Arik Hesseldahl

Recent Posts by Arik Hesseldahl

HP and Oracle to Meet in Court Over $4 Billion Itanium Lawsuit Today

The very public argument over a very obscure chip is spilling into public view today as lawyers for Hewlett-Packard and Oracle present their opening arguments in a California state court in their dispute over Intel’s Itanium chip.

It all began in March of 2011 when Oracle said it would stop creating software that would run on HP’s Itanium-based servers. Itanium is a high-end Intel-made chip that never caught on in the marketplace except among certain HP customers. Oracle argued that Intel had planned to stop producing the chip and that it and HP were not leveling with their shared customer base. Intel and HP both denounced Oracle. Finally, after much public wrangling, HP sued last June.

But the seeds of the dispute were sown even earlier than that, in late 2010. After former HP CEO Mark Hurd joined Oracle, the two companies settled a lawsuit that HP contends requires Oracle to continue to produce software for Itanium-based servers. Oracle has argued, and its CEO Larry Ellison reiterated from the stage at last week’s D: All Things Digital conference, that no such contract exists.

There’s also the business impact stemming from the case. HP has repeatedly accused Oracle of starting this whole thing in order to help the server business it got when it acquired Sun Microsystems in 2010. But it’s clear which company is taking on more damage as a result of the uncertainty being generated by the suit: HP. There’s some documentary evidence suggesting that as recently as 2009, HP generated $2.2 billion in sales and 15 percent of its profits on an EBIT basis from its Itanium-related businesses, in particular service and support contracts. Even if HP wins, the damage to that business could turn out to be permanent.

HP is seeking $4 billion in damages. Oracle says HP can’t support that estimate and filed a counter-complaint alleging false advertising. The case will not be heard by a jury, but by Santa Clara Superior Court Judge James Kleinberg. His first order of business will be to rule on whether HP and Oracle have an enforceable contract. If HP wins that round, then a jury will decide if Oracle has broken its terms.

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