November 1, 2010 / 1:19 PM / 7 years ago

Oracle-SAP testimony nears, HP CEO might appear

OAKLAND, California (Reuters) - Jury selection has kicked off in a Silicon Valley legal drama that could make for some of the best theater the technology industry has seen in years.

Larry Ellison, the co-founder and CEO of software company Oracle Corp, has waited 2-1/2 years to bring archrival SAP AG to court on allegations that SAP stole Oracle's software and resold the technology at bargain-basement prices.

The court proceedings got under way in U.S. District Court in Oakland, California, on Monday, with one of Oracle's highest-ranking executives in attendance. Safra Catz, Oracle's president who rarely appears in public, sat quietly in the gallery as jury selection began.

SAP Co-Chief Executive Bill McDermott has said he will be in court on Tuesday.

An SAP lawyer, Bob Mittelstaedt, expressed concerns in court because some potential jurors indicated on a questionnaire that they might not be able to be fair to a German company.

An Oracle attorney, Geoffrey Howard, voiced concern after some potential jurors disclosed negative views about Ellison, one of the highest-paid U.S. corporate executives.

Oracle has attacked Hewlett-Packard Co for naming SAP's former chief executive, Leo Apotheker, as its own CEO in late September. Ellison charges that Apotheker played a key role in the case. SAP, Europe's biggest software maker, and HP have moved quickly to defend Apotheker.

HP, the world's biggest technology company by revenue, and Oracle, the biggest independent maker of business software, were close partners until three months ago.

They became fast enemies following a series of executive shuffles that began in early August: HP fired its CEO, Mark Hurd, who is a close friend of Ellison. Hurd was accused of falsifying expense reports to hide a relationship with a female contractor.

Oracle then hired Hurd as its president. HP responded by hiring Apotheker as its chief executive, which prompted a verbal firestorm from Ellison.

While the high-tech industry is one where personal rivalries and friendships play a significant role in shaping corporate warfare, it is rare for alliances to shift so quickly and dramatically.

"It has gotten very, very personal. And it's not going to stop," said Howard Anderson, a lecturer at MIT's Sloan School of Management.

THE CASE

SAP has chosen not to contest liability in the case and has admitted to wrongdoing for improperly downloading files from an Oracle customer-service website.

That means the jury case will be limited to determining the scope of damages. SAP has said in a court filing that it believes the damages should total in the "tens of millions of dollars."

Oracle has said SAP should pay more than $2 billion in damages and has hired David Boies, one of the top trial attorneys in the United States, to make that case to the jury.

While the two sides will spend the next four to six weeks arguing over money, several analysts said that the size of the award may not have a huge impact on either company, regardless of the outcome, since SAP and Oracle each generate billions of dollars a year in revenue.

"Let's not confuse this with real money. It doesn't matter whether it's $250 million or a $1 billion," Anderson said.

SAP has already taken a $160 million provision for the case and would likely take a writedown for whatever damages it ultimately ends up paying.

Kim Caughey Forrest, an analyst with Fort Pitt Capital, said that the outcome of the trial would not influence her assessment of the value of either Oracle or SAP shares.

The trial will be remembered more for Oracle humiliating its rivals than whatever damages are awarded, she said.

"The drama of it all ... It's so Silicon Valley," Caughey Forrest said.

The biggest celebrity witness at the trial will likely be Ellison himself, the brash billionaire playboy known outside the business world for racing sailboats and cars.

CRIMINAL PROBE

The U.S. government is conducting a criminal investigation into the matter and will likely be monitoring the trial closely. That could make some executives less keen on testifying in the civil trial, said Eric Goldman, associate professor at Santa Clara University School of Law.

SAP disclosed the criminal probe in July 2007. The government has not disclosed any details on the investigation.

Company spokesman Bill Wohl said that SAP had been cooperating with Department of Justice investigators. He said he was not sure whether government officials had questioned any SAP executives.

One potential witness of high interest is Apotheker, who was due to start his new job with HP on Monday.

HP has declined to say whether Apotheker will testify. The company has said it believes Oracle is calling him only to harass him and interfere with his new duties.

A spokeswoman for HP declined to say whether Apotheker would be working in the Silicon Valley area during the course of the trial. That would put him within the court's jurisdiction and allow Oracle to call him as a witness.

Oracle has said it may also call former SAP CEO Henning Kagermann, current SAP co-CEO McDermott and Oracle's Catz.

The case in U.S. District Court, Northern District of California is Oracle USA, Inc., et al. v. SAP AG, et al, 07-1658.

Reporting by Jim Finkle; Editing by Derek Caney and Matthew Lewis

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