CNBC’s David Faber reported minutes ago that Icahn is getting close to dropping his bid for Dell. What changed? Perhaps it’s the matter of funding. The New York Post reported today that Icahn and partner Southeastern Asset Management are having trouble pulling together the $5.2 billion needed to make an offer that would improve on the $24.4 billion leveraged buyout offer put together by Michael Dell and the private equity firm Silver Lake Partners.

Icahn, the Post said, had told investors that at least part of the delay is addressing the $3.9 billion funding gap called out on June 5 by the special committee of Dell’s board overseeing the go-private process. Icahn and Southeastern proposed last month to recapitalize Dell and pay shareholders a $12 special dividend while leaving a publicly held stub.

One problem is that interest rates have risen a bit in recent weeks, making the prospect of borrowing that kind of money a lot more expensive. The other is that any potential lenders have been looking at the state of Dell’s deteriorating business and found it hard to underwrite a bid for a company with so much risk.

Icahn has — if nothing else — made the Dell situation a lot more colorful. One day he openly proclaimed in a televised rant that he would fire Michael Dell if he were ever to get control of the company. Since then, Icahn has proposed a new slate of directors as well as a short list of CEOs he might like to hire, though at least one of them, Oracle president Mark Hurd, has indicated he’s not interested.

The vote of Dell shareholders on the go-private proposal is set for July 18.

But it looks like they’re going to have to cross at least one name off that list. Sources familiar with his thinking say Oracle president and former Hewlett-Packard CEO Mark Hurd continues to have “no interest” in running Dell.

Hurd’s name appeared on a list shared with Reuters that included Todd Bradley, executive VP at HP and head of its PC and printing business unit; Michael Capellas, the Cisco Systems director who was the last CEO of Compaq Computer until shortly after it was acquired by HP in 2002; and Mike Daniels, the recently retired head of services at IBM.

Icahn has made no secret of the fact that were he to gain control of Dell, the computer company, that his preference would be to fire Dell, the man. Icahn said so very publicly in a televised rant on CNBC last month.

Icahn holds about four percent and change of Dell shares while Southeastern, the company’s largest outside shareholder, has a little more than eight percent. Together they’ve cobbled together a proposal to take control of Dell, leave part of it publicly traded, and use existing cash and new debt to pay existing shareholders a special dividend of $12 a share. The board committee running Dell’s go-private process slammed that proposal last week, saying it suffers from a “liquidity gap” amounting to about $4 billion.

This would be the second time that Hurd was mentioned as the preferred candidate of a potential Dell suitor. In March, when the private equity firm Blackstone was kicking the tires, the firm leaked indicated its interest in Hurd on a day that Oracle reported quarterly earnings. Hurd was silent on Blackstone’s interest until asked directly about it after a speech before customers in Japan. Oracle spokeswoman Deborah Hellinger was quick to tweet his answer that day.

Mark Hurd in Japan goes on the record on #Dell: “I’m very happy at Oracle. No interest.” #oracle http://t.co/pYsKAM9fDK

March 25, 2013 2:01 am via Twitter for iPhoneReplyRetweetFavorite

@dhellinger

deborah hellinger

Don’t expect a similar tweet this time around. However, the thought occurs: It would be the perfect use of Hurd’s new and as-yet-unused Twitter account, which appeared last month.

A point of clarification and credit: Blackstone’s interest in Hurd was originally reported by Fortune’s Dan Primack.

Bloomberg News confirmed a rumor about Lane that has been making the rounds for several months, according to papers filed with the U.S. Tax Court in May.

Late last year, the IRS found that Lane had improperly claimed losses of more than $250 million to offset income. According to Bloomberg, who interviewed Lane (I reached out to him via email, and haven’t heard back), he said that in 2000 he was advised to move about $25 million into a fund that backed technology startups, the point being to use the losses from the fund to offset his taxable income. (Update: I’ve since heard from Lane. See additions to the story below.)

The IRS is accusing Lane of using an instrument known as Partnership Option Portfolio Securities to report what it says was an improper $250 million “non-economic loss” for the tax year 2000. POPS are generally not used anymore, in no small part because they’ve been rendered ineffective by government scrutiny.

It has been a tough few months for Lane. Also in May, he left the board of electric-car company Fisker after the decline of its business. He also scaled back his role as a partner at the venture capital firm Kleiner Perkins Caufield & Byers.

Lane stepped down from his post as HP’s executive chairman on April 4, but retained a seat on the company’s board. He survived a shareholder vote seeking his ouster from the board at HP’s annual shareholder meeting on March 20, having secured slightly less than 59 percent of votes cast.

Lane took a lot of flak from shareholders for HP’s 2011 acquisition of Autonomy. HP paid $10 billion and change for the British software firm, and subsequently wrote down its value by about $5 billion as part of a larger $8.8 billion charge in the fourth quarter of 2012.

HP has alleged that Autonomy executives essentially cooked the books in order to inflate the company’s value. It has referred its findings to regulators in both the U.S. and the U.K.

He joined HP’s board in late 2010 as non-executive chairman on the same day that Léo Apotheker was appointed CEO, weeks after the resignation of former CEO Mark Hurd.

Apotheker lasted 11 months in the CEO job. He was fired in September of 2011 and replaced by current CEO Meg Whitman, who was then an HP director. On the same day, Lane was named executive chairman and was widely seen as something of a backstop to Whitman, who was initially viewed as lacking experience in running a hardware-focused company like HP. In fact, on the day Whitman was appointed CEO, Lane did more than his share of talking on a conference call and in subsequent interviews.

Lane is a former president of Oracle, and left that company as the result of one of Silicon Valley’s more infamous management feuds with Oracle’s founding CEO Larry Ellison. For his part, Ellison has never missed an opportunity to lob darts in Lane’s direction.

An HP spokesman declined to comment on the grounds that Lane’s tax dispute is a personal matter.

Update: I got an email from Lane. He says “This is a 13 year old tax item, that has never been contested by me, only the Vandium partnership. When the IRS decided it was a tax shelter and I would be liable, I immediately settled.” He went on to explain that by “settled,” he means he and the IRS have agreed to some terms, but it is not yet paid. The Vandium Partnership continues to dispute IRS’ case, but Lane himself as partner — he doesn’t know who the others are — has not.

In a conference call yesterday, CFO Safra Catz blamed the problems on issues with sales execution, due in part to all the sales people Oracle has hired in recent months: “Since we’ve been adding literally thousands of new sales reps around the world, the problem was largely sales execution, especially with the new reps, as they ran out of runway in Q3,” Catz said on the call. “As expected, many of the pushed out deals have already closed.”

Analysts today seemed willing to take that explanation at face value. “While the sales execution excuse is hardly bulletproof, we side with Oracle on this one and conclude that the issues are largely internal and can be addressed relatively quickly,” wrote BMO Capital Markets analyst Karl Keirstead in a note to clients today. “We haven’t picked up signs of a February lull in enterprise IT spend.”

