Oracle Corporation et al v. SAP AG et al

Filing 1061

EXHIBITS re 1045 Declaration in Support,,,, Corrected Exhibit 38 to the Declaration of Tharan Gregory Lanier iso Defendants' Renewed Motion For Judgment as a Matter of Law and New Trial Motion [CORRECTION OF DOCKET #[1045-38]] filed bySAP AG, SAP America Inc, Tomorrownow Inc. (Related document(s) 1045 ) (Froyd, Jane) (Filed on 4/14/2011)

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Robert A. Mittelstaedt (SBN 060359)
Jason McDonell (SBN 115084)
Elaine Wallace (SBN 197882)
JONES DAY
555 California Street, 26th Floor
San Francisco, CA 94104
Telephone:
[phone]
Facsimile:
[phone]
[e-mail]
[e-mail]
[e-mail]
Tharan Gregory Lanier (SBN 138784)
Jane L. Froyd (SBN 220776)
JONES DAY
1755 Embarcadero Road
Palo Alto, CA 94303
Telephone:
[phone]
Facsimile:
[phone]
[e-mail]
[e-mail]
Scott W. Cowan (Admitted Pro Hac Vice)
Joshua L. Fuchs (Admitted Pro Hac Vice)
JONES DAY
717 Texas, Suite 3300
Houston, TX 77002
Telephone:
[phone]
Facsimile:
[phone]
[e-mail]
[e-mail]
Attorneys for Defendants
SAP AG, SAP AMERICA, INC., and
TOMORROWNOW, INC.
UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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OAKLAND DIVISION
ORACLE USA, INC., et al.,

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Plaintiffs,
v.
SAP AG, et al.,

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Defendants.

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Case No. 07-CV-1658 PJH (EDL)
CORRECTED EXHIBIT 38 TO THE
DECLARATION OF THARAN GREGORY
LANIER ISO DEFENDANTS’ RENEWED
MOTION FOR JUDGMENT AS A MATTER OF
LAW AND NEW TRIAL MOTION

CORRECTION OF DOCKET ITEM NO. 1045-38
Date:
July 13, 2011
Time:
9:00 a.m.
Courtroom: 3, 3rd Floor
Judge:
Hon. Phyllis J. Hamilton

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SVI-91864v1

CORRECTED EXHIBIT 38 TO LANIER DECL. ISO DEFS’ RENEWED
MOTION FOR JMOL AND NEW TRIAL MOTION
Case No. 07-CV-1658 PJH (EDL)

EXHIBIT 38

Amended Trial Stipulation and Order No. 1 (November 2, 2010) &
Trial Stipulation and Order Regarding Contributory Infringement
Liability (November 2, 2010)

‐1‐

Work Steps
1

2

Information
Reviewed
• Legal Filings
• Company and Industry
Research
• Financial and Other Company
Documents

3

Analysis

Determination of
Damages
Approach /
Amount

• Analyzed Strategic Goals/
Expectations of Oracle and SAP
• Reviewed Oracle and SAP
Licenses / Acquisition History
• Analyzed ERP Market Shares

• Expert Reports

• Analyzed Oracle and SAP
Financial Records / Models

• Trial Testimony

• Interviewed Oracle Personnel

• Stipulations

• Considered Input From Other
Experts

• Depositions

‐2‐

Copyright License Negotiation
The Reduction of the Fair Market Value of the Copyrighted Work is the
Amount a Willing Buyer (SAP) Would Have Been Reasonably Required
to Pay a Willing Seller (Oracle) at the Time of the Infringement

Oracle’s Negotiating
Perspective

What is Oracle
Giving Up?

SAP’s Negotiating
Perspective

What is SAP
Gaining?

‐3‐

Fair Market Value License Negotiation Framework
Oracle’s
Negotiating
Perspective
What is Oracle
Giving Up?

Negotiation Factors*
Scope and Duration of the License
Need for the Copyrighted Works
Risk Acceptance
Competitive Relationship of the Parties

SAP’s
Negotiating
Perspective
What is SAP
Gaining?

Goals/Business Plans Related to the Copyrighted
Works
Expected Financial Benefits/Impacts
Values not Quantified

Amount That SAP Would be Reasonably Required to Pay Oracle at
the Time of the Infringement
* Consistent with Georgia-Pacific Corp. v. U.S. Plywood Corp.

