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HP and Oracle, now headed for a split, could have split up Sun

Stephen Lawson | June 11, 2012
One of the more surprising episodes in Hewlett-Packard and Oracle's ill-fated enterprise IT partnership was touched upon for only a few minutes during testimony in their breach-of-contract trial earlier this week. But that event -- fruitless talks aimed at a joint acquisition and breakup of Sun Microsystems -- may have been one of the sources of their current rancor.

"HP had to recognize at the time that simply being a hardware foil for an increasingly powerful software player like Oracle was not going to play well in the long term for the company," King said. Its reliance on Oracle has eroded its very autonomy as a company, he said.

Hardware grumblings

But Oracle might have been perfectly happy with a three-way deal that left it with Sun's software assets, including the MySQL open-source database, the Solaris OS and the Java programming platform, and none of the hardware. There is some evidence that Oracle hasn't been happy with the servers it got in the Sun acquisition.

A July 28, 2011, instant-message conversation between two Oracle executives, uncovered in the discovery process for the trial, hinted Oracle was struggling to sell the newly acquired Sun servers. The IM exchange included several statements denigrating Sun hardware.

"We bought a dog," wrote Keith Block, executive vice president of Oracle's North American sales and consulting organizations.

"Nobody wants to sell Sun. It baaaalllllooooows," Block wrote.

"Pig with lipstick," Oracle human-resources executive Anje Dodson responded.

"From a long-term strategy standpoint, HP probably made the right decision," King said. "That may have put a crimp in Oracle's plans. That could have been the beginning."

As strange as it may be to imagine a joint acquisition by two companies now at each others' throats in court, HP and Oracle might have been able to pull it off when current Oracle co-President Mark Hurd was still running HP and Oracle wasn't building servers. That was also before HP hired Executive Chairman Ray Lane and short-lived CEO Leo Apotheker, both longtime enemies of Oracle and its brash CEO, Larry Ellison.

"Mark was great with Larry. ... They had a great relationship," said Ray Wang of Constellation Research.

It's complicated

Even if the two companies did have a falling out over the joint Sun buyout, that probably wasn't the fight that doomed their relationship, Wang said. Even now, there are many reasons for them to keep cooperating.

"There's not a single point of failure. ... A number of factors have driven this war between them," Wang said. "The chips have laid out this way, which is very surprising."

In any case, Oracle's solo purchase of Sun has worked out well for it, and HP will be left at a disadvantage if it doesn't start to beef up its software assets, Wang said.

In just the past few years, the value of a hardware business by itself has declined, according to Wang. Cloud computing has made infrastructure a commodity, and those building clouds prefer to buy hardware and software as a package rather than integrating them and keeping them in sync as they evolve, Wang said.


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