Brad Reback of Stifel Nicolaus agreed. “We think the issue was not macro, competitive or product related, but due to training and productivity issues with new sales hires and their inability to close enough ‘bread and butter’ deals,” he wrote in a note today.

However, it’s hard to gauge how much of today’s decline is the result of the quarter’s results, and how much can be attributed to chatter that Oracle President Mark Hurd might, in one scenario, be tapped to run Dell.

Yesterday, Fortune reported that the private equity firm Blackstone Group is mulling a competing bid against Silver Lake Partners and Michael Dell to take that struggling computer company private. In the event that Blackstone were to win the bidding process, it would, the story goes, want Hurd for the CEO job there.

Hurd, whose previous job was running Hewlett-Packard, where he earned a reputation as an aggressive cost-cutter, hasn’t signaled his interest in such an outcome either way. But today The Wall Street Journal reported that Blackstone was in talks with GE concerning a bid on Dell’s financial services unit, meaning that the chatter about Hurd running a Blackstone-owned Dell might be just that — chatter.

Interviewed by analyst Katie Huberty, Whitman said she thinks that the majority of the “tough decisions” appear to be behind her at HP. “I feel like after 18 months I know what most of the challenges are,” she said. Among those was the decision to undo a directive by her predecessor, Léo Apotheker, to spin out HP’s personal systems group as a separate company, and to take massive write-downs on two prior acquisitions, EDS and Autonomy. Big moves like that are done, she said.

What’s not done is the restructuring effort that will reduce HP’s headcount by about 29,000 people, along with the effort to reduce other costs. Whitman said that HP is about halfway through a three-year restructuring and that there are about 15,000 more job cuts to go. But there are also additional cost savings from improved efficiency that can be wrung out of HP’s business. Whitman repeated the story of how HP became the largest customer yet of cloud software giant Salesforce.com, now in use by its 27,000 sales execs.

Whitman said that HP had in the past “underinvested in our own IT” around business processes like getting a price quote to customers and quickly closing a sale. “We’re behind our competitors in that, so we have a lot of work to do there,” she said.

Whitman said that HP is still on track to start showing revenue growth in 2014, even though the world economy is likely to still be on the weaker side. Having boosted research and development spending has helped HP accelerate development of new products like Project Moonshot, a new version of the Proliant server and the Elite 900 tablet — and those products are showing promise, she said.

Whitman also took a not-so-veiled shot at Dell, which is in the process of seeking the approval of shareholders to go private. Companies that look less than stable in the eyes of enterprise customers aren’t as likely to close big deals to sell their gear and services. Listen to her characterization below.

Asked about the troubled services unit, Whitman expressed confidence in its ability to turn around, even though four major customers are said to be shifting their IT operations in-house. They’re not named in the discussion, but one of them is presumably General Motors.

Whitman also explained in detail the meaning behind language found in HP’s most recent 10-K filing with the U.S. Securities and Exchange Commission about the possibility of selling some assets. Many took that to mean that HP might again be mulling the spin-out of its PC division or something like that. It meant nothing of the kind, as Whitman explained in detail.

The filing shows that CEO Meg Whitman earned more than $15.3 million during 2012, even though her base salary was only $1. The majority of her pay came in the form of share and options grants worth more than $13 million, almost none of which are yet vested. She also earned a $1.7 million bonus under HP’s PfR or “Pay for Results” bonus plan.

Under that plan, bonuses are awarded based on performance metrics including revenue, free-cash flow and achievement of management by objective (MBO) goals. There was also $220,000 in miscellaneous income, most of which had to do with her use of HP’s aircraft.

CFO Cathie Lesjak earned $6.7 million, which included her base salary of $825,011 per year plus $978,000 worth of stock options that vested during the year, plus $519,000 under the PfR bonus plan. She received another $4.8 million in combined share grants and options. The combined package is smaller than the $10 million she earned in salary, bonuses and options awards in 2010.

Enterprise business head Dave Donatelli earned the same base salary as Lesjak, but also received $1.15 million worth of stock options that vested during the year, plus another $519,000 under the PfR bonus plan and nearly $6 million worth of share grants and options.

John Hinshaw, the EVP who joined HP from Boeing in 2011, earned a combined $8.2 million in 2012, including $5.1 million in share grants and options. He has recently been tasked with cutting $3.5 billion out of HP’s annual operating budget by the end of 2014.

Todd Bradley, head of the Printing and Personal Systems Group, earned $7.4 million including $2.7 million in share grants and options. His base salary was $850,000 and he earned a PfR bonus of $587,000.

The filing also shows what two exiting execs were paid on their way out the door. Former head of the printing unit Vyomesh “VJ” Joshi, pushed out in a significant shakeup in March, collected $1.6 million in severance. He is also receiving about $3.3 million in four equal cash installment payments that end in October of 2013. He left HP owning 1.4 million shares worth, more than $22 million as of Friday’s closing price.

Another former executive collecting severance pay is John Visentin. He is the former head of Enterprise services, named by former CEO Léo Apotheker. He was fired after HP took an $8 billion charge to write down the value of EDS. That unit, acquired under former CEO Mark Hurd for $13.9 billion in 2008, has been a bit of an albatross around HP’s neck of late. Last year the unit was implicated in an embarrassing foul-up with an Australian bank that required Whitman to fly to Australia.

Visentin was paid a combined $8.3 million, including a base salary of $800,000 and a $2 million bonus connected to his promotion to Executive Vice President. HP also reimbursed him $127,311 for the deposit he made on a house he sought to buy in California, but on which he never closed. He lost out on $3.8 million in combined share grants and options, which were canceled and did not vest when he left. He departed HP owning a little more than 20,000 shares, worth about $330,000.

There are other interesting tidbits in the filing. For one thing, there’s a new policy proposal being put to shareholders that allows any person or group of up to 20 people who own at least 3 percent of HP shares and who has owned them for at least three years to nominate a slate of directors of as much as 20 percent of the board.

The proposal, which requires a vote of two-thirds of all shareholders, is a victory for activist investors over proxy access. Previously, HP shareholders could only vote on the slate of directors nominated by the company. Now if enough shareholders are unhappy, they can nominate their own group of new directors.

It has been a long-simmering controversy in corporate governance circles. Proponents have argued proxy access improves returns to shareholders by forcing boards to be more responsive to them, lest they lose their seats. Without proxy access, investors who want to shake up a board’s membership have been forced to wage expensive public campaigns to sway the votes of shareholders and have had to pay for distributing their own ballots.

As of now, there are only three investors who own enough to meet the 3 percent standard, and they’re all institutional shareholders: Investment firm Dodge and Cox owns 6 percent of HP’s outstanding shares, State Street Corp. owns 5.4 percent and investment firm Blackrock owns 5.2 percent.