‐4‐

Fair Market Value of Copyrighted Works - Concept
Before License to SAP
(Exclusive Rights)

After License to SAP
(Non-Exclusive Rights)

$
License Value

Original Value to Oracle

Value to Oracle After License

Value to SAP with License

Customer Relationships
Customer Revenues
Market Share
Other Value

‐5‐

Why Fair Market Value License Approach
Measures fair market value of what Oracle would have been paid at
the time, based on total scope of infringing activities
Reflects Oracle’s upfront investments for PeopleSoft ($11.1B) and
Siebel ($6.1B), including exclusive use of software and materials
Reflects SAP’s need for the software and materials prior to launching
PeopleSoft and Siebel maintenance services
Substitutes negotiation for infringement

‐6‐

Fair Market Value License – Information Considered
Considers events and circumstances known at the valuation date
• SAP documents indicate expectations at the time
• As ERP software market leader, SAP was experienced in
projecting customer conversions and revenues
Not appropriate to determine fair market value in hindsight
• Value not impacted by events not known at the time
• Value not dependent on SAP execution after January 2005
• Value not affected by Oracle’s filing of lawsuit (March 2007)
Approach consistent with recognized valuation theory

‐7‐

Why Upfront License Fee
Protects Oracle’s upfront investment of $11.1B and $6.1B just
spent to acquire PeopleSoft and Siebel
SAP was aware that Oracle paid upfront to acquire PeopleSoft and
Siebel software and support materials
Only way to balance the risk between Oracle’s upfront investments
and SAP’s execution of its business plans
Common payment structure for technology licenses between direct
competitors
Avoids future disputes over what are royalty-bearing customers or
revenues – especially between competitors
‐8‐

Why Not Running Royalty
Places the entire risk of the $11.1B and $6.1B upfront investments
on Oracle
Does not value software and support materials at the time of the
negotiation
Greater SAP success (customer conversions) equals greater
impact to Oracle revenue / direct competitors
Lower SAP maintenance price equals lower royalty paid / increased
chance of SAP converting the customer

‐9‐

From SAP’s Opening Statement

‐10‐

Scope of PeopleSoft Copyrighted Works Valued
105 PeopleSoft Copyright
Registrations

Oracle Copyrighted Works

• At Least Hundreds of Thousands of
Software Files
• At Least Thousands of Copies of Entire
Applications
• At Least Hundreds of Thousands of
Downloads

Oracle Software Engineers and Developers

‐11‐

Timing of PeopleSoft License Negotiation

January 18, 2005

January 19, 2005

Oracle Announces Plans 
for Combined 
Oracle/PeopleSoft 
Organization 
($11.1B Acquisition)

SAP Acquisition of 
TomorrowNow / 
Launch of Safe Passage 
/ Public Announcement

License Negotiation:  January 19, 2005
‐12‐

“Safe Passage: Winning Customers and Markets from OraclePeopleSoft-J.D. Edwards” – January 16, 2005

PX0141
‐13‐

Oracle and SAP ERP Worldwide Market Share
2004 Worldwide Market Share

Post PeopleSoft Acquisition Market Share

* Oracle paid $11.1 billion to acquire 11% market share
Source: SAP Document - “The Truth About Oracle’s Claims” (PX0157)

‐14‐

“Clear Sailing: Sustaining Our Momentum in Competitive Waters”
– February 3, 2005

PX0171
‐15‐

PeopleSoft License – SAP Negotiation Factors
Negotiation Factor

Analysis

Offering

Offering PeopleSoft Maintenance is Step 1 of “3Step Plan” to Convert Customers to SAP

SAP’s Expected Impact
on Oracle

Impact Oracle’s Return on $11.1B Investment by
Taking PeopleSoft Customers

1 SAP’s Goals for New
2

SAP Increased Revenue Equals Oracle Revenue
Impact

3

SAP’s Expected
Financial Gains

$897 Million in Only 3 Years
Expected Customer Conversions of 2,000 to 6,000
SAP Expected Gains of $881M to $2.69B

January 19, 2005

‐16‐

PeopleSoft License – Key SAP Documents
SAP NEGOTIATION FACTORS

1
Date

Document

SAP
Goals

2

3

Presented To /
Received By

Impact on Financial
Oracle
Gains

1

12/15/2004

Executive Board Meeting Minutes
(PX0003)

X

2

12/20/2004

“PeopleSoft 1-2-3” (PX0006, PX0008)

X

3

12/23/2004

“A Roadmap For PSFT Customers to
SAP” (PX0012)

X

4

1/5/2005

“PeopleSoft 1-2-3” Version 1.2 (PX0015)

X

X

5

1/16/2005

“Safe Passage: Winning Customers and
Markets from Oracle-PeopleSoft-JD
Edwards” (PX0141)

X

X

X

Apotheker, Agassi, Oswald,
Homlish, Ziemen, Mackey and
Others

6

1/19/2005

SAP Conference Call (PX0023)

X

X

X

Public

7

1/20/2005

Executive Board / “Safe Passage:
Winning Customers and Markets from
Oracle-PeopleSoft-JD Edwards” (PX0024,
PX0151)

X

X

X

SAP Executive Board

8

1/25-26/2005

“TomorrowNow Integration Meeting”
(PX0161)

