The whole Larry Ellison/Mark Hurd thing has got a lot of folks scratching their heads. The causes could be anything from Larry having a senior moment (IT Business Edge's Mike Vizard is clearly on that path) to some part of a convoluted scheme to take over HP. Let's have a little fun today and explore the latter because I'm in Larry's age group and the former would just depress me terribly.
Why Ellison Wants HP
Ellison has a deep-seated desire to take on IBM one-on-one as equals. He has always been overmatched by Big Blue, which has vast resources in hardware, software and services. Part of his reason for buying Sun was to close this gap, but Sun was so badly crippled by the time he got it that it was more of a joke to IBM then a real threat. But HP, oh mama! HP is vastly closer to IBM in most ways except software. Meanwhile, Oracle, with software, can and does run against IBM regularly and does reasonably well.
The problem with HP is that it is likely to be too expensive by half. Government tax incentives could play a role in making this move more affordable, but Ellison still would need a better price or he likely can't pull this off. But there is no doubt he wants the property badly, and he has someone who has run it and knows where the bodies are buried. In addition, if he buys HP, Hurd's noncompete agreement doesn't mean anything.
So how does he do it?
A Possible Plan
First he has to drive down HP's value. A significantly large portion of HP's revenue is tied to Oracle business, but Ellison can't simply cut it off to drive down the price. He needs a less manipulative reason or the Securities and Exchange Commission might take exception to his approach. So he knows that hiring Hurd will trigger a reaction from HP, and he responds by going to war with HP and pulling the Oracle business. Now he isn't manipulating the price of the stock, he is simply responding to what HP is unreasonably doing. HP did fire Hurd after all, Hurd is entitled to hold a job, and this is California, where noncompetes are generally laughed out of court.
The financial analysts get nervous about HP's valuation and start driving down HP's stock price. HP's board starts getting even more nervous and clearly isn't particularly happy about all the drama from Hurd's firing in the first place. According to Ellison, at least four of the board members didn't want to fire Hurd, so Ellison offers them a structured deal to make the problem go away. They get board seats on a new mega-company that will be better suited to go after the IBM opportunity with the combined assets of HP, Sun, and Oracle and all the drama evaporates overnight. Oh, and any board options are likely to accelerate at the same time while Oracle bids over-market in a market where folks are hungry for cash and/or swaps for Oracle stock, which has been performing better and likely will spike after the deal.
He then spins out HP's printing and imaging, and possibly its PC division, as parts of the company he doesn't want and is left with a firm that, on paper, is close to IBM's. It has experienced integration teams of both sides coupled with a division head that the financial analysts have always loved. Given the size of IBM and Microsoft, he shouldn't have too many antitrust problems as the result wouldn't dominate any market. However, I would expect both IBM and Microsoft to move sharply against allowing this to happen. It wouldn't be a trivial process either, particularly in the EU which wasn't exactly happy with the way the Sun deal actually turned out.
So what do you think? Is Oracle going to make a play for HP? Is Ellison having a senior moment or is there some other method behind his Mark Hurd madness? In any case, this is already turning out to be a rather exciting year, and what actually happens may stretch our imaginations.