Why Larry Ellison is Disappointed in HP's CEO Choice

Rob Enderle

Last week Oracle's CEO wrote a scathing letter to The Wall Street Journal on HP's choice of CEO. You can understand why Larry Ellison is disappointed in the HP CEO choice.


Here in the Silicon Valley, Todd Bradley's people had allegedly made it clear that he, as Mark Hurd's handpicked successor, was a shoo-in for the job of HP CEO. At worst, Bradley would have tried to turn HP into an Apple-targeted company and pulled funding from areas that interested Oracle. At best, through his relationship to Hurd, he would have either sold key assets to Oracle or partnered with the company while exiting market areas in conflict. In short, he would have taken HP in a direction that Ellison doesn't believe is particularly interesting or profitable and away from areas Ellison wants Oracle to own.


Instead, Leo Apotheker and Ray Lane will be taking HP directly at Oracle and likely pull resources from other battles to focus on the same lucrative markets Oracle is attempting to mine more effectively. Instead of growing closer and more dependent on Oracle, HP is likely to align more closely with SAP. It eventually could create a joint partnership like EMC, Cisco, and VMware did with Acadia or actually merge with SAP to create a nasty competitor for Oracle.


So Ellison is clearly upset that this didn't go his way, but why is he being so vocal about it? His concerns go beyond the idea that HP might become a vastly tougher Oracle competitor and revolve around a concept that might be obsolete: that a CEO cannot be challenged. He's frightened of the potential success of an independent board and a model that could threaten his unchallenged leadership. Let's explore that.


What's the HP Plan?


There are a number of things going on with this appointment that Ellison is attempting to distract us from. The bigger news with this appointment is that the true heavy hitter isn't the CEO, but the chairman of the board. Yes, while Leo Apotheker was CEO for a short time at SAP, Ray Lane turned around Oracle and departed as a successful CEO. He was removed because Ellison wanted the job back, not because he had done anything wrong.


HP's board, instead of hiring the heaviest hitter as CEO, made him chairman with the greatest power on protecting HP stockholders and not on day-to-day operations. This is likely because HP's previous two CEOs had ethical problems. Carly Fiorina shifted much of her time from running HP to getting George Bush elected and refused to hire a strong COO to back her up. Mark Hurd went off the reservation with a personal relationship that was inappropriate and badly covered up, while destroying HP's ability to survive long term.


As a result, HP is experimenting with strong balance between the CEO and the board so there is no tendency to drift away from board direction and into areas that could lead to scandal or worse. In short, HP is testing a concept that, were it successful and applied at Oracle, would make Ellison subordinate to his board and he certainly doesn't want that.


Wrapping Up: The Way it Should Be?


There is no right or wrong here because clearly Ellison has been successful at Oracle and Steve Jobs, who has a similar model, is even more successful at Apple. However, Jobs almost did get fired for messing around with stock options and Ellison likely would have been fired several times for creativity in contracts or female employee relationships. A strong board might be able to prevent these mistakes, but it could have also resulted in the premature removal of both men. I'm a big believer in making sure power isn't excessive in any one person because the history of power misuse when that happens often leads to Enron or Bernie Madoff-like problems, which are eventually company killers.


But Ellison is worried that if what HP is doing is successful, the job and power he has now might become obsolete. Power is addictive, and I think we can easily understand why HP's moves have frightened Ellison so. However, it is exactly that fear that suggests that HP might be doing the right thing and that it's something that Oracle's board might want to explore.

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