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 U.S.," 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% to 35.83 euros by 1105 GMT (6:05 a.m. ET), one of the biggest losers in Germany's blue-chip index DAX, which was up 0.3%.
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 U.S. district court jury in Oakland, California on Tuesday.
"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," 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 U.S. 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 U.S. 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 CEO 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 CEO Larry Ellison has publicly charged Apotheker with overseeing an "industrial espionage scheme" to steal Oracle software. But both SAP and HP characterized 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 apologized 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," 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."
Oracle's arguments about the importance of protecting intellectual property appeared to carry weight with the jury. Juror Joe Bangay, who works as an auto body technician, said the group did not focus on the star CEOs during their deliberations.
"Their information was helpful, but basically I was figuring on the property that was stolen," said Bangay, 57.
The U.S. 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.
"One should not forget that there can be a great difference between the decision of the jury and the ruling of the judge on the amount of the fine," Silvia Quandt's Abramowicz said.