HP vs. Oracle Round Two: Now it's Personal

Rob Enderle

There is a lot of drama going on between HP and Oracle, and one might argue that it is progressing beyond the need for a trial separation and into restraining-order territory.


This is because Oracle recently added HP's new CEO Leo Apotheker to the witness list for its SAP litigation after he was awarded the HP job, a move that appears punitive. Ray Lane, the yet-to-be-seated chairman of HP's board has entered the fray defending Apotheker and pointing to former HP CEO Mark Hurd as being epically ethically challenged. To add insult to injury, Oracle was once again listed as overpaying executives, though Yahoo CEO Carol Bartz was named the most overpaid underperforming CEO. Suddenly I'm wondering who the most underpaid overperforming CEO is.


The Yahoo stuff aside, this Oracle/HP battle has the feel of a political fight in which both sides are seeking office and neither realizes that the election is over and it's time to live with the results. However, if either Apotheker or Hurd fail to perform, neither HP or Oracle have shown any resistance to replacing them, so let's focus on the road ahead for them.

Mark Hurd: Honeymoon Problems

The problem I've observed when fighting for an employee is that expectations for that employee tend to be set too high, placing the bar higher than the employee is able to reach. We saw this play out between Microsoft and a Chinese employee Google wanted. While Google won the battle, it lost the employee anyway, likely because once the honeymoon was over, both parties realized he was a bad fit. The passions ignited in the fight set expectations at a level that simply could not be met.


Oracle has a serious problem with executive compensation. It isn't just that this compensation appears to be too high, it is that it makes it look like Oracle is overcharging in order to pay it and still provide acceptable bottom-line performance. Much of its business comes from government, which is under massive pressure to control expenses and eliminate graft or the appearance of graft.

Oracle is already under an investigation for fraud, and the combination could turn the company into a pariah in segments where the concern over appearing to overpay has reached near-epic levels. Hurd will be expected to provide growth in these and other markets, but his ties to questionable behavior at HP likely will be problematic. His expertise isn't sales, it is in cost-cutting. But he now represents, along with the rest of the executive staff, an example of excess and potentially concealed excess at that.


High expectations coupled with a poor skill match and excessive compensation could lead to an ugly post-honeymoon result. The prognosis for Hurd's survival at Oracle isn't good.


Apotheker/Lane: HP Revision 2.0


Apotheker and Lane don't have the ethics problems that Oracle is dealing with. Their issue is to take a company that just went through an apocalyptic change and position it for a better future. This is really less about dealing with Oracle or IBM and more about really considering where the market is going and getting there first. They start out with a nearly insignificant software capability and will need to build that out quickly. Shifting the priorities of a company largely focused on hardware will be far from easy, as Jonathan Schwartz demonstrated at Sun.


It's key thay they ensure that the parts of HP that are currently paying the bills are neither neglected or crippled in the process. They will need a clear goal, along with an execution plan and milestones to it. Drama with Oracle only delays and confounds this process, so it's critical that both men stop focusing on Oracle and start focusing on transforming HP as quickly as possible.


Software and hardware historically have not mixed particularly well in companies that were almost exclusively one or the other. Though IBM represents what can result if the mix is balanced, building IBM to that point took more than a decade at a time when the market was far more stable than it is now. The upside is a vastly more capable company, but the risks are also unprecedented and the effort has been rarely successful. This will be no walk in the park for Lane and Apotheker.


Wrapping Up: Back To Business

Both HP and Oracle have major problems that go well beyond each other. Oracle is facing a serious threat: being perceived as gouging during a time when customers are particularly sensitive to that. Hurd adds to that perception and the fight with HP appears to be exacerbating this problem. Hurd is unlikely to survive at Oracle anyway.


At HP, the new executive leadership needs to quickly get the company on the road toward massive change. Changes like the one that HP's is contemplating are rarely successful and will require tight focus and sharp execution. Oracle presents a distraction that HP can ill afford either.


In short, this isn't a mud-slinging election. Both Hurd and Apotheker have jobs they will find difficult to keep and so must become more focused on their company's success than in trying to assure the failure of the other. The vote is over, the jobs have been awarded, it is now time to see if either can execute.

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