Oracle Corporation et al v. SAP AG et al

Filing 793

Declaration of Chad Russell in Support of 790 Memorandum in Opposition, to Defendants' Motions in Limine filed byOracle EMEA Limited, Oracle International Corporation, Oracle USA Inc., Siebel Systems, Inc.. (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Exhibit C, # 4 Exhibit D, # 5 Exhibit E, # 6 Exhibit F, # 7 Exhibit G, # 8 Exhibit H, # 9 Exhibit I, # 10 Exhibit J, # 11 Exhibit K, # 12 Exhibit L, # 13 Exhibit M, # 14 Exhibit N, # 15 Exhibit O, # 16 Exhibit P, # 17 Exhibit Q, # 18 Exhibit R, # 19 Exhibit S, # 20 Exhibit T, # 21 Exhibit U, # 22 Exhibit V, # 23 Exhibit W, # 24 Exhibit X, # 25 Exhibit Y, # 26 Exhibit Z, # 27 Exhibit AA, # 28 Exhibit BB, # 29 Exhibit CC, # 30 Exhibit DD, # 31 Exhibit EE, # 32 Exhibit FF, # 33 Exhibit GG, # 34 Exhibit HH, # 35 Exhibit II, # 36 Exhibit JJ, # 37 Exhibit KK, # 38 Exhibit LL, # 39 Exhibit MM, # 40 Exhibit NN, # 41 Exhibit OO, # 42 Exhibit PP, # 43 Exhibit QQ, # 44 Exhibit RR, # 45 Exhibit SS, # 46 Exhibit TT)(Related document(s) 790 ) (Howard, Geoffrey) (Filed on 8/19/2010)

Oracle Corporation et al v. SAP AG et al

Doc. 793 Att. 7

EXHIBIT G
Dockets.Justia.com

DOUGLAS KEHRING August 28, 2009 HIGHLY CONFIDENTIAL - ATTORNEYS' EYES ONLY Page 1
UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION

ORACLE CORPORATION, a Delaware corporation, ORACLE USA, INC., a Colorado corporation, and ORACLE INTERNATIONAL CORPORATION, a California corporation, Plaintiffs, vs. SAP AG, a German corporation, SAP AMERICA, INC., a Delaware corporation, TOMORROWNOW, INC., a Texas corporation, and DOES 1-50, inclusive, Defendants. ______________________________

) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) No. 07-CV-1658 (PJH)

VIDEOTAPED DEPOSITION OF DOUGLAS KEHRING _________________________________ FRIDAY, AUGUST 28, 2009

HIGHLY

CONFIDENTIAL - ATTORNEYS' EYES ONLY

REPORTED BY:

HOLLY THUMAN, CSR No. 6834, RMR, CRR (1-422504)

Merrill Legal Solutions [phone]

DOUGLAS KEHRING August 28, 2009 HIGHLY CONFIDENTIAL - ATTORNEYS' EYES ONLY
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Q. So staying with Exhibit 591 on the Bates page ending -849, referring again to the information that says, 20 to 30 percent of license revenues is from new customers. Do you see that? A. Yes. Q. Is that a metric that Oracle was relying on in valuing PeopleSoft for purposes of the acquisition? MR. HOWARD: Objection. Lacks foundation. THE WITNESS: I don't recall whether it is, but it would have been something that Safra Catz and Larry Ellison would have utilized in terms of coming to a determination as to what the incremental revenue and expenses would come from the PeopleSoft transaction. MR. McDONELL: Q. Do you know whether after the acquisition you were able to determine

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whether 20 to 30 percent of PeopleSoft license revenue in fact continued to be generated from new customers? MR. HOWARD: Objection. Vague and ambiguous. THE WITNESS: I don't recall for that doing that effort. But to be clear, my role is one in which we establish the financial model at the time of the acquisition, and the financial figures from which we'll -- we'll gauge it, and then we do comparables. So things of this detailed nature are, you know, not things that show up in -- oftentimes in our tracking models. MR. McDONELL: Q. Let's take the next line there, on the same page. It says: 30 percent cross-sell to installed base. Do you see that? A. I do. Q. What does that mean to you? A. Again, I could venture a guess, an educated guess, as I mentioned, as to related to how they are defining it. But again, without having talked, spoken with PeopleSoft directly, there would be no way to