HP’s fourth-largest investor, who owns 1.8 percent, already has a seat on the board. Ralph Whitworth, the activist investor with a history of agitating for breaking up the companies he invests in, joined HP’s board in November of 2011. And all indications are that he’s supportive of Whitman and her plans to turn HP around over the next few years. Besides, any board shakeups he may wish to carry out will have to wait for awhile: He doesn’t yet own 3 percent.

Asa Mathat / AllThingsD.com

The results were better than expected. Earnings on a per-share basis were 64 cents, three cents above the consensus of 61 cents. Sales were $9.11 billion, beating the consensus estimate of $9.03 billion.

As usual, we’ll be listening for hints from Oracle on the state of overall IT spending, which could have important implications for other companies, including Hewlett-Packard, SAP and IBM.

Also, though much of Oracle’s corporate legal dramas with HP and Google have quieted for now, it’s possible that CEO Larry Ellison will have some colorful words about his various competitors.

Update: The call is now over and you can read my abbreviated transcript below. (Sorry, I joined late.) A few highlights: President Mark Hurd declared that Oracle plans to hire more sales people, and to do so fairly aggressively. Ellison reminded the analysts on the call that the surge in hiring has been done without adding much to the expenses. CFO Safra Catz said that sales to federal customers are healthy despite the worries about the federal budget’s “fiscal cliff” that is looming at the end of the year.

2:18 pm: Joining late after a technical foul-up. The Q&A session has already started.

2:19 pm: Question from Merrill Lynch about growth rates of Exadata. Are you tracking closer to the billion-dollar run rate? Also, any changes in customer behavior in regards to the fiscal cliff?

President Mark Hurd: We’re changing nothing. Generally speaking, that’s the trajectory we’re on.

CFO Safra Catz: We’re having a wonderful December so far. People are wanting to spend their budgets. I can tell you our federal customers have been spending money with us even in December.

Question from Wells Fargo: Sales performance and productivity. There were changes in headcount and software licensing. Curious about productivity ramping for net new hires and heading into Q4.

Hurd: Without making too many forward-looking statements, in general we feel great. We’re hiring the best people in the industry and getting them ramped and oriented to sell and beat competition. We’ve lined up our sales force against the secular competitors and trained them to be experts in their products. We don’t expect them to be very productive for the first twelve months. If they are productive, that’s gravy. We feel great about the talent we’re attracting and we feel great about getting them inside. And we’re still hiring.

CEO Larry Ellison pipes up: We’re also hiring in BI (Business Intelligence).

Ellison: Mark and his team have done an extraordinary job of ramping the sales force without increasing the cost. We’ve kept expenses pretty close to flat. We’re going to keep doing that for the next 18 months. We’re going to add to capacity without adding expense.

Question from Goldman Sachs: Given all the enhancements you’ve made with Fusion, can you speak to attach rates of add-ons? Also, given successes you’re seeing in the cloud subscription line, how does that affect the growth rates?

Hurd: Our attach rate, we look at it over a number of years. In the quarter, we had a significant number of logos where we closed a module. It’s a core part of our strategy. (He’s talking about selling additional software modules that work with different software apps.)

Here’s one key bit of news that occurred before I joined the call: “Oracle said it expects new license software revenue growth in the range of 4 percent to 14 percent on constant currency basis and 3 percent to 13 percent in reported dollars. Hardware product revenue growth is expected to range from a negative 10 percent to flat in constant and reported dollars.”

Question about a year-end budget flush.

Catz: Folks wanted to close deals in November and they want to close deals in December. No impact on pricing.

2:30 pm: Ellison is speaking a bit about Oracle 12c and the cloud. He mentioned Salesforce.com as a customer. He says it’s also appropriate for customers building private clouds. The key feature he says is that 12c moves multi-tenancy into the database layer.

Catz: Our customers who are paying for license updates are entitled to the product. Over time they will update to it over a number of years. It will make us more competitive.

Hurd: We had good solid growth in every region in the database business.

Final question from Stifel Nicolaus: Give us some color on increases in coverage in vertical businesses.

Hurd: We put a lot of effort into our verticals. Those are discussions we’re having at the CEO level. The implications are huge. We’ve invested a lot of R&D. We feel great about our position in communications, and in retail. We’ve made big investments in financial services, not just in product, but scaling out the sales force.

And that wraps up the call.

While it’s true that Oracle has fared better than most of its rivals amid a crash in global IT spending, analyst Brendan Barnicle of Pacific Crest Securities in Portland, Ore., argued in a research note to clients last week that analysts may have set the bar a bit high. He expects EPS of 60 cents and sales of $8.94 billion. “In checks, we heard about more large deals than we have in the recent past. Nevertheless, it is likely that macro uncertainty made it difficult to close all the deals. Therefore, we expect November quarter results generally to be in line to slightly lower than consensus,” he wrote.

On top of that, he thinks the outlook for the quarter ahead is too aggressive, given the state of the world economy. “Oracle has a clear practice of guiding conservatively, and in the current macroenvironment, we expect the same,” Barnicle wrote. With that in mind, he thinks the current consensus that calls for earnings of 66 cents on sales of $9.3 billion is a little too high.

Even so, Barnicle expects mostly positive news from Oracle today. With the shares trading at $32.43 this morning, up more than 26 percent this year, he still thinks there’s room to grow. His price target is $36.

Michael Dell said in an interview with the U.K.’s Sunday Telegraph newspaper that Autonomy was shopped to Dell before it wound up in the hands of Hewlett-Packard in 2011.

Dell, CEO of the personal computer and IT concern that bears his name — a company that has been aggressively acquiring software companies in recent months — said he was approached by Autonomy. He passed on the opportunity because it was, in his words, “obviously overpriced.”

The story doesn’t go into any detail about how Dell was approached or when, but it raises some eyebrows for a few important reasons, none of which are entirely helpful to former Autonomy CEO Mike Lynch’s version of events.

On the other hand, it doesn’t make HP’s management team at the time, including former CEO Léo Apotheker and then-director now-CEO Meg Whitman, look any smarter in hindsight.

Recall that Oracle CEO Larry Ellison made a similar claim about passing up on an approach by Autonomy. It’s a sensitive topic because as a British company, it would have been illegal for Autonomy to be “shopping” itself around to potential buyers without first disclosing the fact to shareholders, though rumors that it was in play had been making the rounds since late 2010.

Lynch initially denied Ellison’s version of events, only to have Oracle produce not one but two sets of PowerPoint slides produced by investment banker Frank Quattrone, slides that looked an awful lot like they were intended to help make a deal. Quattrone conceded after a bit of PR back and forth that he had been quietly pitching Autonomy to Oracle as a potential acquisition independently of Lynch.

It’s not clear in Dell’s version of events if Quattrone was involved. I reached out to him this morning and he declined to comment any further.