X

X

Oswald, Ziemen, Nelson, Ravin
and Others

SAP Executive Board
X

Agassi, Oswald, Mackey
X

Agassi, Apotheker,
Kagermann, Oswald
Agassi, Oswald, Shenkman,
Mackey and Others

‐17‐

PeopleSoft License - SAP’s Goals For New Offering
(Factor 1 )
Document
1

Executive Board Meeting Minutes
– 12/15/2004 (PX0003)

2

“PeopleSoft 1-2-3” – 12/20/2004 &
1/5/2005 (PX0006, PX0008,
PX0015)

3

“A Roadmap for PSFT Customers
to SAP” - 12/23/2004 (PX0012)

4

“Safe Passage: Winning
Customers and Markets from
Oracle-PeopleSoft-J.D. Edwards”
– 1/16/2005 (PX0141)

Presented To /
Received By

SAP’s Goals (quotes)

SAP Executive
Board

• “The Executive Board agrees to make a special offer to
PeopleSoft/SAP customers to take over responsibility
for the maintenance of their PeopleSoft HR installations
and for potentially upgrading to mySAP BS”

Agassi, Oswald,
Mackey

• “Step 1: Provide current SAP customers PeopleSoft
support”
• “Freezing a PeopleSoft customer ‘forever’ is not an end
goal of SAP. SAP ultimately wants to sell more
software and upgrade a customer to mySAP.”

Agassi, Apotheker,
Kagermann,
Oswald
Apotheker, Agassi,
Oswald, Homlish,
Ziemen, Mackey
and Others

• “SAP provides ongoing support for PSFT software until
2009”
• “Safe Passage features 3 fundamental elements: 1.
Maintenance of PeopleSoft and J.D. Edwards
applications”

‐18‐

PeopleSoft License - SAP’s Goals For New Offering
(Factor 1 ) – cont.
Document

Presented To /
Received By

SAP’s Goals (quotes)

Public

• “To accelerate this offering, SAP has acquired
TomorrowNow”
• “Our Safe Passage program has three key
components. One: a maintenance offering on existing
investments customers have made in PeopleSoft and
JDE.”
• “This offer is a global offer.”

6

Executive Board / “Safe Passage:
Winning Customers and Markets
from Oracle-PeopleSoft-JD
Edwards” – 1/20/2005 (PX0024,
PX0151)

SAP Executive
Board

• “Our Offering: SAP will offer full product maintenance
and support for all PeopleSoft and J.D. Edwards
products, and provide that support through
TomorrowNow.”

7

“TomorrowNow Integration
Meeting” – 1/25-26/2005 (PX0161)

Oswald, Ziemen,
Nelson, Ravin and
Others

• “Tnow will serve as major cornerstone of our Go-to –
market strategy as our key Service-delivery unit”

5

SAP AG Phone Conference –
1/19/2005 (PX0023)

‐19‐

PeopleSoft License - SAP’s Expected Impact on
Oracle (Factor 2 )
Document

Presented To /
Received By

SAP’s Impact on Oracle (quotes)
• “May force Oracle to change its behavior or plans
around pricing or positioning” (PX0006, PX0015)
• “Affecting Oracle’s ability to maintain this revenue
stream could impact the ROI assumptions of the
Oracle/PeopleSoft deal“ (PX0015)

1

“PeopleSoft 1-2-3” - 12/20/2004 &
1/5/2005 (PX0006, PX0008, PX0015)

Agassi, Oswald,
Mackey

2

“Safe Passage: Winning Customers
and Markets from OraclePeopleSoft-JD Edwards” –
1/16/2005 (PX0141)

Apotheker, Agassi,
Oswald, Homlish,
Ziemen, Mackey and
Others

3

SAP AG Phone Conference 1/19/2005 (PX0023)

4

“Safe Passage: Winning Customers
and Markets from OraclePeopleSoft-JD Edwards” –
1/20/2005 (PX0024, PX0151)

• “Contain Oracle’s potential growth in the next
generation application market.”
• “SAP will siphon off the cash flow that Oracle
needs to build or acquire it’s next generation
applications.”

Public

• “The value was estimated by Oracle, rightfully or
wrongly, as $10 billion.”
• “This customer base is not necessarily captive by
Oracle.”

SAP Executive
Board

• “Disrupt Oracle’s ability to pay for the acquisition
out of cash flow”
• “Shrink their share of the application market”
• “Discredit their efforts to create a next-generation
application platform”
‐20‐

PeopleSoft License - SAP’s Expected Financial Gains
(Factor 3 )
Document

Presented To /
Received By

SAP’s Expected Gains

1

“A Roadmap For PSFT Customers to SAP” 12/23/2004 (PX0012)

Agassi, Apotheker,
Kagermann, Oswald,
Homlish

• 3,000 maintenance customers by 2007
• Convert 1,375 customers to SAP by 2007
• $897 million in first 3 years

2

“Safe Passage: Winning Customers and
Markets from Oracle-PeopleSoft-J.D.
Edwards – Executive Overview” – 1/16/2005
(PX0141)

