SAP wants Oracle to reveal software, support profit margins

Disclosing such information could put SAP at a disadvantage, one industry analyst says

SAP wants Oracle to reveal profit-margin information for JD Edwards and PeopleSoft software and support, according to a joint discovery statement filed this week in connection with Oracle's lawsuit against SAP.

In quarterly earnings reports, software vendors regularly trumpet statistics such as growth in earnings per share or the increase in revenue for general software categories, such as databases. But it is far from typical for companies to detail their profit margins for specific software product lines.

[As the legal wranglings stand now, there's  no clear sign of a settlement in the Oracle-SAP suit. ]

If such information were in the public domain, it could put Oracle at a disadvantage in negotiating with customers and provide "useful ammo" for its competitors, particularly Salesforce.com, said 451 Group analyst China Martens.

Oracle sued SAP in March 2007 for copyright infringement and other alleged violations, charging that workers at SAP's now-shuttered subsidiary TomorrowNow, a provider of third-party support for Oracle's PeopleSoft, JD Edwards, and Siebel applications, had illegally downloaded material from Oracle's support systems and used them to court Oracle customers.

Meanwhile, SAP has said that TomorrowNow staff members were authorized to download materials from Oracle's site on behalf of TomorrowNow customers, but acknowledged that some "inappropriate downloads" had occurred. However, SAP has also said that Oracle's software remained in TomorrowNow's systems and has strongly rejected Oracle's claims of a broader pattern of wrongdoing.

Oracle has said its damages could top $1 billion, but has not yet provided a specific figure.

SAP, meanwhile, states in the discovery document filed Monday that the information is "relevant to the calculation of Oracle's alleged damages."

"Under the Copyright Act, actual damages represent the injury to the market value of the copyrighted work at the time of infringement. In appropriate circumstances, this amount may be computed by determining the profits that would have accrued to plaintiff but for the infringement," it adds.

However, during discovery Oracle "has taken the position that it is unable to determine its profit margins on the two product lines that are at the center of this case," the filing adds. Oracle has refused to provide financial information to allow SAP to determine or make a "reasonable estimate of" its profits on the product lines, according to the filing. So, SAP wants the court to order Oracle to provide the "financial data necessary to attempt to determine Oracle's actual profit margins for the PeopleSoft and JDE products and support services."

SAP's motion comes some weeks before a settlement conference scheduled for Feb. 23. A judge has ordered both parties to turn in proposals for settlement that include specific dollar figures prior to the conference.

Oracle spokeswoman Deborah Hellinger declined comment on Wednesday.

"This filing speaks for itself and this is a normal part of the discovery process," SAP spokesman Andy Kendzie said of the company's request for the profit margin information.

SAP is not interested in dragging out the suit, he added. "We have always said that we would like this case to be resolved."

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