SAP AG (SAP) has been ordered by a federal jury in California to pay $1.3 billion to Oracle Corp. (ORCL) as a compensation for copyright infringement. The violation was made by a software maintenance unit of SAP, which is at present inoperative.
The amount of damages to be paid by SAP came in as a surprise. The company had anticipated a penalty amount of $160 million of which $120 million had already been paid. The compensation amount is more than half of SAP’s total profit in 2009, and is one of the highest amounts ever paid in software piracy.
SAP admitted that its unit had illegitimately used Oracle’s software. However, the company’s lawyers disagree with the huge amount claimed by Oracle for damages. Oracle calculated the claim based on the business lost due to the illegal use of its software by SAP and value of its infringed intellectual property.
The share price of SAP fell 1.4% while Oracle received a boost with an increase in share price of 1.4% following the news.
SAP is the leader in the worldwide enterprise applications market with the largest market share. The litigation may affect the company’s image as a leading software provider.
Headquartered in Walldorf, Germany, SAP AG is one of the largest independent software vendors in the world and the leading provider of enterprise resource planning (ERP) software. Its solutions are designed to cater to the needs of organizations, ranging from small and medium businesses to large, global enterprises. SAP’s business suite solutions help clients to improve customer relationships, enhance collaboration, and improve efficiencies across their supply chains and business operations.
We current maintain our Neutral recommendation on SAP AG, with a Zacks #3 Rank (short-term Hold recommendation).
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