Prior to the acquisition of Sun, Oracle entered into a long term agreement with HP to develop software for Intel’s Itanium chips, which can be found in a large percentage of the latter’s high-end enterprise boxes.  Everything went according to plan until 2011, when Larry Ellison’s firm declared that it will prematurely stop supporting the chip. HP filed suit in June of that year.

A judge ruled in favor of HP last August and ordered Oracle to fulfill its part of the contract, but that wasn’t the end of the story. In a hearing this week, an expert witness representing the hardware giant said that Oracle should pay between $4 billion to $4.2 billion in damages for its misconduct, which apparently cost HP a lot of money.

Jonathan Orszag, an economist with Compass Lexecon, said that “the Oracle conduct at question in this case had a very significant and negative effect on the HP Itanium business.” He backed his argument by pointing out that Hewlett-Packard’s Itanium revenue dropped by 11 percent in the quarter Oracle stopped releasing updates for the chip family. Sales dropped by 18.1 percent over the course of the next three months, and fell by another 32 the next quarter.

“You see this snowballing effect,” Orszag said, adding that the kind of buyers who invest in mission-critical servers “don’t want to have the risk associated with some fight, or some delay, or some issue.”

There’s no denying that the 17 months of server disruption caused a lot of damage, but it remains to be seen whether a judge will agree with Orszag’s $4 billion estimate. Oracle claims that the year and half gap did not deprive HP customers of any software.

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