Oracle Corporation (ORCL - Analyst Report) recently won a favorable judgement in a copyright infringement lawsuit against Rimini Street and its President and CEO, Seth Ravin.
The United States District Court for the District of Nevada not only granted Oracle's motion for a permanent injunction but also ordered Rimini and its CEO to pay more than $100 million in punitive charges.
The favorable ruling is quite a breather after Oracle’s recent litigation setbacks against Alphabet Inc. (GOOGL - Analyst Report) and Hewlett-Packard Enterprise (HPE - Snapshot Report) , both Zacks Rank #3 (Hold) stocks. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In May, a 10-member jury found no copyright violations of Oracle’s Java APIs by Google -- now Alphabet -- while developing its Android operating system. However, Google denied such allegations and maintained that the usage of Java APIs was protected under the “fair use” clause “which permits copying under limited circumstances.”
In July, Oracle lost the high profile Itanium software lawsuit against HP Enterprise. The state court of California directed Oracle to cough up $3 billion in damages. HP Enterprise was formed after its parent company Hewlett Packard split into two separate entities — HP Inc. (HPQ - Analyst Report) and HP Enterprise — in Nov 2015. HP Inc. also carries a Zacks Rank #3.
Oracle recently appealed May verdict of the lawsuit against Google. The company stated that "Google's financial rewards are as 'conspicuous' as they come, and unprecedented in the case law." Oracle claims that Google has gained over $42 billion from Android powered by its Java APIs and therefore demanded a share of its profit. (Read More: Oracle's $9B Lawsuit with Google Sees New Development)
Apart from intellectual property related lawsuits, Oracle is also facing litigations related to accounting irregularities. In June, Oracle’s former senior Finance Manager, Svetlana Blackburn filed a lawsuit against the company. Blackburn alleged that the company had terminated her service when she resisted some manipulative accounting practices in Oracle’s cloud-computing business.
Per a Wall Street Journal report, an Oracle investor Grover M. Klarfeld also filed a lawsuit that alleged Oracle of “improper accounting practices to inflate the company’s cloud-computing revenues by millions of dollars”.
We believe that the numerous litigations will remain an overhang on Oracle’s stock in the near term. Further, higher legal fees can impact profitability. Notably, in the recently concluded first-quarter 2017, general & administrative (G&A) expense increased 70 basis points (bps) due to higher legal fees that hurt operating margin, which contracted 230 bps to 35.9%.
Currently, Oracle has a Zacks Rank #5 (Strong Sell).
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