Oracle refuses to bow to HP's demands that it restore support for Intel's low-volume platform

There's little love lost today between Oracle Corp. (ORCL) and Hewlett-Packard Comp. (HPQ).  The pair enjoyed a 30-year partnership as each other’s biggest partners in the business sector, serving 140,000 clients.  The relationship began to erode in recent years as Oracle ventured into server hardware with its acquisition of Sun Microsystems, and HP expanded its software efforts.  

I. Oracle Accuses HP and Intel of Collusion

Oracle last Friday filed a stinging host of accusations against HP in Santa Clara, California Superior State Court.  Oracle claims that HP colluded with chipmaker Intel Corp. (INTC) to keep the Itanium platform alive, when it would otherwise have died.

Its lawyers write (according to a Reuters report), "HP has secretly contracted with Intel to keep churning out Itaniums so that HP can maintain the appearance that a dead microprocessor is alive.  The whole thing is a remake of Weekend at Bernie's."

Weekend at Bernie's was a 1989 comedy starring Andrew McCarthy and Jonathan Silverman.  In it the pair played the role of young insurance agents who pretend that their recently murdered boss is still alive in an effort to avoid getting "whacked" by a hired hitman.

Continued support of Itanium = Weekend at Bernies?

HP was not amused by the analogy.  In a comment to Reuters, spokesperson Michael Thacker says "[The filing is] nothing more than a desperate delay tactic designed to extend the paralyzing uncertainty in the marketplace created when Oracle announced in March 2011 - in clear break of contract - that it would no longer support HP's Itanium platform."

Oracle currently licenses the SPARC (Scalable Processor Architecture) reduced instruction set computer (RISC) architecture, which is heavily used for high-end/mission critical server deployments.  SPARC licensees compete directly with Intel's Itanium.

In recent years, Intel's Itanium has lagged in sales and seen delays in development.  In March, Oracle claimed Intel told it that it was preparing to kill Itanium and focus on x86 (Xeon) server chips.  In response, it announced that it was dropping software support for the platform.

HP, which sells Itanium servers, panicked.  Without Oracle's broadly used business software products it would lose many customers.  HP, who argues Intel is not killing Itanium, filed suit (Case "Hewlett-Packard Company v. Oracle Corporation" No:111CV203163) against Oracle in June, claiming it breached contractual obligations to provide software for the platform.

In August, Oracle fired back with a countersuit, claiming it entered the contract to provide ongoing software support for Itanium under false pretenses.  Oracle says that HP hid business details from it, including the unannounced decision by HP's board to hire Léo Apotheker as its chief executive and Ray Lane as its chairman.  Aside from concealing these details, Oracle also accused HP of defamation and intentional interference with contractual relations.

II. Company is Not Alone in Abandoning Itanium Support

The suit and countersuit are clearly an example of he-said-she-said sort of business commentary.  While a win for HP could for Oracle to pay damages or return some support for Itanium, the pair of suits are unlikely to prevent the impending demise of the platform, which has long lagged in sales.

After all, while Oracle may be serving itself in abandoning Itanium after it became a competitor to it, it is not alone in dropping software support.  Top operating system makers Microsoft Corp. (MSFT) and Red Hat, Inc. (RHT) have both abandoned support for Itanium in recent years, as well.

Intel Tukwila
Intel's latest Itanium, Tukwila launched in Feb. 2010 after years of delays.  It was originally announced in Feb. 2003 under the code-name "Tanglewood". [Image Source: Intel]

Intel has thus far added to the mystery by refusing to comment on whether an end-of-life is indeed in its long term plans for Itanium.  Thus far Intel has stuck to solely stating that in the near term development on and support for Itanium continues.

Itanium has turned significant profits over the years for Intel, despite its low sales volumes.  However, with virtually no commercial operating system support today, and with Oracle's decision to kill business software support for the platform, Itanium is appearing an increasingly unattractive option for prospective buyers.  Those factors are definitely driving down sales, and look likely to make the platform financially insolvent at some point.  But the big question when it comes to Intel's role is when it will make financial sense for Intel to bail on the platform.

III. Animosity Runs Deep Among Firms' Leadership

The war between HP and Oracle runs far deeper than merely Itanium or servers.  It's in part driven by the executive histories of the two firms.  HP recently fired Mark Hurd, a close friend of Oracle CEO Larry Ellison.  

Mr. Hurd had been a strong leader at HP, but was felled when he allegedly faked expense reports in an effort to cover up a relationship with a former adult actress-turned-contractor.  Mark Hurd was married at the time.

Allies of Mr. Hurd, including a small minority of board members, claimed the board was out to get the CEO and was just using the incidents as a convenient justification for dumping him.  Two members of the board resigned in protest over Mr. Hurd's forced resignation.

Mr. Ellison promptly named Mark Hurd an Oracle co-president.  HP sued Oracle claiming Mr. Hurd had trade secrets and would be in breach of contract.  It eventually settled the case.

Mr. Ellison has publicly called HP's board "idiots" for the decision and their subsequent recruitment of Mr. Apotheker.  Some investors believed this was merely rhetoric to devalue HP's stock price and allow for an Oracle acquisition.  Regardless, there does appear to be some earnest animosity between the top leaders at the two firms.

Source: Reuters

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