But here’s why it all matters: While Oracle and Dell might indeed have not been interested in Autonomy, the mere mention of meetings with Dell and Oracle to HP’s then-CEO Léo Apotheker might have had the effect of pushing up the price for Autonomy.

Think about it: Autonomy’s advisers had every motivation to do what they could to drive up the price and make the company seem as valuable as possible. The mention of a whiff of interest from Oracle and Dell, combined with rumors that were already in the water that Microsoft, too, was interested (and which goosed Autonomy’s share price), might have stirred fears of a bidding war. This might in turn have spurred HP to make the rich offer of $11 billion and change that it did. It eventually conceded that Autonomy was worth $5 billion less than it paid for it.

And that only makes Apotheker and his deal team look sillier now than they already did.

Of course, once the offer was on the table, U.K. laws made it all but impossible to walk away, even if the price seemed high after the fact. And so here we are.

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Asa Mathat / AllThingsD.com

You may recall a brief PR kerfuffle in which Oracle disclosed that it had been approached by investment banker Frank Quattrone, who was, as some people have it, shopping Autonomy around for a possible acquisition. Some people, including Quattrone and Autonomy’s founding CEO Mike Lynch, wouldn’t call it “shopping around” because it would have been illegal to “shop around” a U.K.-based company under that country’s securities laws without disclosing the fact to shareholders. But we’re getting ahead of ourselves here.

Remember, however, that in the wake of HP’s move to acquire Autonomy, Ellison said that at something north of $11 billion, HP had paid an “absurdly high” price, and cattily followed that by saying that Oracle had “taken a pass” on Autonomy.

Lynch, in an interview with The Wall Street Journal days later, said that no such overtures to Oracle had ever been made.

Oracle, just to set the record straight, mind you, with absolutely no other agenda in mind, fired back that Lynch apparently had a bad memory and had forgotten about a meeting, indeed a pair of meetings, involving Hurd, Lynch and Quattrone and some PowerPoint slides.

“Oh, you mean those slides,” Lynch said. No, he didn’t really say that, but he might have. Anyway, at that point, Lynch clarified that he had indeed accepted an offer to meet Hurd to talk about database technologies but he was “not there to sell anything.” Okay, then.

Again, just to clarify the record and nothing else, Oracle dug through its files and found the PowerPoint slides from at least two meetings that Lynch and Quattrone had held with Hurd. Quattrone owned up that the slides were his and that the idea had been to pitch Autonomy to Oracle independently of Lynch or Autonomy “as an idea.”

Autonomy had already been the subject of repeated rumors about a nonexistent bidding war for the company that had Oracle and Microsoft wrestling over it. And the meetings at Oracle took place in early 2011 after those rumors had been in the water a little while.

So yesterday’s disclosures by HP certainly put an exclamation mark on a back-and-forth between Oracle and Lynch that had simply quieted but not concluded.

Which brings us to those slides. What’s in them? Some interesting nuggets for sure, but there are no smoking guns concerning Autonomy’s alleged cooking of the books prior to HP’s announcement that it would acquire the software firm on Aug. 18, 2011.

On one slide we see Autonomy’s revenue mix as of early 2010. (Click to make bigger.) Note that the IDOL Product that makes up the blue slice of 29 percent of sales is the “hardware product” that in HP’s telling is the one sold either at a low margin or at a loss in some cases. Those allegedly improper bookings, HP says, amounted to 10 percent to 15 percent of Autonomy’s overall sales, and would otherwise be about half the size shown here.

In another slide we see Autonomy’s revenue and enterprise value as of January 24, 2011 — less than six months before HP’s acquisition — converted to U.S. dollars and compared against other notable software companies. Autonomy is valued at about $5.7 billion, or a little less than six times revenue. Six months later HP would pay nearly twice a much, which struck pretty much anyone paying attention as odd if only for the timing of the deal. Now HP says it paid about $5 billion too much for Autonomy and that amount lines up almost exactly with the increase in Autonomy’s valuation from this point. Coincidence? Maybe. But, interesting! (Click to see it bigger.)

And here we see a list of names of both Autonomy senior executives and members of its board of directors. As yet there’s no indication who it was from within the ranks of Autonomy who came forward to HP after Lynch’s dismissal from HP by CEO Meg Whitman, and so there’s no way to know if this person’s name appears here. Also, Autonomy’s former directors will almost certainly be contacted by both the U.S. Securities and Exchange Commission and the U.K.’s Serious Fraud Office. (Click to see it bigger.)

If you want to read those slides in their entirety yourself, here they are, via Scribd.

Autonomy Presentation 1 503341

Autonomy Presentation 2 503342

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• The Red Flags That Were Obvious — To Some — In the HP-Autonomy Deal
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Two years and two CEOs later, HP is stumbling. Over that time, the Palo Alto, Calif., company’s market capitalization has fallen to less than $30 billion from more than $100 billion. On Friday, HP’s shares hit a new 10-year low.

Read the rest of this post on the original site »

Hurd appeared on CNBC from the Oracle OpenWorld Conference in San Francisco. “There isn’t a customer we have that’s not on both an austerity plan and an innovation agenda at the same time,” Hurd told CNBC’s Maria Baritoromo in what I think was his first televised interview since joining Oracle in 2010.

He said customers are spending incrementally more of their IT budget simply storing the deluge of data they’re gathering, and repeated the company line that the Exadata line of database hardware helps both shrink the amount of data a company needs to store and then turn that data into useful information.

He also dodged a question about what he thinks is going on at his old stomping grounds, Hewlett-Packard, where he was CEO for five years. Asked where he thinks Oracle’s growth will come from in the near future — it has been rather acquisitive over the last year — he said the company will continue with its balanced approach, buying both companies and shares, and finish beating the market. “Whatever the market does, we’re going to beat it.”

Watch it below.

The company says it expects to see 50,000 attendees this year, and is featuring more than 2,500 sessions presented by more than 3,500 speakers across 14 individual venues. And forget about booking a hotel room in San Francisco this week: People attending OpenWorld have booked nearly 98,000 hotel nights.

So what’s on the agenda? Expect to hear a lot about the cloud. Oracle’s latest update to its core database software, known as 12c, will be unveiled. It’s the first major revision to Oracle’s database software in about five years. The “c” naturally stands for cloud, which Oracle is going to be embracing in a significant way at this event.

The speeches kick off Sunday night with the first of two keynotes from Oracle CEO Larry Ellison. Co-President and former Hewlett-Packard CEO Mark Hurd is speaking twice as well, once on Monday and again on Thursday.

Oracle is likely to continue to challenge the notion that it’s on the defensive from companies like Salesforce.com. Ellison has publicly disparagedSalesforce and another cloud-based software company Workday, both of which compete directly with Oracle.

