Customers Weigh In on Oracle Itanium Controversy
It's pretty clear that many IT organizations are dubious of Oracle's motives.
The litigation between HP and Oracle took another turn this week when the Superior Court ruled against Oracle on its claim that the contract between it and HP was void due to alleged fraud by HP. This fraud was the alleged cover up of the killing of Itanium. This position was a surprise to both Intel and HP, which had been presenting an extended Itanium roadmap to analysts at the time the fraud was allegedly taking place.
It is interesting to note that Oracle's attack likely put pressure on both Intel and HP to do exactly what they were alleged to have already done due to the loss of Itanium sales and revenue generated by Oracle's claim. In short, both firms were likely damaged significantly, which should make future judgments related to these findings particularly expensive.
Let's revisit the drama surrounding this HP/Oracle battle and revisit Oracle/SAP and Oracle/Google for a moment.
First, the activities between Oracle and HP and Oracle and SAP showcase the huge expense and distraction that can result when the court is used to settle differences. You can have a situation where neither side believe they were adequately served and hearings go on well beyond the lives of those who brought or initially defended against an action. Even in winning, the cost in time and effort can defocus a company and make it less successful in its chosen market. Recall that Netscape went after Microsoft hard eventually using the DOJ, but when Microsoft finally settled, Netscape was long gone.
With the SAP trial, the litigation resulted from an attempt by SAP to capture disgruntled PeopleSoft customers when Oracle did a hostile takeover of that company and effectively shut it down. It pointed to the extreme cost of a hostile takeover in a software unit, but it also pointed out that there are rules and SAP broke them. Oracle initially won a judgment of a whopping $1.3 billion, but that was quickly overturned by the court and replaced by a far more reasonable $272 million figure. Oracle rejected that and the two parties are expected to roll the dice again for another amount with no certainty that Oracle will even get the $272 million figure. Currently, both firms appear off their game. And now SAP is apparently taking aim at Oracle.
Of course, Oracle is also suing Google for patent infringement with Java. Oracle thinks it has been damaged to the tune of $2.6 billion and Google has offered up $100 million, which seems like a lot given Java is basically free. On the other hand, Oracle does clearly have a case and you could also argue that Google's lack of belief in software patents is making them pigheaded in what could be a very expensive wake-up call if this goes against them. It is certainly now possible that in both of these cases, once the dust settles, Oracle's judgments may not even cover its massive legal fees. It does look like Oracle may be trying to get Google to pay for its acquisition of Sun, which Google should have likely contested. In effect, had Google bought Sun, it would be in far better shape with its patent portfolio overall and not be facing Oracle in this action. Hopefully, it won't miss the next opportunity.
HP vs. Oracle: Like an Ugly Divorce
This brings us to HP vs. Oracle and the allegation of fraud. Oracle maintained that it was tricked into settling with HP on the Mark Hurd hiring because HP didn't disclose it was hiring long-time Oracle hater Leo Apotheker. Though, for the life of me, I never really understood Oracle's argument because there was no contract or deal on record requiring HP to disclose who they chose to run the company anymore than there is a requirement that Oracle either notify or ask HP permission with regard to its own staffing changes. Anyone coming in, whether they liked Oracle or not, would have had to adhere to the agreement and it was Oracle that created the initial tension by buying Sun and then escalated it by hiring HP's fired CEO Mark Hurd. You could argue at the very least that Apotheker, who didn't work out, was a defensive move against Oracle and if there were a breach, it was Oracle that initially breached by moving against HP's interests first.
Apparently, the court agreed and Oracle's fraud charge was tossed. Oracle could appeal this ruling, but a successful appeal is unlikely. So, over the three high-profile lawsuits, Oracle's mammoth award was tossed on the SAP one. It isn't even close to a settlement on the Google action, and it is losing the HP suite and likely will eventually owe damages to HP for the breach. I expect SAP will eventually have to pay around $300 million, Google around $200 million, and it will owe HP damages in excess of both settlements due to the damage to one of HP's most profitable lines. In fact, were I arguing for HP, I'd argue its actions made Itanium non-viable and I would go after the company for the lost development cost and lost sales pushing the damages into the $20 billion range, but HP likely won't be that aggressive for one reason: Apparently Itanium products are kicking SPARC butt.
Wrapping Up: Litigation Is a Bitch
Every time I see this level of litigation by a company with an aging CEO, I wonder if the cause isn't age-related. As we age, we fight to hold on to our lost youth and this is showcased, particularly in men, by fast cars, young women and an increased need to showcase aggressive behavior. It rarely ends well and Oracle would likely be better off if it pushed much of this into arbitration now and just moved to the end game.
So my advice to Ellison is this: SAP is already weakened and the unsubstantiated multi-billion-dollar judgment is still born, so close this out and move on. Steve Jobs has passed, so the need to kill Google likely passed with him (it is believed that Ellison began this action as a favor to his friend Steve Jobs), and it isn't going that well anyway, so move to the end game or double down as this is just becoming a distraction. HP has moved from partner to competitor, so rather than spend anymore time trying to kill Itanium, put your effort into either saving or killing SPARC, which is even more outdated, in my opinion.
In the end, all this litigation, and it is a bit unprecedented, puts a cloud over Oracle's leadership and makes you wonder how long before it'll return to a focus on customers and closing business. The world is changing and given the rate of change, a timely distraction like this litigation, could force the firm to miss a step - just look at Sun to see how that is likely to turn out. It would be an embarrassing state of affairs if Google eventually bought Oracle for its intellectual property, but that is the path Oracle may be on.