Oracle Corporation et al v. SAP AG et al

Filing 1022

Declaration of Tharan Gregory Lanier in Support of 1021 Response filed by SAP AG, SAP America Inc, Tomorrownow Inc. (Attachments: # 1 Exhibit 1, # 2 Exhibit 2, # 3 Exhibit 3, # 4 Exhibit 4, # 5 Exhibit 5, # 6 Exhibit 6, # 7 Exhibit 7, # 8 Exhibit 8, # 9 Exhibit 9, # 10 Exhibit 10, # 11 Exhibit 11, # 12 Exhibit 12, # 13 Exhibit 13, # 14 Exhibit 14, # 15 Exhibit 15, # 16 Exhibit 16, # 17 Exhibit 17, # 18 Exhibit 18, # 19 Exhibit 19, # 20 Exhibit 20, # 21 Exhibit 21)(Related document(s) 1021 ) (Froyd, Jane) (Filed on 12/23/2010) Modified on 12/27/2010 (kc, COURT STAFF).

EXHIBIT 2

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA BEFORE THE HONORABLE PHYLLIS J. HAMILTON, JUDGE ) ) PLAINTIFFS, ) ) VS. ) ) SAP AG, ET AL., ) ) DEFENDANTS. ) ____________________________) ORACLE CORPORATION, ET AL. JURY TRIAL NO. C 07-01658 PJH

CERTIFIED COPY
PAGES 480 - 640 OAKLAND, CALIFORNIA THURSDAY, NOVEMBER 4, 2010

(PAGES 485 THROUGH 491 ARE UNDER SEAL AND BOUND SEPARATELY) TRANSCRIPT OF PROCEEDINGS APPEARANCES: FOR PLAINTIFFS: BY: BINGHAM MUCCUTCHEN LLP THREE EMBARCADERO CENTER SAN FRANCISCO, CALIFORNIA 94111-4607 ZACHARY J. ALINDER, HOLLY A. HOUSE, GEOFFREY M. HOWARD, DONN P. PICKETT, ATTORNEYS AT LAW BOIES, SCHILLER & FLEXNER LLP 1999 HARRISON STREET, SUITE 900 OAKLAND, CALIFORNIA 94612 STEVEN C. HOLTZMAN, ATTORNEY AT LAW

BY:

(APPEARANCES CONTINUED NEXT PAGE)

REPORTED BY:

RAYNEE H. MERCADO, CSR NO. 8258

RAYNEE H. MERCADO, CSR, RMR, CRR, FCRR, CCRR [phone]

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PHILLIPS - DIRECT / PICKETT OF BUSINESS, THEY STAY WITH YOU. Q. LET'S GO TO THE SECOND REASON THAT YOU LISTED TO THE

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INVESTORS AND ANALYSTS, "LARGER APPLICATIONS, R&D BUDGET AND ACCELERATED INNOVATION." A. WHAT DID YOU MEAN BY THAT?

SO THESE CUSTOMERS ARE PAYING YOU EACH YEAR TO MAINTAIN THE SO LIKE I SAID EARLIER, THE MORE

SOFTWARE AND INVEST IN IT.

CUSTOMERS YOU HAVE, THAT MEANS MORE MONEY COMING IN BECAUSE THEY'RE PAYING ON A EITHER -- YEARLY BASIS. NORMALLY YOU TAKE THAT, AND THAT'S WHAT YOU USE TO IMPROVE THE PRODUCT. SO THE MORE CUSTOMERS YOU HAVE, THE BIGGER

R & D BUDGET YOU CAN HAVE, THE MORE DEVELOPERS YOU CAN HAVE. THE MORE DEVELOPERS, THE MORE INNOVATION. SO THAT'S ANOTHER WAY

TO CATCH UP WITH A LARGE COMPETITOR IF YOU HAVE MORE MONEY COMING IN TO PUT IN RESEARCH AND DEVELOPMENT. BECAUSE OF ALL

THOSE CUSTOMERS, YOU CAN THINK OF THINGS AND FUND DEVELOPMENT IN A WAY YOU COULDN'T BEFORE. Q. THIRD REASON FOR THE PEOPLESOFT ACQUISITION STRONGER, WHAT DID YOU MEAN BY THAT?

"COMPETITIVE POSITIONING." A.

WELL, WHEN THESE CUSTOMERS ARE MAKING A DECISION ON A

SOFTWARE PARTNER TO PUT IN A NEW FINANCIAL ACCOUNTING SYSTEM, FOR INSTANCE, OR MANUFACTURING SYSTEM, THIS IS A CAREER BET. YOU DON'T PUT THESE SYSTEMS IN AND CHANGE YOUR MIND SIX MONTHS LATER. IT MAY TAKE YOU TWO TO THREE YEARS TO GET THEM FULLY

INSTALLED, AND THEN YOU WILL BE LIVING WITH THAT SOFTWARE PARTNER FOR THE NEXT 15, 20 YEARS.
RAYNEE H. MERCADO, CSR, RMR, CRR, FCRR, CCRR [phone]

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PHILLIPS - DIRECT / PICKETT SO YOU WANT TO MAKE SURE THAT THEY'RE LARGE; THEY