Salesforce (whose recent Dreamforce conference also blocked traffic) has built what’s forecast to be a $3 billion annual business selling customer relationship software that runs in the cloud, and its CEO Marc Benioff is a former Oracle exec and Ellison protégé. Workday, due for a $400 million initial public offering soon, is run by Aneel Bhusri and Dave Duffield, the founders of PeopleSoft, a company Oracle acquired in a hostile takeover. It offers a breed of software known as human capital management software used by HR departments at big companies.

Ellison and Benioff have feuded — sometimes publicly — over their competing visions of the cloud and how software should be delivered to large companies. Benioff is fond of saying that if a company ever takes delivery of a server at a loading dock, they’re not running the “true cloud.” Ellison — who also has a significant hardware business to consider — argues that big customers need a mixed approach: Where some will be happy farming out the work of managing the hardware to someone else, others will want to own it outright, while still others will want to mix and match. He’s also fond of pointing out that Salesforce is a big customer of Oracle’s database.

Oracle isn’t the only company arguing for the mixed cloud approach. IBM and Hewlett-Packard and Dell — hardware vendors all — tend to see the cloud in this way, as does Microsoft, which offers its products in both hosted and on-premise varieties.

Still, there’s no mistaking Oracle has come to embrace the “software-as-a-service” model long personified by Benioff and Bhusri as well as Netsuite, a cloud software player run by former Oracle exec Zach Nelson and in which Ellison is an investor. (Nelson is speaking at Openworld, too.) Oracle is pivoting toward delivering all of its software as a service, allowing customers to choose which approach best suits them. On Oracle’s last earnings call, Hurd made a point of calling out a long list of customer wins for cloud-based CRM and HCM offerings: Accenture, Adobe, Cisco Systems — where Benioff is a new director — Colgate-Palmolive and Proctor & Gamble are all running Oracle applications in the cloud.

Indeed, Oracle has said it is now the second-largest company offering software-as-a-service behind Salesforce itself. It reported $1 billion in bookings for cloud software in June. Expect an update on the size of that business in Ellison’s remarks.

Much of that growth has come from Oracle’s aggressive pace of acquisitions. It has been gobbling up cloud-based software companies such as RightNow and Taleo.

And Oracle’s service offerings don’t stop at software: They extend to hardware, too. Customers can purchase ExaData and ExaLogic hardware and then run them inside an Oracle-owned and -maintained data center. The point is to get the hardware up and running quickly without having to bear the time and expense associated with setting it up.

So, if you care about the cloud — and nearly everyone in enterprise IT does these days — it’s going to be an interesting week.

Asa Mathat / AllThingsD.com

The filing shows that while Ellison took a token $1 salary, his combined compensation from stock options and other items for the year jumped by 24 percent year on year to north of $96 million from $77.6 million in 2011. Ellison’s compensation package included about $90 million worth of stock options, an $8.4 million $3.9 million incentive payment that was only half one-quarter as large as the maximum allowed under the bonus plan, and a $1.5 million payment for security at his home. Most of the increase can be attributed to the value of the options for 7 million shares that Ellison received. He received the same amount of options last year, and they’re simply worth more this year.

Ellison, the company’s founder, who has run it since 1977, already owns more than 23 percent of the outstanding equity in Oracle, amounting to more than 1.1 billion shares. As of Friday’s closing price, his stake in the company is worth more than $37 billion.

Catz, Oracle’s president and CFO, received a 23 percent raise in total compensation. Oracle reported her combined compensation in salary, stock options and other payments as $51.7 million, up from $42.1 million the year before, including options awards worth more than $48.3 million, and an annual base salary of $950,000. She owns a stake in the company amounting to more than 23.5 million shares, which, as of Friday’s closing price, is worth more than $763 million.

Hurd, who joined the company in 2010 after leaving Hewlett-Packard, where he was CEO, saw his total compensation for the year drop to $51.7 million from $78.4 million the year before. The decrease is because of a big one-time bonus in stock-option grants that Oracle gave him when he joined. His base salary is equal to Catz’s, at $950,000, and also included $48.3 million worth of stock options. Hurd owns 5.4 million shares in the company, which, as of Friday, was worth north of $176 million.

Hurd and Catz also each received a $2.4 million incentive payment out of a possible $10.4 million.

The compensation was for Oracle’s fiscal year 2012, which ended May 31, a period during which the company’s share price fell by 19.5 percent, annual revenue rose by 4.2 percent, and net profits rose by 16.8 percent.

But the questions stemming from the dispute don’t stop with the decision by Judge James Kleinberg ruling that Oracle must abide by the terms of promises it made to HP in 2010 when it settled an unrelated lawsuit concerning Oracle’s hiring of former HP CEO Mark Hurd.

First off for HP is the question of whether the damage to its Business Critical Server business unit, which sells the Integrity line of servers that use the chips, can be reversed. The damage is plain to see in HP’s financial results. For the first six months of the year, sales are off by $275 million, in a business unit that last year saw sales north of $1.1 billion. The uncertainty brought about by the lawsuit has hurt sales, and HP has made it clear it expects them to remain under pressure.

But it’s not lost sales that are hurting HP the most: A half-billion-dollar drop in sales at a company on track do $123 billion this year isn’t much to get excited about. It’s the profits. Legal filings made public over the course of the suit showed that HP derives a healthy portion of its profits from ongoing service and support contracts with companies that buy its Integrity servers. While HP doesn’t routinely break these numbers out in regulatory filings, documents showed that in 2010, HP derived about 15 percent of its profits on an EBIT basis (Earnings Before Interest and Taxes) on business related to Itanium.

Reversing the trend will be hard. For one thing, the legal fight isn’t over. Oracle has promised both to appeal the decision and to continue to press its counter-claims against HP in court, so the uncertainty among HP customers will continue, though as HP’s enterprise chief Dave Donatelli put it to me in an interview in June, the first step toward saving the BCS business is winning the lawsuit.

HP does have a plan to move Itanium customers onto more mainstream servers. It’s called Odyssey, and it involves building a new generation of Business Critical Servers on a more mainstream platform, probably Intel’s Xeon. Over time — and it would take several years — Integrity customers could be persuaded to move in this direction. Exactly how HP preserves the highly profitable service and sales contracts upon which it has relied all these years isn’t entirely clear. One key piece of the strategy would likely involve the creation by HP of a version of its Unix operating system, called HP-UX, that runs on Intel’s mainstream x86 chips.

For Oracle’s part, while its appeal is pending it will have to rejigger its plans and issue an update to its database software for Itanium systems. Existing customers had nothing to worry about in the first place. But it now faces the prospect of paying out a significant damages award to HP. Even if it is as high as $4 billion as many reports have suggested — and it likely won’t be — Oracle’s balance sheet, flush with almost $31 billion in combined cash and short term investments, can take the hit.

But why let it go that far? HP CEO Meg Whitman has referred to the historical relationship that existed between HP and Oracle as “one of the great partnerships in IT history.” And Oracle CEO Larry Ellison has said he likes Whitman.