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validate the -- what their assumption was. But the general -- a general educated guess could start with the premise that it related to, you know, selling of new modules that hadn't been -- hadn't been deployed to an existing customer of other products that PeopleSoft possessed, as opposed to additional seats of an existingly deployed license. Q. Is it your understanding that that was consistent with PeopleSoft's historical trends? A. I don't recall if this was a piece of information that was publicly available. Q. Do you know one way or the other if that is representative of PeopleSoft's historical trends pre-acquisition? A. I don't recall. Q. Do you know whether that 30 percent is a percentage of all customers of PeopleSoft? A. I do not. But again, the -- you know, again, you'd have to make educated guesses simply based on the information that was provided. Q. Let's look at the next -- well, do you know whether the PeopleSoft installed base continued to generate 30 percent of its license revenues from cross-selling after the acquisition? A. Again, I'm not even sure what that would

Oracle Board? A. I don't recall being given that opportunity. I was not part of any -- anything like that. Q. What is your understanding of what the term "upsell" means as contrasted with the term "cross-sell"? A. Again, I can provide you with my educated guess as to -- as it relates to the industry. And my educated understanding is, cross-sell again is the selling of new modules of software or new products; as opposed to upselling, which is selling more of an existing product, in terms of added functionality of that product or added seats. But as I mentioned, many software providers have different ways of defining. This isn't an exact science. Q. Is it your interpretation of this document that PeopleSoft had historically been generating approximately 40 percent of its license revenues from upsell --up sell sales to the installed base? A. Previous to this document? Q. No. A. Or in -- now that I have this document? Q. Now that you have the document.

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mean as part of Oracle. But as it relates to our tracking, our focus is on actual license revenue as opposed to individual metrics like this. Q. As opposed to individual metrics like what percentage of it was generated from cross-selling? A. Right. Q. So let's look at the next line item, which is, 40 percent upsell to installed base. What does that mean to you? A. Like I said, first I would assume that's a typo, that she meant -- Faith meant base rather than based. But as it relates to upsell, again, an educated guess would be that they're referring to selling additional seats or other sort of license revenue that existing -- existing customers on existing modules. But again, without -- that oftentimes happens in these matters. You know, you would sit down and have that conversation, just as you're asking me what the PeopleSoft management team, for which we weren't given that opportunity. Q. Were you ever given the opportunity to sit face-to-face with the PeopleSoft management time prior to the final price being approved by the

A. I would have assumed that that was their thing. If I had made the educated guess what the definition of upsell was, then I would assume that they were being truthful and saying that that was consistent with their historical trends. Q. Do you have any reason to doubt that? A. Of course not. Q. And do you know what the 40 percent was? Was it of all active maintenance customers? Would that have been your assumption? A. Again, that's where the -- that's where the nuance comes in. You've added a new wrinkle in the concept of even understanding this. You're correct. It could be as it relates to the total installed base, it could be related to the total customers that ever existed, it could be related to the total active customers. It's not -they haven't provided definitions here.

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process. Q. Is Harry You still with the company? A. No. Q. Where is he? A. I don't know. I believe he's at EMC. Q. In the Bay Area? A. No. Q. Do you know where he is? A. I don't. I mean, other than that he may be working for EMC. Q. How about Mr. Henley? Do you know where he is today? A. I believe he lives in California. Q. But do you know where he works? A. I don't know which office he works out of. He has an office at the Oracle headquarters. Q. Was he involved -- what was his role in connection with the acquisition? A. I believe he was a member of the Board of Directors, and, again, for a period of time was the CFO, I believe. Q. Was -- but he was employed by Oracle throughout the entire acquisition period. A. Yes. Q. And for part of that period, he was CFO?

Q. I'm sorry, you said you do recognize it? A. I don't recognize this. Q. Okay. So under -- on Exhibit 595 on the first page is a heading that reads "Preliminary Purchase Price Allocation." Do you see that? A. Yes. Q. And in that section, it says, among other things, that the total preliminary purchase price was allocated to PeopleSoft's net tangible and identifiable intangible assets based on their estimated fair values as of December 29, 2004 as set forth below. The excess of the purchase price over the net tangible and identifiable intangible assets was recorded as goodwill. Do you see that? A. I do. Q. And if you turn the page to Bates number ending -870, do you see there's a table there showing various categories of tangible assets, identifiable intangible assets, and goodwill? A. I do. I do see it. Q. And then the Goodwill line item has a number of 6.487 billion dollars. Do you see that? A. I do.