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HAVE A LOT OF CUSTOMERS; FUNDING THE DEVELOPMENT, AS I MENTIONED BEFORE; THEY'RE GOING TO BE IN THE BUSINESS FOR A VERY LONG TIME AND NOT THINKING ABOUT GETTING OUT OF IT BECAUSE, YOU KNOW, IT'S NOT WORKING FOR THEM. SO HAVING MORE CUSTOMERS MAKES YOU ACTUALLY MORE COMPETITIVE BECAUSE PEOPLE NOW ARE HAVE COMFORT THAT YOU WILL BE THERE IN 20 YEARS. Q. A. AND YOUR COMPETITION AT THE TIME? WELL, THE COMPETITION WAS MUCH LARGER. THERE WAS NO

QUESTION ABOUT SAP'S STAYING POWER AND COMMITMENT TO THE BUSINESS. THAT WAS THEIR BUSINESS. AND THEY HAD, YOU KNOW, SO WE WOULD SOMETIMES

THOUSANDS AND THOUSANDS OF CUSTOMERS.

LOSE TO SAP BECAUSE THEY WERE VIEWED AS THE SAFE DECISION BECAUSE THEY HAVE THE MOST CUSTOMERS. LONG TIME. THERE'S NO ONE JUST GOING TO CATCH THEM. SO IF YOU THEY BEEN DOING THIS A

WERE A CONSERVATIVE DECISION-MAKER, YOU DIDN'T WANT TO TAKE ANY RISK, THEY WERE THE SAFE PURCHASE AT THAT TIME. Q. NOW, MR. PHILLIPS, THE FOURTH REASON ON YOUR SLIDE, "MORE CAN YOU EXPLAIN TO THE JURY

HIGH-MARGIN RECURRING REVENUE." WHAT YOU MEANT BY THAT? A.

WELL, THE SUPPORT REVENUE IS PROFITABLE REVENUE, AND YOU IT'S

TAKE THAT SUPPORT DOLLARS THAT THEY'RE PAYING EACH YEAR. KIND OF LIKE A -- ALMOST LIKE A MAGAZINE SUBSCRIPTION.
RAYNEE H. MERCADO, CSR, RMR, CRR, FCRR, CCRR [phone]

THAT

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530 PHILLIPS - DIRECT / PICKETT MONEY IS COMING INTO US EVERY YEAR. AND YOU TAKE THAT MONEY, AND THAT'S WHAT YOU USE TO PUT IN RESEARCH AND DEVELOPMENT TO FIGURE OUT WAYS TO MAKE THE PRODUCT BETTER. SO LONG AS THAT'S IMPROVING AND INCREASING, THAT'S HOW THE PRODUCTS GET BETTER. Q. FIFTH REASON, "ACCRETIVE TRANSACTION FROM OPERATIONS TO WHAT DOES THAT MEAN?

ORACLE'S SHAREHOLDERS." A.

SO WHAT THE "ACCRETIVE" MEANS, IN THIS CONTEXT ANYWAY, IS

THAT THERE ARE SOME ACQUISITIONS THAT ON DAY ONE WHEN YOU BUY THEM, BECAUSE YOU'RE LOSING MONEY, THEY ACTUALLY YOU MAKE LESS MONEY OVERALL. EARNINGS. BUT THIS ONE WAS ACCRETIVE, WHICH MEANS BECAUSE IT PROFITABLE AND BECAUSE IT'S A LARGE CUSTOMER BASE WITH ALL THAT RECURRING REVENUE, ON DAY ONE, WE ACTUALLY MAKE MONEY WITH THIS COMPANY. THEY ADD TO OUR EARNINGS. SO THE NUMBER YOU REPORT TO AND THEY ARE WHAT'S CALL DILUTIVE TO YOUR

THE PUBLIC, TO YOUR SHAREHOLDERS, WILL BE HIGHER NOW ON DAY ONE. SO IT'S ACCRETIVE TO YOUR EARNINGS, ADDS TO YOUR EARNINGS, AND, YOU KNOW, INVESTORS AND RATING AGENCIES LIKE TO SEE THAT. THEY DON'T LIKE ACQUISITIONS WHERE, OKAY. YOU'RE

BUYING IT, BUT YOU'RE ACTUALLY GOING TO MAKE LESS MONEY FOR THE FIRST YEAR OR TWO. Q. A. Q. NOT SO MUCH? NOT SO MUCH. THEN FINALLY, "LOW-RISK ACQUISITION BASED ON PLANNED THEY DON'T LIKE THAT.

RAYNEE H. MERCADO, CSR, RMR, CRR, FCRR, CCRR [phone]

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PHILLIPS - DIRECT / PICKETT UMBRELLA OF ENTERPRISE APPLICATIONS. AND ONCE AGAIN, THERE, ORACLE'S PRESENCE THERE PRE-SIEBEL WAS PRETTY SMALL.

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SAP HAD A LARGE PRESENCE THERE.

