Why The Fight With Google Won't Affect Oracle

| About: Oracle Corporation (ORCL)

I always cheer on the underdogs, which would explain why I'm a Cubs fan. That being said, I am looking on with interest at the courtroom battle between Oracle (ORCL) and Google (GOOG) over whether a computer language can have a copyright law.

Before you yawn and click another page, keep in mind the possible impact of this. If one company owns the rights to a computer language, it could charge whatever it will for others to use said language. And companies would be forced to pay, because everything heretofore that we as consumers have come to rely upon is written with said language. Imagine the cost of trying to reinvent the language of the PC, the smart phone, every video game… the list goes on. Not only would one company become king, those who oppose it could change the way our technology operates.

Now that I have your attention, from an investment standpoint, I don't see this case impacting either company. It is extremely unlikely that any court would allow for such limitation on what has always been an open-source commodity. Even so, after the slugging match between the two is over, I predict Oracle will continue to hold its own this year in revenue and stock performance.

What's Happened

Oracle can be classified as a quiet success. Its market share is a force to be reckoned with when it comes to enterprise resource planning software, customer relationship management software, and even supply chain management software.

Oracle Systems officially came about in 1982. Bob Miner, the new company's senior program, was assisted through heavy reliance on the C programming language to create products, and in turn, the company gained a huge advantage over other companies that were stuck using their own operating-system-specific languages.

It faced several struggle in its early years, not the least of which was IBM (IBM), a much older company, attempting to stunt the growth of the company through keeping its own technology incompatible with Oracle products. By the 1980s, IBM was already an industry standard in data management, and had partnerships with some other big names across the globe.

Google, on the other hand, is the baby of the bunch. The company began 14 years ago and quickly moved to the top as leader in online activity. Rapid growth with a host of products, acquisitions, and partnerships beyond the company's initial focus of web search engine provider has solidified this position. But that does not seem to faze Oracle, as it staunchly claims the use of the Java programming language in Google's Android operating system is a violation of patents.

Today in Court

The case finds its beginning back In January 2010 when Oracle acquired Sun Microsystems, the creators and distributors of the Java platform and toolbox. In August of the same year, it bought out Phase Forward, a data management system developer with heavy ties to the pharmaceutical industry. It was perhaps this big win that made the company so sure of itself to take on big tech.

It was in this same month that the company filed a lawsuit against Google for patent and copyright infringement of Java technologies in Google's development of its Android operating system. Google began accusing competitors like Apple (AAPL), Microsoft (MSFT) and Oracle of trying to take down Android through patent litigation. A fair argument, however, it did not directly answer the claims of copyright breach.

Google's reimplementation of the Java platform in its phones prompted Oracle to seek damages up to $6 billion. The trial was scheduled to start in October 2011 but was delayed. A further delay occurred when Google attempted to propose a settlement that would include cutting Android's revenue through 2018 if Oracle wins the patent infringement suit.

But it all will come out now in a San Francisco courtroom where Google will most likely claim that Oracle is attempting to claim ownership over an idea. Oracle will rebuttal that it is the expression of that idea in the tangible form of a computer language that makes the grounds for infringement. It cannot be argued that all Java patents from Sun belong to Oracle. Nor the fact that Google used Java to develop Android and failed to obtain a license. What Google must do is successfully argue that the law bans copyright of a concept or an idea - which one can possibly classify a language as such.

A great analysis, however, describes how Oracle's original intention of making Java universal, might backfire by preventing a copyright to be placed on it.

Dan Rowinski writes:

Java was created with the basic intention of letting developers use one language to write applications that would run anywhere. The idea of copyrighting Java is antithetical to the idea of Java. Google is going to argue that, as a language that fundamentally operates computers processes, Java is an abstract language that cannot be copyrighted.

Why 'It Don't Mean a Thing'

Even in the face of a formidable opponent, Oracle seems unfazed. It's acquisition of ClearTrial, a software developer for clinical trial operations, is a good sign. While this would not be as big a win as copyrighting an entire language, it would still be good for the company to profit from the only two industries whose growth has not slowed through trying economic times.

In addition to growing, the company has a steady stream of income from supplying other countries. More than half its revenue comes from outside the U.S., the company has seen a steady rise in earnings, nearly unaffected from the last tech slump.


Watching the slugging match between Oracle and Google could be interesting or mind-numbing, depending upon who you ask. Both companies will continue to be profitable, because they are steady with their business focus, and strategic in their product implementation. Currently, Oracle has a 52-week low of $24.72 and a 52-week high of $36.50. I concur with analysts from UBS AG (UBS) who rate ORCL as a buy.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.