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Larry Ellison's high-profile charges may be only PR, but that may be all he wants
Oracle Corp. Chief Executive Lawrence J. Ellison sure knows how to kick 'em when they're down: On Mar. 22, two days after reporting blockbuster sales of Oracle's (ORCL) business software in a conference call that included potshots at archrival SAP (SAP), the company filed suit in a federal court in San Francisco, claiming SAP employees stole 10,000 tech-support files from its computers in a case of "corporate theft on a grand scale."
The suit is the latest shot in the blood feud between tech's fiercest competitors, and it cements Ellison's reputation as a crafty opportunist who exploits rivals' weaknesses. "This is Larry Ellison at his finest," says Marc Benioff, CEO of salesforce.com (CRM), a former Ellison protégé. "He is a master at [using] The Art of War"—Chinese general Sun Tzu's sixth century B.C. primer on military strategy, which is much admired by Ellison.
Oracle's 44-page complaint reads like pages ripped from a different sort of book—a spy novel. Oracle accuses top SAP executives of orchestrating a heist to improve their own products and steal Oracle's customers. It alleges that SAP employees posed as Oracle customers, stole passwords, and cached purloined documents on SAP computers. Whether true or not, analysts say the accusations could sully SAP's reputation and crimp first-quarter sales as it tries to bounce back from a recent slowdown. Oracle would not comment.
SAP vows to defend itself aggressively and suggests the suit could be little more than a marketing ploy. "It wouldn't surprise me [that] they see creative ways to attack our business if they don't see a way to beat us in the marketplace," says Andrew J. Nelson, president of SAP's TomorrowNow Inc. unit. Indeed, in spite of Oracle's acquisitions of PeopleSoft and Siebel Systems, its estimated 12% market share in corporate applications last year is about the same as the totals of the three before they merged, according to industry consultant AMR Research. Meanwhile, SAP's share climbed from 19.5% in 2004 to nearly 22% in 2006.
Ellison has a long history of launching attacks to disrupt another company's business. Three years ago, when Oracle announced its hostile bid for PeopleSoft, analysts saw it as a way to weaken, and then pick off, a vulnerable rival. In 2000, Ellison hired private investigators to rifle the trash of trade groups sympathetic to Microsoft Corp. (MSFT), calling it his "civic duty" to do so. More recently, SAP has been in the bull's-eye. Two years ago, Oracle swiped retail software maker Retek Inc. from under SAP's nose after a heated bidding war.
SAP doesn't pull its punches, either. Its TomorrowNow acquisition, which came just as Oracle was closing on its purchase of PeopleSoft, was seen by analysts as a way of undercutting Oracle. TomorrowNow sells support for software from PeopleSoft, J.D. Edwards, and Siebel Systems—all three now part of Oracle—at half price. About 300 customers have signed up for the service, which offers fast phone support and updates that keep software current with regulations. The business has become the keystone of a successful program to get Oracle customers to switch to SAP. "Oracle is starting to feel the hurt of having TomorrowNow take its customers," says Joshua Greenbaum, principal at Enterprise Applications Consulting.
Now the question is whether Oracle can prove the alleged SAP downloading—if it indeed occurred—was ordered by executives and wasn't just a rogue operation. There's nothing in the complaint that directly connects SAP's top dogs to the downloads. "It's not going to be an easy thing to prove," says Yar R. Chaikovsky, a partner at Sonnenschein Nath & Rosenthal. But "there'll be a market effect now—negative PR for SAP," he says. And that may have been the point.