Apotheker, Agassi,
Oswald, Homlish,
Ziemen, Mackey and
Others

• “Our goal is to convert the majority of the
PeopleSoft and J.D Edwards customer base
to SAP”
• “Aggressively convert” 450 of Global 1000
“over the next 30 days”

3

SAP AG Phone Conference – 1/19/2005
(PX0023)

4

“Safe Passage: Winning Customers and
Markets from Oracle-PeopleSoft-JD
Edwards” – 1/20/2005 (PX0024, PX0151)

5

“TomorrowNow Integration Meeting” – 1/2526/2005 (PX0161)

6

Deposition Testimony of Shai Agassi,
Former SAP Executive Board Member

Public

SAP Executive Board
Oswald, Ziemen,
Nelson, Ravin and
Others
N/A

• Target 4,000 joint SAP customers
• Two common customer scenarios
• Convert 50% of PSFT/JDE customers
(100% of shared customers) to SAP
• 9,920 x 50% = 4,690
• 2,000 to 4,000 TomorrowNow customers by
2009
• 60% of PSFT/JDE customers
• 9,920 x 60% = 5,952
‐21‐

Executive Board Meeting Minutes
– December 15, 2004 (Factor 1 )

PX0003
‐22‐

“PeopleSoft 1-2-3”
- December 20, 2004 (Factor

1

)

PX0006
‐23‐

“A Roadmap For PeopleSoft Customers to SAP”
- December 23, 2004 (Factor 3 )
2007
Upswitch Total: 1,375

3,000

Cross Sell Total:
2,250

$897 Million
$897 Million

PX0012
‐24‐

“PeopleSoft Attack Program”
- December 23, 2004 (Factor

3

)

PX4814
‐25‐

“Safe Passage: Winning Customers and Markets from OraclePeopleSoft-J.D. Edwards” – January 16, 2005 (Factors 2 & 3 )

PX0141

‐26‐

SAP AG Phone Conference
- January 19, 2005 (Factor 2 )

PX0023
‐27‐

“Safe Passage: Winning Customers and Markets from OraclePeopleSoft-J.D. Edwards” – January 20, 2005 (Factors 2 &

3

)

PX0024
‐28‐

“TomorrowNow Integration Meeting”
– January 25-26, 2005 (Factor 3 )

PX0161
‐29‐

“TomorrowNow Integration Meeting”
– January 25-26, 2005 (Factor 1 )

PX0161
‐30‐

PeopleSoft License - SAP’s Expected Financial Gains
(Factor 3 )
Document

Presented To /
Received By

SAP’s Expected Gains

1

“A Roadmap For PSFT Customers to SAP” 12/23/2004 (PX0012)

Agassi, Apotheker,
Kagermann, Oswald,
Homlish

• 3,000 maintenance customers by 2007
• Convert 1,375 customers to SAP by 2007
• $897 million in first 3 years

2

“Safe Passage: Winning Customers and
Markets from Oracle-PeopleSoft-J.D.
Edwards – Executive Overview” – 1/16/2005
(PX0141)

Apotheker, Agassi,
Oswald, Homlish,
Ziemen, Mackey and
Others

• “Our goal is to convert the majority of the
PeopleSoft and J.D Edwards customer base
to SAP”
• “Aggressively convert” 450 of Global 1000
“over the next 30 days”

3

SAP AG Phone Conference – 1/19/2005
(PX0023)

4

“Safe Passage: Winning Customers and
Markets from Oracle-PeopleSoft-JD
Edwards” – 1/20/2005 (PX0024, PX0151)

5

“TomorrowNow Integration Meeting” – 1/2526/2005 (PX0161)

6

Deposition Testimony of Shai Agassi,
Former SAP Executive Board Member

Public

SAP Executive Board
Oswald, Ziemen,
Nelson, Ravin and
Others
N/A

• Target 4,000 joint SAP customers
• Two common customer scenarios
• Convert 50% of PSFT/JDE customers
(100% of shared customers) to SAP
• 9,920 x 50% = 4,690
• 2,000 to 4,000 TomorrowNow customers by
2009
• 60% of PSFT/JDE customers
• 9,920 x 60% = 5,952
‐31‐

PeopleSoft License – SAP’s Expected Financial Gains
- Calculation Inputs – Revenue Components (Factor 3 )
Example
Conversions to SAP Apps

+
Sales of Other SAP Products

+
Maintenance

Source: PX0012

‐32‐

PeopleSoft License – SAP’s Expected Financial Gains
– Calculation Approach (Factor 3 )
Based on SAP’s Expectations at the Time of the Negotiation
1

2
TomorrowNow
Maintenance
Customers

+
Other Customer
Sales / Conversions

3
Expected Renewal
Rates
Expected Revenues per
Customer
SAP Profit Margins

Total Expected
Financial Gains

Future Value of
Converted Customers

‐33‐

PeopleSoft License – SAP’s Expected Financial Gains
– Calculation Inputs (Factor 3 )
INPUTS
Category