There have been at least two rounds of settlement talks held before and during the trial. Now that the primary issue of the trial — whether Oracle was bound to stick to an agreement it made in 2010 — has been decided, perhaps there’s ground upon which to build the foundations of a third way out of the dispute.

Oracle’s point that the Itanium chip is nearing the end of its life has more merit than either HP or Intel would care to admit. There may indeed be a few more generations left of Itanium, but nothing can change the fact that the world of enterprise computing is turning its back on Unix and non-x86 chips. The research firm IDC noted in May that the size of the market for non-x86 servers as a percentage of the overall server market has declined to the lowest it has ever seen.

Both HP and Oracle have to respond to this. HP’s response is Odyssey. Oracle, which owns the legacy Sun Microsystems business of SPARC-based servers running Solaris, has its Exadata, Exalogic and Exalytics hardware systems, all of which are based on Intel x86 chips. As the migration away from Unix plays out, customers of both HP’s Integrity line and Oracle’s SPARC systems are going to be forced to choose a way forward.

Depending on the case, both Oracle and HP will be jockeying for this emerging segment of post-Unix customers. One would think they’d want to do so with the maximum amount of customer goodwill. These are specialized customers — shared customers were the basis of the partnership in the first place — who don’t make their computing choices lightly and who tend to stick with one vendor for a long time. For them, the sight of these two tech industry heavyweights fighting so bitterly must be getting tiresome.

Porrini’s LinkedIn profile confirms the move, and shows that he has taken a job as general counsel and secretary at YuMe, a company that provides video advertising software and services. The company is backed by investments from Accel Partners, BV Capital, DAG Ventures, Khosla Ventures, Menlo Ventures and Intel Capital.

HP’s legal office has seen a lot of changes recently, since former CEO Mark Hurd left, ultimately to take a job as President of Oracle. Last December, general counsel Michael Holston, who had previously been seen as a key Hurd aide, left the company. His departure came about three months after the ouster of former CEO Léo Apotheker, and Meg Whitman’s taking over as CEO last year.

In April, HP named John Schultz as general counsel, replacing David Healy, who had the job on an interim basis after Holston.

Porrini (pictured from his LinkedIn profile) had been at HP since 2001. Before that, he worked at Bluestone Software, which HP acquired in 2000. Earlier, he was a partner at the law firm of Pepper Hamilton; before that, he worked at the U.S. Securities and Exchange Commission.

Earlier this month, the company surprised analysts by reporting quarterly results that were better than anyone expected, and with the revelation that Oracle is now the second-largest provider of software-as-a-service after Salesforce.com, it has challenged the conventional wisdom that it was more of an old-school software company.

But that’s not the most interesting thing I noticed in looking over Oracle’s most recent financials. I saw that a lot of operating expenses were lower — $174 million lower, to be exact — in Oracle’s fiscal 2012 versus fiscal 2011. It looked to me like the Mark Hurd playbook is alive and well. It was the first thing that came to mind when I sat down with the Oracle president (and former CEO of both Hewlett-Packard and NCR) at Oracle’s offices in New York for his second on-the-record interview (here’s the first) with AllThingsD. A transcript of our conversation is below:

AllThingsD: Mark, Oracle had a pretty good quarter, when people expected it to be tougher. Software sales are up, hardware is down. But when I went back and looked at the results, I saw something that looked familiar: Shrinking expense lines in things like marketing and general and administrative. I thought that looked a bit like the old Mark Hurd playbook from HP, and NCR before that. Is that part of what’s going on?

Mark Hurd: I think it was a good quarter for us. The quarter behaved well across virtually every metric. Our pipelines were up. Our conversion rates, which is our ability to convert pipeline into orders, was strong. I think, to your point, we managed our expenses. I think, in the context, if you look at the quarter, we added 3,300 people to our sales organization. And those are really the quota-carrying people, plus the technical people who support the sales people. And we did that while keeping our sales and marketing expenses relatively flat year over year. I think anytime you can realign your capital so you can get it into R&D, or into sales, as we have, it tends to show up. We’ve got more opportunities than we can deal with right now, so we had to increase, and it’s a great thing for us.

And that increase is taking place at a time when some people expected you to cut back. Are you trimming in some places and adding in others?

We’re doing exactly what you’d expect us to do. We’re looking at everything in the company, and trying to ensure that we have our investments in the right place. It’s a team sport. We’ve done a lot of work across Oracle to be prudent in some areas with expenses. But at the same time, we’re investing. Our investment in Research and Development is up. As as you’ve seen, our investment in sales and technical people is up. We’re investing into the business because we think we’ve got a great hand and we want to go play it.

Are you investing in Europe, too? Everyone is concerned about their exposure there, given all the sovereign debt problems and the economic troubles there.

We invested during the year across all the geographies. We grew our U.S. sales organization. We grew our European sales organization. We grew in Latin America, and we grew in Asia. And we grew across most pillars of our business. We made material investments in our applications business, and our cloud applications business. We made investments in middleware — we think we have a very strong suite of middleware, and we want to increase our sales force there. We made investments in business intelligence. We think we have a strong offering with Exalytics, and we want to boost our efforts there. And we’ve made investments in engineered systems, and they’re showing up. If you look at the quarter, we booked almost as many systems in Q4 of 2012 as we did in all of 2011. So I think that’s a compliment to both the product and the capacity of the sales force.

Let’s talk about your engineered systems business, because I think that’s the newest piece that people are just beginning to understand. These are the Exadata, Exalogic and Exalytics systems you’ve been talking about. You’ve got the legacy Sun hardware business on one hand, but what’s fundamentally different about the engineered systems versus the traditional systems?

When you look at Sun, it’s a server line that has the SPARC chip and the Solaris operating system, and it has a very long history. So there’s a couple things we’ve done. Exadata is really a little different than a traditional Sun server. It’s a combination of five different technologies. It has a lot of DRAM memory in it. It has a lot of flash memory in it. It’s got incredible compression technology. We can take a database and shrink it and make it one-tenth the size that it was before. We network it with Infiniband, which gives us 10 times better performance inside it. When you shrink the database by a factor of 10, and run the data inside the computer 10 times faster, you’re doing what you did before 100 times faster. A report that used to take 100 minutes to generate now takes one. And, by the way, you can turn that into a cost benefit or a performance benefit. By that I mean, if you’re happy with 100 minutes, you need only one-tenth of the computer. Or you can run 100 reports in the time it used to take you to run one. It also really combines a server, storage and a database. It’s all of those things, and that’s why we call it an engineered system. And just as important as all of that is the fact that we put it together for you, we provision it for you. Our engineers take the Exadata and integrate everything, which normally you’d have your own people do.

And then you have specific flavors of these systems that are designed for specific industries, say retail or finance or health care?

