Oracle-HP Trial Will Trace an Ill-fated Partnership
After Oracle and Hewlett-Packard enjoyed a long and fruitful partnership in enterprise IT, it's hard to find anything that hasn't gone wrong with their relationship over the past two years.
On Monday, the companies are set to launch into opening arguments in a trial in Santa Clara Superior Court in San Jose that's likely to include accusations of lying, betrayal, abandonment, scheming and defamation. HP will argue that Oracle breached a contract between the two companies by quitting development for HP's Integrity servers, based on its Itanium chip architecture. Oracle charges that Itanium is dying and HP is lying about its impending death. Some high-profile witnesses may be called to the stand, with testimony starting off next week with Ann Livermore, the former head of HP's enterprise business and still a member of its board.
The dispute centers on hardware and software for the most demanding workloads in the largest of enterprises. HP and Intel developed the Itanium processor architecture more than a decade ago, saying it would provide for higher performance, reliability and availability than the industry-standard x86 platform could deliver. It has proved well suited for the large-scale databases that are Oracle's specialty, according to Pund-IT analyst Charles King. But Itanium hasn't made many inroads into the server industry beyond HP, and having Oracle by its side with business-critical software that would run on the platform was crucial, he said.
"HP, for many years, was an extremely close partner of Oracle's," King said.
Oracle and HP may have been set on a collision course as soon as the acquisitive software giant decided to buy Sun Microsystems, long a technically advanced but struggling server maker, in January 2010. A sudden move into the hardware business was bound to change Oracle's relationships with the companies that made servers to run its software. But in the case of HP, other factors combined to create a volatile combination.
After HP fired CEO Mark Hurd in August 2010 over a scandal involving his relationship with a former contractor, Hurd joined Oracle as co-president just a month later. That led HP to sue Hurd, accusing him of breaching a confidentiality agreement and seeking to block him from working for Oracle. The two companies quickly negotiated a deal in which HP dropped its suit against Hurd and the companies reaffirmed their partnership.
But instead of dying down, the fight soon heated up. In March 2011, Oracle announced it would discontinue all software development for Itanium. Though Microsoft and Red Hat Software had made similar decisions already, Oracle is a more important software supplier for the Integrity servers, which run HP's version of Unix, called HP/UX. In a press release, Oracle said it had reached the decision based on information from Intel that the Itanium line was being phased out. HP and Intel denied they were planning to end the Itanium line. In another press release the next day, Oracle said HP had known Itanium was nearing the end of its life and kept that information from its customers.
That's when HP filed the suit being heard next week. It wants a court to declare that the so-called Hurd Agreement reached in September 2010 is a binding contract and that Oracle breached it by dropping Itanium development. HP also accused Oracle of libel and defamation, saying the company lied when it said that Intel was planning to kill Itanium. HP said Oracle was pulling development from Itanium in a bid to pull customers over to its own hardware, which came from the Sun acquisition.
Oracle countersued, saying HP had deceived it regarding the future of Itanium and hid the fact that the platform was on the way out. Oracle called the Hurd Agreement a mere "corporate hug," and said it deliberately did not negotiate a binding commitment to Itanium development. It wants the Hurd Agreement to be scrapped. Oracle also made a defamation charge of its own, saying that HP's allegations were false and hurt its reputation.
Oracle also said HP was guilty of fraud for holding back information while negotiating the Hurd Agreement. Among the facts Oracle says HP hid during the talks in 2010 was that the company was planning to hire two executives who would be dead-set against Oracle. Soon after the deal was signed, HP picked as its new CEO Leo Apotheker, who led German software maker SAP when a division of that company illegally downloaded information from Oracle's website. In addition, HP hired Ray Lane, a former Oracle executive who had clashed with Oracle Chairman Larry Ellison years earlier, as non-executive chairman. Lane is now executive chairman, while Meg Whitman has replaced Apotheker as CEO.
Both companies say they have their common customers' interests at heart and that the other side is hurting those users. But the dispute itself is probably hurting customers more than any verdict could hurt either company, Pund-IT's King said. While vendors want to push their own products, enterprise IT executives have their own agenda.
"What they're really looking for is predictability. Not only predictability of the systems that they use, but predictable behavior on the part of the trusted vendors that they work with," King said.
Now that the feud has gone this far, there may be no good outcome for anyone, he said.
"Even if a suit found for one company or the other -- or, in particular, if it found for HP -- you have to wonder about how valuable a relationship that Oracle was forced back into would really be for both companies."