TN Maintenance

Other Revenues

(PX0012, PX0023, PX0024, PX0161,
PX0141)

3,000

Conversions: 1,375 - 2,000
Other Sales: 2,250 - 3,000

Minus: Customer Attrition

Expected Attrition for PSFT

3.5% (per year)

3.5% (per year)

Multiplied By: Average
Revenue per Customer

“SAP Business Opportunity”

$68,000 (per year)

Number of Customers

= Total Revenue
Multiplied By: Profit
Margin
Multiplied By: Discount
Factor
= Expected Profits
(as of 1/05)
Plus: Future Value of
Customers

Source
SAP Projections 12/04 – 1/05

(PX0012)

Calculated
SAP Financial Records
(PX1760, PX1761)

SAP Valuation Documents
(PX0533)

Calculated
70%

70%

14%

14%
Calculated

Calculated
PeopleSoft Acquisition
(PX0013, PX1762)

Conversions: up to $358K
Other Sales: up to $86K

N/A

= SAP EXPECTED FINANCIAL GAINS

Revenue Multiple: 4
Per Customer Value: $1M

‐34‐

PeopleSoft License – SAP’s Expected Financial Gains
– Example Calculation (Factor 3 )
3,000 Maintenance Customers / 2,000 Converted to SAP
2005 - 2008
SAP Expected Gains as of January 2005
(in $ millions)

Customer
Base

259.1

3,000

187.9

(56.3)

131.6

90.6

222.2

2,000

427.9

(128.3)

299.6

440.4

740.0

690.3

$ 531.0

$1,221.3 $

3,000

Expected Additional Product Sales
Expected License Revenue / Converted Customers

$

Less:
Costs

Total
Expected
Profits

$ 985.9 $ (295.6)

$

N/A

Total
Expected
Gains as of
January
2005

370.1 $ (111.0 ) $

Expected SAP Maintenance Revenue

Total Expected Gains as of January 2005

Total
Expected
Revenue

Future
Financial
Gains from
Converted
Customers

$

259.1

Sources: PX0012, PX013, PX0193, PX0533, PX1760, PX1762
‐35‐

PeopleSoft License – SAP’s Expected Financial Gains
– Calculation Results (Factor 3 )
Calculation A

Calculation B

TomorrowNow Maintenance
Customers

3,000

3,000

Other SAP Product
Customers

2,250

3,000

Converted Customers

1,375

2,000

SAP’s Expected Gains
(as of January 2005)

$881 Million

$1.22 Billion*

$2.69 Billion**

* Future value based on revenue multiple
** Future value based on value per customer
Sources: PX0012, PX013, PX0193, PX0533, PX1760, PX1762

‐36‐

PeopleSoft License – SAP Negotiation Factors
Negotiation Factor

Analysis

Offering

Offering PeopleSoft Maintenance is Step 1 of “3Step Plan” to Convert Customers to SAP

SAP’s Expected Impact
on Oracle

Impact Oracle’s Return on $11.1B Investment by
Taking PeopleSoft Customers

1 SAP’s Goals for New
2

SAP Increased Revenue Equals Oracle Revenue
Impact

3

SAP’s Expected
Financial Gains

$897 Million in Only 3 Years
Expected Customer Conversions of 2,000 to 6,000
SAP Expected Gains of $881M to $2.69B

January 19, 2005

‐37‐

PeopleSoft License – Oracle Negotiation Factors
Negotiation Factor

1 Oracle’s Goals for

PeopleSoft Acquisition

Analysis
Maintenance revenue stream from 9,920
customers
Doubles Oracle ERP worldwide market share

2 Risk to Oracle’s

Investment in PeopleSoft

$11.1B investment including software and support
materials
Loss of exclusive rights to copyrighted works

3 Oracle’s Expected
Financial Impacts

At least 3,000 expected maintenance customer
losses
Oracle expected financial impact

January 19, 2005

‐38‐

Oracle’s Goals / Plans for PeopleSoft (Factor

1

)

Double worldwide market share in enterprise applications
Obtain “Best of Breed” software
Obtain PeopleSoft customer base (approx. 10,000)
– Maintenance relationships using copyrighted works
– On-going customer relationships
Retain annual $1.3B maintenance revenue stream to fund further
innovation
Earn a return on $11.1 billion investment

‐39‐

Oracle “Rating Discussion”
– January 2005 (Factor 1 )

Charles Phillips / Safra Catz
Presentation

PX4811
‐40‐

Oracle Corporation Presentation
– January 26, 2005 (Factor 1 )