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A. Yeah, again, I -- I believe so. I don't know at what point in time he stopped being CFO or whether that occurred before June 2003. I just -my -- my memory doesn't serve me. But, you know, he became -- also became chairman at some point in time, so he was actively involved throughout the process. (Deposition Exhibit 595 was marked for identification.) MR. McDONELL: Q. Showing you what's been marked as Exhibit 595, would you take a moment and look that over? And I'll represent to you that I believe it to be excerpts from public Oracle financial statements? A. (Examining document.) Is there a reason there's writing on it? Q. This is given to us by Oracle. So the writing was on it when we received it. MR. HOWARD: Is it from his file? MR. McDONELL: I couldn't tell you offhand. Q. Do you recognize the handwriting? A. No. Q. Okay. A. I don't recognize this, but let me wait and hear your question.

Q. And then just beneath that, there are intangible assets valued at 3.384 billion. Do you see that? A. I do. Q. And then if you look below, you'll see some detail of the components of the 3.384 billion. Do you see that? A. I do. Q. Do you see what I'm referring to? A. Yes. Q. To the best of your knowledge, was this information that was published by Oracle to the public and submitted to the SEC? A. I would assume so. This is standard accounting -Q. Were you involved in any way in preparing any of the valuations that we've just talked about on this page? A. You know, as I mentioned, this was part of the finance accounting team as it relates to -- as it relates to what's required for standard accounting practices, so I wasn't involved in the preparation of this. I certainly may have been involved at some point in explaining the original model, in terms of, you know, how it was structured,

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if they used that at all. Q. Who would have been responsible for preparing this information? A. The -- this information being what? Being just the text, or -Q. No. The -- the numbers that we just walked through, for goodwill and intangible assets. A. The CFO's office. Q. Pardon me? A. The CFO's office. Q. Okay. So as of May of 2005, who was the CFO? A. Again, I -- it's not that I don't want to recall; it's that we had a sequence of CFOs at one point in time. Q. Do you recall any individuals who were -what -A. This likely was Safra at this point in time, but I don't ... Q. Do you recall who were any of the CFO's main reports who would have been actively involved in preparing SEC financial statements like this during that time frame? A. Again, I have never been involved in the preparation of these sort of documents. So

earlier in your testimony today? A. The concept, yes. This would have been one of them. Q. Would you turn to page ending Bates No. -127 in Exhibit 596? A. Yes. Q. Do you see there at the top, there are column headings. Are each of those an acquisition that Oracle completed at some point? A. Yes. Q. And of those acquisitions, was PeopleSoft the only one that was unsolicited? A. Unsolicited. I guess the only qualification would be, you know, Retek was one in which SAP had announced their -- that they'd entered into an agreement with -- to acquire Retek, but we had previously had discussions with Retek, so I don't consider that in the same concept of unsolicited. But it depends on what you want to define as "unsolicited." Q. But other than that, only PeopleSoft was unsolicited in the sense of a tender offer? A. Retek ended up being a tender offer as well, but -Q. Okay. Was PeopleSoft the only one that was

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underneath the CFO's office, I actually don't have any idea how the work is divvied up, who's responsible for what, and how the process works. (Deposition Exhibit 596 was marked for identification.) MR. McDONELL: Q. I'm showing you what's been marked as Exhibit 596. It's a cover email dated September 1, 2005 from you to Chuck Rozwat and others. Would you take a moment to look it over, including the attached integration scorecard? A. (Examining document.) Okay. Q. Can you identify this document for the record, please? A. This is a -- one of our, you know, earliest Integration Scorecard that Corporate Development issued to the management team and at times the Board of Directors to report on the progress of the integrations and their -- and their performance. Q. What is the group of people to whom you directed the email? A. Largely the Executive Team. Q. Is this -A. At that time. Q. Is this the same scorecard you referred to

subject to a Department of Justice investigation? MR. HOWARD: Objection. Vague and ambiguous. THE WITNESS: I think we -- you know, we submit the required documents to get antitrust approval on every transaction that qualifies. So whether they investigate it or not, I guess it depends on what you define as an investigation. MR. McDONELL: Q. Please turn in Exhibit 596 to the next page ending in the Bates numbers -128. Do you have that before you? A. I do. Q. What is that page? A. This page is the scorecard that we provided on the -- on the -- you know, the performance of the metrics that we were able to provide on PeopleSoft as part of Oracle. Q. In the left-hand column, under the heading "License Revenue" -A. Yes. Q. -- there's an entry that says, versus Board model. Do you see that? A. Yes. Q. And what is the Board model?

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