Depending on how far up the stack goes. Think of Exadata up through the database layer. Exalogic goes up through the middleware layer. Exalytics takes the foundation of Oracle’s business intelligence suite. So they’re three different engineered systems that are built around different parts of the Oracle software stack.

So where does that leave the traditional Sun hardware business?

I think when you speak of Sun, you think of the T Series computer line and the M Series computer line. Larry [CEO Larry Ellison] has done a lot of investments in that core line. So in the traditional server line we’ve done new SPARC silicon, the T4, we’ve brought out a new version of the Solaris operating system, all in an effort to drive better performance and total cost of ownership. And we think now, as we push new releases of SPARC, we think we’re going to have the highest-performing silicon in the computer industry. No one argues that Solaris is the most advanced operating system of the Unixes that are available today. Now we’ve also done something new. We’ve introduced a SPARC Supercluster, and that’s all those different pieces in Exadata, built on a SPARC chip and running Solaris. So if you’re an older Sun-SPARC customer and want the benefit you get from Exadata, but you don’t want to switch over to Intel and Linux, which is what Exadata is built on, you can get them and keep SPARC and Solaris. We’re investing into the Sun base.

That brings me to another interesting point. Without diving too deep into the circumstances around the departure of Keith Block, he got caught in court documents saying some things about Sun products; and earlier, there were some statements made by Larry about letting the business around some older commodity products — Sun products, products where the profit margin is lower — shrink. Obviously you’re not going to defend what Block said, but at the same time, you’ve got Larry saying that it’s okay with him if the sales of certain hardware products fall to zero. Putting myself in the shoes of a longtime Sun customer, I wonder if you can unpack those two ends of a spectrum for me?

The best thing to do is tell you what we’re doing. We’re interested in selling intellectual property that differentiates Oracle in helping our customers run their IT better. That’s what we’re focused on. Those things manifest themselves in the T4 chip and Solaris 11 and SPARC Supercluster, and Exadata and Exalogic, and so on. A product that we bring to the customer that merely passes through our distribution channels and passes through our books, we don’t think we add a lot of value to that. We continue to do it mainly, though with less emphasis, because the customer has asked us to do it. Our view is that Oracle adds value where we can bring to bear differentiated intellectual property that gives people a better, more advanced solution that helps them do something cool and exciting.

Let’s talk about the cloud. Larry said Oracle is on track to be the No. 2 software-as-a-service (SaaS) provider after Salesforce.com, after all those acquisitions you’ve made. Oracle has always been kind of a traditional on-premise software player. How do you see the cloud strategy shaping up?

Let me first say this: You have to separate “cloud” from SaaS. First, there’s an incredible amount of Oracle technology running in the cloud: Oracle databases, Oracle middleware, Exadata, Exalogic. … So if you asked us to give us to give you cloud revenue, it would be huge. But that’s separate from SaaS. Just to be clear: We are No. 2 today in SaaS; we have roughly a billion dollars in SaaS revenue. And we’re just getting started. Our stuff is only just now hitting the market. We will have most of our Oracle portfolio running as SaaS on the Oracle cloud by the end of the calendar year. And when you look at our cloud, it’s best on our technology, running our apps. And by the way, that other SaaS company you mentioned — I can’t remember their name — their stuff is built on Oracle. And it was built three decades ago, in the ’90s. Our stuff is fresh, it’s new and modern and built on Fusion middleware.

Speaking of acquisitions, are you still in the hunt? You did Taleo and RightNow and Collective Intellect recently in the SaaS space. Are you still looking around?

We’ve said we’ve got a balanced capital allocation strategy. We’ve been big buyers of our stock. We’re increasing our dividend. And we’re continuing to look at deals that make sense. Larry has said that sometimes the best growth in Oracle’s history has been during economic downturns. And it’s because so many properties become available.

Did you kick tires on Quest Software?

I can’t comment on M&A matters.

When I talked to Meg Whitman at HP earlier this month, she talked about her desire to have a better relationship with Oracle, and how HP and Oracle crafted one of the “great partnerships in IT industry history.” It sounded a little like an olive branch to me. You’re unique in that you sat on both ends of that partnership at various times. Do you share her sentiment?

I can’t comment on that.

You’re coming up on two years at Oracle. Tell me a little about the division of labor. You work with Larry and CFO Safra Catz. How does it work?

It’s just like Larry said at D: All Things Digital. [See the full video here.] He does a lot on products, as he said. I run the revenue, and Safra runs most of our operations. And then, to be blunt, the three of us come together on the strategic issues, and we talk about the issues that cross the areas.

Lawrence Zucker, an HP shareholder, sued the company’s directors, arguing that they had wasted company money by agreeing to such a large severance package, and that directors could have fired Hurd for cause and thus paid him nothing.

However, doing so, wrote Judge Donald Parsons in his opinion, would have made it more difficult to attract and hire a possible replacement, though he conceded that the amount “may appear extremely rich or altogether distasteful to some.”

Hurd resigned from HP in August of 2010, after complaints by a female marketing contractor led to the discovery of irregularities in Hurd’s expense reports that appeared intended to conceal a relationship. Aside from the expenses, Hurd was cleared by HP of any wrongdoing, but he was forced by the board to resign.

The severance package soon shrunk. A month later, Hurd accepted a job as president at HP rival Oracle, which prompted HP to sue Hurd and Oracle. The two companies later settled that lawsuit and, as part of the settlement agreement, Hurd forfeited 346,000 stock options that had initially been included in the severance, options then worth $13.6 million (though they would be worth a lot less today).

And, of course, we know that the Hurd settlement is central to the current legal mishegas under way between HP and Oracle over Intel’s Itanium chip. HP says there’s a section of the agreement that requires Oracle to port its software to HP’s Integrity servers, which use the Itanium chip. Oracle says there’s no such agreement in force, and that the Itanium chip is on its way to the graveyard, anyway. That trial is still going on in a San Jose, Calif., courtroom.

HP shares closed today at $20.30, down 86 cents, or more than 4 percent. Hard as it may be to believe, that’s lower than HP shares traded in the wake of the mess of Aug. 18, 2011, when former CEO Léo Apotheker sought to lead HP into PC-less era.

In fact, the last time HP shares traded this low was in May of 2005, about a month and change after Mark Hurd took over as CEO, meaning the shares are trading near a seven-year low.

For a little perspective, here are some bullet points on what this price represents:

• A 52-week low.
• A drop of more than 20 percent year to date.
• A drop of more than 28 percent since Aug. 18, 2011.
• A drop of 40 percent from a year ago today.
• A drop of 62 percent from HP’s peak price in 2010.
• A drop of 53 percent over five years.
• HP’s lowest share price since May 12, 2005.
• A gain of 28 percent over 10 years.

Of course the expected turnaround is partially under way, but it is a big job that is just now beginning. CEO Meg Whitman says the work is about 15 percent complete. One can fairly wonder how long shareholders will have patience.

