A record $1.3 billion fine slapped on SAP for downloading rival Oracle's software has tarnished the German software maker's reputation and is set to undermine its sales and profitability in the United States.
"Even though SAP may appeal the judgment, the huge amount should be negative for the stock price and, will weaken SAP's position in the US," said Jacques Abramowicz, analyst at Silvia Quandt research.
"Oracle will use the decision as a marketing tool, wielding the moral cudgel every time new contracts are negotiated," he added.
SAP shares fell 1 per cent to €35.83 by 1105 GMT, one of the biggest losers in Germany's blue-chip index DAX, which was up 0.3 per cent.
Commerzbank analyst Thomas Becker added: "The $1.3 billion is higher than we expected and marks an all-time high with respect to software patent infringement cases."
Based in the small town of Walldorf, near Heidelberg, SAP said it is considering appealing the decision, which was announced by a US district court jury in Oakland, California yesterday.
"This judgment is a shock to SAP who had argued that the intellectual property theft (to) which it had admitted was worth only around $40 million," Mr Abramowicz said and added that it is also 10 times more than SAP has set aside.
SAP has acknowledged that its TomorrowNow subsidiary in the US had wrongfully downloaded millions of Oracle's files.
With the admission of liability, the issue before the jury was how much was owed in damages. SAP said no more than $40 million, while Oracle sought at least $1.65 billion.
"The decision is disappointing and we will now examine all options," a SAP spokesman said, adding that there will be no impact on the company's outlook.
"There may be some reputational damage to sales, and government agencies in the US may be particularly sensitive to the trial's outcome," UBS analyst Michael Briest said.
Testimony in the trial wrapped up last week without a hoped-for appearance by former SAP chief and current Hewlett-Packard chief executive Leo Apotheker.
During the trial, Oracle linked Apotheker to the operations of TomorrowNow. But it did not appear to produce evidence to prove he knew of the theft.
Oracle chief executive Larry Ellison has publicly charged Apotheker with overseeing an "industrial espionage scheme" to steal Oracle software. But both SAP and HP characterised the Apotheker issue as a sideshow and said Oracle offered no proof to back up its allegations.
The three-week courtroom drama, which captivated Silicon Valley, featured testimony from such top executives as Oracle's Ellison - whom SAP's lawyers accused of plucking damages numbers "out of the air" - and president Safra Catz.
SAP co-CEO Bill McDermott also took the stand and apologised to Oracle for the events surrounding TomorrowNow. "For more than three years, SAP stole thousands of copies of Oracle software and then resold that software and related services to Oracle's own customers," Mr Catz said in a statement.
"The trial made it clear that SAP's most senior executives were aware of the illegal activity from the very beginning."
The US government is also conducting a criminal investigation into the events surrounding TomorrowNow but has not disclosed details. SAP said it has been cooperating with Department of Justice investigators.
Reuters