The Implications of the HP vs. Oracle Litigation

Rob Enderle
Slide Show

Customers Weigh In on Oracle Itanium Controversy

It's pretty clear that many IT organizations are dubious of Oracle's motives.

As expected, HP filed a lawsuit against Oracle in an attempt to force Oracle to reverse its position against their 140,000 shared customers and for Oracle to admit that its statement regarding the discontinuation of Itanium, the shared processor technology between Intel and HP, was false. This is the first shot in what likely will be an interesting fight because, as I mentioned in the prior post, Oracle appears to be operating tactically, which suggests that it had not fully thought through the implications of a large public lawsuit. If played right, and Oracle is exposed since Itanium is not any more obsolete than IBM's Power or Oracle's SPARC, then HP could end up in a much better position against Oracle and IBM than when it first started.


Let me explain.


Removing the Itanium Cloud


Initially, Itanium was to be the replacement for Pentium in the mass market. Delays surrounding the production of this processor resulted in cost and performance issues that took Intel down another path and left Itanium off of Intel's mainstream roadmap. Now there is nothing wrong with that, and agreements between HP and Intel coupled with the fact that it is a very profitable part, even though it sells in relatively low volumes, ensured its survival. But there was a cloud of negative perception that surrounded it because it isn't what it was initially intended to be.


That means that even though Itanium was from Intel, a vastly better funded company when it comes to processors against both IBM Microelectronics and Oracle, it was seen in an equal light. Its advantages, in terms of heredity, were largely overshadowed by the perception that Intel would eventually have to kill it. Given this is a low-volume part and Intel's Xeon team was vastly better funded as a result, Intel wasn't interested in aggressively changing Itanium's image and the large marketing effort required would have taken budget away from parts (Core and Xeon) that are vastly higher volume and would provide a better return on that marketing investment. Finally, this was a custom part, putting the responsibility for any related marketing (in Intel's mind) mostly in HP's camp anyway.


From HP's perspective, the problem was Intel's because it was the Xeon that created the issue and not anything that HP did. Therefore, HP expected Intel to deal with this misperception and that limited HP's willingness to fund marketing that dispelled this cloud. Ironically, it was better for both Oracle and IBM that this cloud existed because it degraded the image of Itanium and created a false belief that it was obsolete for both vendors.


However, now both Intel and HP are forced to either decide to abandon Itanium or to double down on it and HP has decided to double down. The litigation will now serve as a vehicle to reaffirm Itanium, effectively removing the cloud from it, and this alone should put it in a better position competitively against Power and SPARC. Long term, I expect it will now get more development resources because of this as well as both Intel and HP are forced to rethink priorities and move Itanium higher up the list.


Ironically, if this case goes as expected, Oracle will pay for HP, making Itanium more competitive against SPARC and eliminate a belief that benefited Oracle.


The Mark Hurd Problem


Oracle has more than one other major problem in this. Mark Hurd would have known the HP/Intel roadmap intimately and he would have also known that HP was dealing with a big perception problem surrounding Itanium. Hurd is already under a cloud due to why he was fired, which suggests that he has behaved less than ethically and his testimony in this case could be pivotal. In short, he knew what Oracle claimed was a lie and knew how much damage that lie would cause. Under the cloud of his infidelity, he probably won't be well liked or believed, in terms of Oracle defense, by the court.


Once again, this suggests that Oracle's moves were tactical and not well thought out, which has implications that go beyond this case and into the firm's executive competency and leadership.


Wrapping Up


Oracle has embarked on a dangerous path. It is clearly having difficulty making its Sun acquisition work and it increasingly looks, like I previously mentioned, that it is desperate to cover up that the acquisition isn't working out. As it moves to cover up the problem, it is making what appears to be severe tactical errors that are putting its customers at increased risk in terms of higher charges and forced migrations. Oracle is also entering into what may be protracted and public litigation against HP and Intel, and neither company, particularly Intel, is considered weak in this regard.


I would suggest that customers sharing HP and Oracle as vendors go through a contract review and determine if actions need to be anticipated or taken to assure their interests are protected in what appears to be a very painful breakup between HP and Oracle.

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