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Companies are at odds over Itanium, other issues

After being dealt critical losses in its court crusade against Google Inc.'s (GOOG) Android, Oracle Corp. (ORCL) and its CEO Larry Ellison are collecting themselves for their next major court battle.  Back in court (Case "Hewlett-Packard Company v. Oracle Corporation" No:111CV203163), Oracle finds itself on the receiving end as Hewlett-Packard Comp. (HPQ) looks to punish it with breach-of-contract allegations regarding Oracle's decision to kill support for Itanium servers.

I. Oracle and HP Quibble About Fate of Itanium

Itanium is an alternative architecture from Intel Corp. (INTC) specialized for mission-critical systems.  While pricey and outdated in some ways, Itanium remained for many customers remained the best option, hence constituting a small, but lucrative annual revenue stream for Intel.

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]

With recent statements from Intel raising the possibility of a merger of the Itanium and x86 architectures, some companies -- including Microsoft Corp. (MSFT) and Red Hat, Inc. (RHT) -- perceived that as a signal that Itanium was going the way of the dinosaur.  Both companies dropped their support, putting substantial pressure on the Itanium ecosystem.

Oracle, not looking to be left in the dust, also announced its decision to jump ship.  Unfortunately that move may have breached its contractual obligations to HP -- or so HP says.

The pair was unable to settle their differences in mediation, so the court trial will be kicking off today.  HP seeks $4B USD in damages.  Oracle's lawyers claim that HP "cannot support" its allegations of breach-of-contract.  Further, they allege that Intel and HP had a secret understanding that Itanium was headed for end-of-life.  Oracle has counter-sued over that alleged understanding, accusing HP of false advertising.

The spat is expected to draw in Intel CEO Paul Otellini to set the record straight about Itanium's fate, although Intel is not a plaintiff or defendant in the case.

Santa Clara
The court conflict is set in scenic Santa Clara, Calif. [Image Source: Treehugger]

The contract dispute between the two California-based companies (HP and Oracle) will take place in state court -- the Superior Court of the State of California, County of Santa Clara, to be specific.  Santa Clara is located at the heart of Silicon Valley in northern California (in the Bay Area) and is home to Intel's headquarters.

II. Judge Likens Case to "Divorce" Proceeding

The first phase of the trial, presided over by Judge James Kleinberg, will constitute the Judge seeking to verify whether a contract still exists between the two companies.

The spat between the software and hardware giant is particularly acrimonious.  Its roots might trace to Oracle's acquisition of Sun and HP's recent business software purchases, both of which put the companies out of their traditional realm and into direct competition with the others' products.  Further hurt feelings stem from Oracle CEO Larry Ellison's decision to appoint dear friend and former HP CEO Mark Hurd as a co-President after HP fired him.  

Mark Hurd
Mark Hurd ex-HP CEO is now an Oracle co-President and Oracle CEO Larry Ellison's right-hand man. [Image Source: Justin Sullivan/Getty Images]

While HP had no interest in keeping Mr. Hurd after he lied to board members about an affair, they were quite upset with him for jumping to the frenemy, calling the decision "anti-consumer".  HP tried to stifle the appointment, but Mr. Hurd was eventually allowed to work at Oracle.

Judge Kleinberg acknowledge the bitter nature of the spat commenting, "This case appears to be the end of a marriage."

The case is an important one for Oracle, who in the wake of the Android defeats will likely look to save face with this major dispute.  Another loss could be perceived as a sign of weakness from investors -- something Oracle desperately wants to avoid.

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It's all about Oracle having bought Sun
By ilt24 on 6/4/2012 2:51:36 PM , Rating: 4
Oracle, not looking to be left in the dust, also announced its decision to jump ship.

No, it was more that Oracle realized they made a mistake buying Sun and their SPARC platform and that they could maybe gain some sales by ending support of Itanium.

The decision not to port the software to Itanium was made by Oracle CEO Larry Ellison and shared with only a few Oracle executives, according to HP's filing. Oracle's senior vice president of database development was not consulted about the decision and is said to have testified that his group had not even considered ceasing software development on Itanium because it "was still, in our opinion, a platform that a significant number of customers were using, and so we didn't think there was a business reason to consider not supporting it."

The most recent filing points out that Intel had refuted Oracle's claims regarding the supposed end-of-life of the Itanium platform. A testimony from the Intel Executive in charge also made it clear that, "far from being near its demise, Itanium had just gained new vitality when Oracle made its announcement."

Oracle's internal sales communications shows the real reason the company decided to drop support for Itanium. The sales force was exhorted to take full advantage of the Itanium announcement according to the new filing, which quoted a sales executive from Oracle saying that, "we are the ones dictating IT/Itanium obsolescence."

By amanojaku on 6/6/2012 9:10:02 AM , Rating: 2
I don't think your analysis is entirely correct. SPARC sells twice as many units as Itaninum, and more than 90% of Itanium shipments are through HP. HP has a vested interest in Itanium, because:

"HP Paid Intel $690 Million To Keep Itanium On Life Support"
In 2008, HP agreed to pay Intel $440 million dollars over five years — between 2009 and 2014 — to keep producing the Itanium chips. Of course, HP would also have to pay for the cost of the processors it ordered. Then in 2010, the two companies signed another $250 million deal that would keep Itanium on life support through 2017.

Larry Ellison is a douche, but he's not stupid. If Itanium sold well Oracle would support it. As it stands, Intel has a rock solid lead with Xeon, IBM has second place with POWER, and Oracle/Sun is in third with SPARC. Itanium has lost other software support: Windows, Red Hat and Ubuntu, further limiting Oracle's potential install base. SPARC is a much better platform than Itanium, anyway.

"Well, there may be a reason why they call them 'Mac' trucks! Windows machines will not be trucks." -- Microsoft CEO Steve Ballmer

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