PX4809
‐41‐

PeopleSoft Acquisition - Summary (Factor 2 )
January 18, 2005

January 19, 2005
ORACLE

ORACLE
Exclusive Rights to PSFT
Software and Materials
~ 10,000 Customers
11% Increase in ERP Market
Share
$1.3B Annual Maint. Revenue

Non-Exclusive Rights to
PSFT Software and Materials
Expected Loss of Customers,
Market Share and Revenue
SAP
Non-Exclusive Rights to
PSFT Software and Materials
Expected Gain of Customers,
Market Share and Revenue

‐42‐

PeopleSoft License - Oracle’s Expected Financial Impact
– Calculation Approach (Factor 3 )
Based on Oracle’s Expectations at the Time of the Acquisition
1

2

3,000 Expected
Maintenance
Customers Lost to
TN/SAP

3
Annual Renewal Rates
Expected Revenues per
Customer

Expected Financial
Impact

Oracle Profit Margins

Over a 10‐Year Period
‐43‐

PeopleSoft License - Oracle’s Expected Financial Impact
– Calculation Inputs (Factor 3 )
Category

Source
SAP Projections 12/04 – 1/05

Inputs
3,000 (10/08)
1,375 – 3,000 (post-10/08)

Number of Lost Customers

(PX0012, PX0023, PX0024, PX0161,
PX0141)

Minus: Customer Attrition

Expected Attrition for PSFT

3.5% (per year)

Multiplied By: Average Revenue per
Customer

Oracle Valuation Documents

$130,000 (per year)

= Total Revenue
Multiplied By: Profit Margin
Multiplied By: Discount Factor
= Expected Profits (as of 1/05)
Plus: Future Value of Customers

(PX0615)

Calculated

Calculated

Oracle Financial Records

80%

(PX0013, PX1758)

Oracle Valuation Documents
(PX0013)

10%

Calculated

Calculated

Oracle Valuation Documents

8.3% Capitalization Rate

(PX0658)
= ORACLE EXPECTED FINANCIAL IMPACTS

‐44‐

PeopleSoft License - Oracle’s Expected Financial Impact
– Example Calculation (Factor 3 )
3,000 Maintenance Customers / 1,375 (Post 10/08)
2005 - 2014
Oracle Financial Impacts as of January 2005
(in $ millions)
Impacted Oracle Maintenance (1/05 – 10/ 08)
(Impacted 1,375 Customers 10/08 – 12/14)

Customer
Base

3,000 /
1,375

Total
Impacted
Revenue

Less:
Costs

$ 1,082.9 $ (216.6 )

Total
Impacted
Profits

$ 866.3

Future
Financial
Impact of
Converted
Customers

$ 519.9

Total
Expected
Impact as of
January
2005

$ 1,386.2

Sources: PX0012, PX0013, PX0615, PX0658, PX1758
‐45‐

PeopleSoft License - Oracle’s Expected Financial Impact
– Calculation Results - (Factor 3 )
Calculation A

Oracle’s Expected Impact
(as of January 2005)

Calculation C

3,000
(1,375 post-10/08)

PSFT/JDE Maintenance
Customers Lost to
TomorrowNow

Calculation B
3,000
(2,000 post-10/08)

3,000

$1.36 Billion

$1.82 Billion

$2.46 Billion

Sources: PX0012, PX0013, PX0615, PX0658, PX1758
‐46‐

PeopleSoft License – Oracle Negotiation Factors
Negotiation Factor

1 Oracle’s Goals for

PeopleSoft Acquisition

Analysis
Maintenance revenue stream from 9,920
customers
Doubles Oracle ERP worldwide market share

2 Risk to Oracle’s

Investment in PeopleSoft

$11.1B investment including software and support
materials
Loss of exclusive rights to copyrighted works

3 Oracle’s Expected
Financial Impacts

At least 3,000 expected maintenance customer
losses
Oracle expected financial impact

January 19, 2005

‐47‐

PeopleSoft Fair Market Value Damages - Summary
$3B
$2.7B SAP Gain
$2.5B Oracle Impact

$2B
$1.8B Oracle Impact
$1.4B Oracle Impact

$1.2B SAP Gain

$1B
$0.9M SAP Gain

1,375 Customers
Converted to SAP

2,000 Customers
Converted to SAP

3,000 Customers
Converted to SAP
‐48‐

Why Not Oracle Lost Customer Profits + SAP Profits
Does not measure full fair market value of copyrighted works
• Does not measure total impact to Oracle
• Does not capture all acknowledged benefits of infringement to
SAP
Specifically does not measure value beyond lost customer revenues
and profits
Dependent on SAP’s execution, not the value of the copyrighted
works
Lost profits only available measure of damages for non-copyright
legal claims
‐49‐

Timing of Siebel License Negotiation
September 12,
2005

Oracle and Siebel
Execute Merger
Agreement

January 31, 2006

May 15, 2006

September 29,
2006

Oracle Acquires
Siebel
($6.1 Billion)

