as the cavalry in this battle, the troops that really matter are the PR special forces contingent,'' Ovum Plc analyst David Mitchell said. ``PR is where this battle will be won or lost.''