THE ONLY WAY TO CATCH UP, YOU HAVE TO LOOK AROUND AND FIND WHAT CAN I BUY TO HAVE AS MANY CUSTOMERS OR AT LEAST APPROACH THE SAME SIZE THEY HAVE SO I CAN SPEND AS MUCH ON THE PRODUCT. THE ONLY THING AVAILABLE WAS SIEBEL, AND IT WAS THE LEADER IN THAT AREA, SO IT WAS THE OBVIOUS THING TO BUY. Q. A. Q. A. Q. HOW MUCH DID ORACLE PAY FOR SIEBEL? JUST OVER 6 BILLION. 6 BILLION? RIGHT. NOW, I WANT YOU TO ASSUME NOW A SECOND NEGOTIATION, ONLY

THIS TIME IT'S FOR SAP AND TOMORROWNOW TO GAIN ACCESS TO THE SIEBEL SOFTWARE STARTING IN SEPTEMBER 2006 WHEN THEY STARTED TO SERVICE SIEBEL CUSTOMERS. HOW WOULD YOU VALUE A LICENSE, HOW WOULD YOU APPROACH THE NEGOTIATIONS FOR A LICENSE FOR THE SIEBEL SOFTWARE? A. WELL, MUCH THE SAME WAY AS -- AS WE DISCUSSED EARLIER WITH IF I JUST PAID 6 BILLION AND I'M NOW GOING TO GIVE

PEOPLESOFT.

SAP, OF ALL PEOPLE, ACCESS TO THE CODE AND TO THOSE CUSTOMERS AND LOSE THOSE CUSTOMERS, I'D HAVE TO GET PAID A GOOD CHUNK OF THAT UPFRONT TO JUSTIFY DOING THAT TO MY BOARD. Q. WHAT WAS THE -SORRY, GO AHEAD.
RAYNEE H. MERCADO, CSR, RMR, CRR, FCRR, CCRR [phone]

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A.

PHILLIPS - DIRECT / PICKETT OTHERWISE, WHY WOULD I DO THAT? IT WOULD JUST -- IT'S

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ALMOST -- DOESN'T MAKE MUCH SENSE. Q. WHAT WAS THE SIEBEL CUSTOMER BASE THAT YOU ACQUIRED IN THE

ACQUISITION? A. Q. IF I REMEMBER RIGHT, IT WAS AROUND 4,000 CUSTOMERS OR SO. AND IN THAT NEGOTIATION, WHAT WOULD YOU RECOMMEND ORACLE'S

POSITION BE IN THE NEGOTIATION FOR THE LICENSE FOR SIEBEL? A. THE NUMBER, OPENING NUMBER FOR ME WOULD HAVE A "B" ON IT IN

BILLIONS IF I JUST PAID 6 BILLION AND I'M ABOUT TO GIVE THOSE CUSTOMERS AWAY TO MY LARGEST COMPETITOR. I KNOW THERE'S VARIOUS WAYS OF ANALYZING THIS, AND THERE MAY BE OTHER MODELS. BUT FOR ME, IT'S JUST PRETTY SIMPLE.

I JUST PAID 6 BILLION, AND MY BIGGEST COMPETITOR WANTS WHAT I JUST BOUGHT. I CAN'T GIVE IT TO HIM FOR NOTHING. THANK YOU. I HAVE NO FURTHER

MR. PICKETT: QUESTIONS.

THANK YOU, MR. PHILLIPS. THE COURT: MR. LANIER: ALL RIGHT. CROSS?

YOUR HONOR, WE HAVE A COUPLE OF CAN I GIVE HIM THAT?

DOCUMENTS FOR MR. PHILLIPS AS WELL. THE COURT: MR. LANIER: SURE.

YOU CAN GIVE HIM THOSE.

THANK YOU. CROSS-EXAMINATION

BY MR. LANIER: Q. MORNING, MR. PHILLIPS. GOOD TO SEE YOU AGAIN.

RAYNEE H. MERCADO, CSR, RMR, CRR, FCRR, CCRR [phone]

CERTIFICATE OF REPORTER WE, RAYNEE H. MERCADO AND DIANE E. SKILLMAN, OFFICIAL REPORTERS FOR THE UNITED STATES COURT, NORTHERN DISTRICT OF CALIFORNIA, HEREBY CERTIFY THAT THE FOREGOING PROCEEDINGS IN C07-01658PJH, ORACLE USA, INC., ET AL. V. SAP AG, ET AL., WERE REPORTED BY US ON, THURSDAY, NOVEMBER 4, 2010, CERTIFIED SHORTHAND REPORTERS, AND WERE THEREAFTER TRANSCRIBED UNDER OUR DIRECTION INTO TYPEWRITING; THAT THE FOREGOING IS A FULL, COMPLETE AND TRUE RECORD OF SAID PROCEEDINGS AS BOUND BY US AT THE TIME OF FILING. THE VALIDITY OF THE REPORTER'S CERTIFICATION OF SAID TRANSCRIPT MAY BE VOID UPON DISASSEMBLY AND/OR REMOVAL FROM THE COURT FILE.

___________________________________ RAYNEE H. MERCADO, CSR, RMR, CRR, FCRR, CCRR

___________________________________ DIANE E. SKILLMAN, CSR, RPR, FCRR

/s/

FRIDAY, NOVEMBER 5, 2010