SAP Announces
Extension of
TomorrowNow
Service to Siebel
Customers

First
TomorrowNow
Contract for Siebel
Service

License Negotiation: September 29, 2006

‐50‐

Oracle and SAP Worldwide CRM Segment Market Share
2004 Market Share by Revenue

Post Siebel Acquisition Market Share

Source: PX0680

‐51‐

“CRM Review II”
– October 24, 2005

PX0245

‐52‐

Siebel License – SAP Negotiation Factors
Negotiation Factor

Analysis

1 SAP’s Goals for Siebel

Goal to convert customers to mySAP CRM

2 SAP’s Expected Impact

$110M to $220M related to Siebel maintenance

3 SAP’s Expected Financial

200 customers by 2008

Maintenance Offering

TomorrowNow is enabler for future license revenue

on Oracle
Gains

Expected future gains of $97M to $247M

September 29, 2006

‐53‐

Siebel License – Key SAP Documents
Document

1

“Siebel Safe Passage Program
Playbook” – October 2005
(PX0960)

2

“Business Case: TomorrowNow
2006” – 10/17/2005 (PX0958)

3

Email: “TN Standalone deals to
Safe Passage” – 3/26/2006
(PX0037)

SAP Negotiation
Factor(s)

1

2

1

3

3

2

SAP Statements (quotes)
• “The opportunity is to move the 300+ SAP customers
SAP and Siebel have in common and migrate them to
mySAP CRM.”
• “Program Objectives & KPI’s: Keep Oracle out of our
customer base. Provide an incentive to Siebel customers
who have a SAP footprint to migrate from Siebel CRM to
mySAP CRM.”
• “The Siebel customer base consists of 4,000 customers,
(including large number of join SAP/Siebel customers)
and presents a huge market opportunity.”
• “The maintenance offering – a key part of the Safe
Passage Program and provided by TomorrowNow – can
be used as enabler for future license revenue”
• “Biz Planning – TNow Offering for Siebel”: 200
customers (cumulated) in 2008
• “Over the long term, every $1 of TN Stand-alone revenue
this year represents $18 of originally expected Oracle
revenue”
‐54‐

“Siebel Safe Passage Program Playbook”
– October 2005 (Factors 1 & 3 )

PX0960

‐55‐

“Business Case: TomorrowNow 2006”
– October 17, 2005 (Factors 1 & 3 )

PX0958

‐56‐

“Business Case: TomorrowNow 2006”
– October 17, 2005 (Factor 3 )

Customers
(cumulated)

PX0958

200

‐57‐

Nelson Email, “TN Standalone deals to Safe Passage”
– March 26, 2006 (Factor 2 )

PX0037

‐58‐

Siebel License – SAP’s Expected Impact on Oracle
- Calculation Results (Factor 2 )
If 50% of
Oracle’s
Price
SAP Expected TN 2007 Siebel Revenue

$7.19M

$14.38M

18

18

$130M

$259M

85%

85%

$110M

$220M

$1 of TN Revenue = $18 of Oracle Revenue
Impact to Oracle Revenue
Oracle Profit Margin
Impact to Oracle
Impact to Oracle

If 100% of
Oracle’s
Price

Sources: PX0037, PX0958, PX0658
‐59‐

Siebel License - SAP Expected Financial Gains
– Example Calculation (Factor 3 )
200 Maintenance Customers / 200 Converted
2006 - 2008
SAP Expected Gains as of September 2006
(in $ millions)

Customer
Base

Total
Expected
Revenue

$ (5.1 )

130

8.3

(2.5)

5.8

4.4

10.2

200

41.4

(12.4)

29.0

45.6

74.6

Total Expected Gains as of September 2006

$ 66.7

$ (20.0)

$ 46.7

$ 50.0

200

Expected Additional Product Sales
Expected License Revenue / Converted Customers

$

11.9

N/A

Total
Expected
Gains as of
September
2006

17.0

Expected SAP Maintenance Revenue

$

Less:
Costs

Total
Expected
Profits

Future
Financial
Gains of
Converted
Customers

$

11.9

$96.7

$

Sources: PX0012, PX0193, PX0533, PX0615, PX1760, PX1762
‐60‐

Siebel License – SAP’s Expected Financial Gains
– Calculation Results (Factor 3 )
TomorrowNow
Maintenance Customers

200

Other SAP Product
Customers

130

Converted Customers

200

SAP’s Expected Gains
(as of September 2006)

$97 Million*

$247 Million**

* Future value based on revenue multiple
** Future value based on value per customer
Sources: PX0012, PX0193, PX0533, PX0958, PX1762, PX1760
‐61‐

Siebel License – SAP Negotiation Factors
Negotiation Factor

Analysis

1 SAP’s Goals for Siebel

Goal to convert customers to mySAP CRM

2 SAP’s Expected Impact

$110M to $220M related to Siebel maintenance

3 SAP’s Expected Financial

200 customers by 2008

Maintenance Offering

TomorrowNow is enabler for future license revenue

on Oracle
Gains

Expected future gains of $97M to $247M

September 29, 2006

‐62‐

Siebel License – Oracle Negotiation Factors
Negotiation Factor

Analysis

1 Oracle’s Goals for Siebel

Acquired maintenance revenue stream for 4,000
customers

Acquisition

Establishes Oracle as leader in CRM market

2 Risk to Oracle’s

Investment in Siebel

$6.1B investment including software and support
materials
Loss of exclusive rights to copyrighted works

3 Oracle’s Expected
Financial Impacts

At least 200 expected maintenance customer losses
Oracle expected financial impact

September 29, 2006

‐63‐

Siebel Acquisition – Summary (Factor
January 31, 2006

2

)

September 29, 2006
ORACLE

ORACLE
Exclusive Rights to Siebel
Software and Materials
~ 4,000 Customers
Increased CRM Market Share
$500M Annual Maint. Revenue

Non-Exclusive Rights to
Siebel Software and Materials
Expected Loss of Customers,
Market Share and Revenue
SAP
Non-Exclusive Rights to
Siebel Software and Materials
Expected Gain of Customers,
Market Share and Revenue

‐64‐

Siebel License - Oracle’s Expected Financial Impact
- Calculation (Factor 3 )
Based on Oracle’s Expectations at the Time of the Acquisition
1

2

3
Annual Renewal Rates

Lost Maintenance
Customers

Expected Revenues per
Customer

Oracle’s Expected
Financial Impact

Oracle Profit Margins

Over a 10‐Year Period
‐65‐

Siebel License - Oracle’s Expected Financial Impact
– Example Calculation (Factor 3 )
200 Maintenance Customers / 200 (Post -10/08)
2006 - 2015
Oracle Financial Impacts as of September 2006
(in $ millions)
Impacted Oracle Maintenance (9/06 – 12/15)

Customer
Base

200

Total
Impacted
Revenue

$ 109.4

Less:
Costs

$ (16.4 )

Total
Impacted
Profits

$ 93.0

Future
Financial
Impact of
Converted
Customers

$ 71.0

Total
Expected
Impact as
of Sept.
2006

$ 164.0

Sources: PX0012, PX614, PX0615, PX0658, PX0958 PX1758
‐66‐

Siebel License – Oracle Negotiation Factors
Negotiation Factor

Analysis

1 Oracle’s Goals for Siebel

Acquired maintenance revenue stream for 4,000
customers

Acquisition

Establishes Oracle as leader in CRM market

2 Risk to Oracle’s

Investment in Siebel

$6.1B investment including software and support
materials
Loss of exclusive rights to copyrighted works

3 Oracle’s Expected
Financial Impacts

At least 200 expected maintenance customer losses
Oracle expected financial impact

September 29, 2006

‐67‐

Siebel Fair Market Value Damages - Summary
$300M

$200M

$247M
to

$100M

$164M

$97M

SAP’s Expected
Financial Gains

Oracle Expected
Financial Impacts
‐68‐

Database License Negotiation

Oracle’s Negotiating
Perspective
Database licensing
practices
Database pricing
Competitive relationship
with SAP and
TomorrowNow

SAP’s Negotiating
Perspective
Negotiated 
Database 
License Fee

Goals for database
software
Need for database
copyrighted works
Competitive relationship
with Oracle

‐69‐

Database License – Calculation Approach
1

Oracle Database Licensing Practices

2

TomorrowNow Hardware Configuration

3

Oracle Enterprise Edition Database Pricing

4

# of TomorrowNow Customers Benefiting

5

Total Database License Fee

‐70‐

Database Licenses Needed
– Number of TomorrowNow Customers
Source

Number of
Customers

SAP Discovery Response

71

Confirmed Cross-Use With Oracle Local Development
Costs of
Fixes Developed in Oracle
Database
Database Environments
Costs of Development Environments

43

Benefit from Oracle Database
Local Oracle Database Environments

Additional Cross-Use

PeopleSoft HRMS
Customers

TOTAL

58
172

Sources: PX0583, PX0602, PX2822, PX2827
‐71‐

Database Fair Market Value Damages - Summary
172 Customers

$240,000
License
Fee/Custome
r

+

(

$52,800
Maintenance
Fee/Custome
r

x

Number of
Years Under
TN Service

)

$55.6 Million
Sources: PX0097, PX0269, PX0583, PX0602, PX0653, PX0984, PX0996, PX2822, PX2827
‐72‐

Oracle’s Damages - Summary

Damages Category
PeopleSoft / JDE Software & Support Materials
Costs of Development
Siebel Software & Support Materials
Costs of Development
Database Software Materials
Total Damages

Amount
at least $1.5 Billion
at least $100 Million
$55.6 Million
at least $ 1,655,600,000

‐73‐