Today the Oracle narrative will pivot back to a San Jose, Calif., courtroom, where Oracle has been litigating its case against Hewlett-Packard. The highlight of the day will be an appearance on the witness stand by Oracle president and CFO Safra Catz.

Her testimony will be key for both sides in the trial, because it was Catz who negotiated with HP’s Ann Livermore, then head of its Enterprise business unit, over the terms of settlement of another lawsuit over Oracle’s hiring of former HP CEO Mark Hurd.

It was during these negotiations that a particular section of the agreement, the disputed $4 billion paragraph, emerged. HP contends that the paragraph requires Oracle to continue porting its software to HP’s Integrity servers, the ones that happen to use Intel’s exotic Itanium chip. Oracle says otherwise.

The Integrity line of servers lies at the very heart of HP’s Business Critical Server unit, and the uncertainty around its future, given all this legal mishegas, is causing HP some serious financial pain. Many — if not most — HP customers who buy Integrity servers run some Oracle software on them, and they’re the type of customers who don’t like to change their IT setups often, if at all.

HP says it has an enforceable contract with Oracle on the porting issue, while Oracle says not only that the paragraph doesn’t amount to a contract, but it also disputes that the paragraph in question was even included in the final signed settlement agreement.

The highlight is that it beat the consensus EPS by four cents, reporting earnings of 82 cents a share versus the street view of 78 cents. Revenue was in line with expectations: $10.9 billion, up 1 percent.

The other highlight is that Oracle has authorized a re-purchase of $10 billion worth of shares.

In after-hours trading, Oracle shares rose 88 cents, or more than 3 percent, to $28 a share.

The early disclosure came on chatter — which CNBC’s John Fortt just reported as confirmed moments ago — that executive vice president and head of North American Sales Keith Block has left the company. The departure comes in the wake of the surfacing of some embarrassing instant messages in a release of documents by Hewlett-Packard a few weeks ago, arising from the ongoing lawsuit between the two companies over Intel’s Itanium chip.

Oracle’s statement is below.

Oracle Reports Q4 GAAP EPS Up 11% to 69 Cents; Q4 Non-GAAP EPS Up 10% to 82 Cents

Fiscal Year 2012 Operating Cash Flow Up 23% to $13.7 Billion

REDWOOD SHORES, CA–(Marketwire -06/18/12)- Oracle Corporation (ORCL) today announced fiscal 2012 Q4 GAAP total revenues were up 1% to $10.9 billion, while non-GAAP total revenues were up 1% to $11.0 billion. Both GAAP and non-GAAP new software license revenues were up 7% to $4.0 billion. Both GAAP and non-GAAP software license updates and product support revenues were up 5% to $4.2 billion. Both GAAP and non-GAAP hardware systems products revenues were down 16% to $977 million. GAAP operating income was up 5% to $4.6 billion, and GAAP operating margin was 42%. Non-GAAP operating income was up 5% to $5.5 billion, and non-GAAP operating margin was 50%. GAAP net income was up 8% to $3.5 billion, while non-GAAP net income was up 7% to $4.1 billion. GAAP earnings per share were $0.69, up 11% compared to last year while non-GAAP earnings per share were up 10% to $0.82. GAAP operating cash flow for fiscal year 2012 was $13.7 billion, up 23% compared to last year.

Without the impact of the US dollar strengthening compared to foreign currencies, Oracle’s reported Q4 GAAP earnings per share would have been $0.03 higher at $0.72, up 16%, and Q4 non-GAAP earnings per share would have been $0.04 higher at $0.86, up 15%. Both GAAP and non-GAAP total revenues also would have been up 5%, GAAP new software license revenues would have been up 11%, non-GAAP new software license revenues would have been up 12% and both GAAP and non-GAAP hardware systems products revenues would have been down 13%.

For fiscal year 2012, GAAP total revenues were up 4% to $37.1 billion, while non-GAAP total revenues were up 4% to $37.2 billion. GAAP new software license revenues were up 7% to $9.9 billion. Non-GAAP new software license revenues were up 8% to $9.9 billion. GAAP software license updates and product support revenues were up 10% to $16.2 billion, while non-GAAP software license updates and product support revenues were up 9% to $16.3 billion. Both GAAP and non-GAAP hardware systems products revenues were $3.8 billion. GAAP operating income was up 14% to $13.7 billion, and GAAP operating margin was 37%. Non-GAAP operating income was up 8% to $17.2 billion, and non-GAAP operating margin was 46%. GAAP net income was up 17% to $10.0 billion, while non-GAAP net income was up 10% to $12.5 billion. GAAP earnings per share were $1.96, up 18% compared to last year while non-GAAP earnings per share were up 11% to $2.46.

“Our record-breaking fourth quarter featured several all-time highs for Oracle: new software license sales of $4 billion, total software revenue of $8 billion, total revenue of $11 billion, and EPS of 82 cents,” said Oracle President and CFO, Safra Catz. “For the fiscal year, we also set all-time highs for operating margins of 46%, and operating cash flow of $13.7 billion.”

“Our engineered systems business is now operating at well over a billion dollar revenue run rate,” said Oracle President, Mark Hurd. “For the year, the Exadata, Exalogic, Exalytics, SPARC SuperCluster and the Oracle Big Data Appliance product group grew over 100% year-over-year.”

“The development of Oracle Cloud is strategic to increasing the size and profitability of Oracle’s software business,” said Oracle Chief Executive Officer, Larry Ellison. “Our Oracle Cloud SaaS business is nearly at a billion dollar revenue run rate, the same size as our engineered systems hardware business. The combination of engineered systems and the Oracle Cloud will drive Oracle’s growth in FY 2013.”

The Board of Directors also declared a quarterly cash dividend of $0.06 per share of outstanding common stock. This dividend will be paid to stockholders of record as of the close of business on July 13, 2012, with a payment date of August 3, 2012.

Oracle also announced that its Board of Directors authorized the repurchase of up to an additional $10.0 billion of common stock under its existing share repurchase program in future quarters.

At least two analyst reports today suggested that Keith Block, the longtime head of sales for North America, is out. This is the same Keith Block seen disparaging Oracle’s lineup of Sun products in an embarrassing instant messaging conversation with another Oracle executive last summer.

The conversation was included in a dump of documents subpoenaed by Hewlett-Packard in connection with the ongoing litigation between those two companies concerning Intel’s Itanium chip. (HP’s dump came after a release of an equally juicy cache of documents by Oracle earlier the same day.)

The exchange between Block and Anje Dodson, Oracle’s VP for Human Resources, was conducted while Block was on a flight to Washington, D.C., on July 28. In it, Block, typing in the clipped language customary to instant messaging, says the following:

“Nobody talks about Sun, even the Sun customers…it’s dead dead dead….Nobody wants to sell Sun…it baaaalllllooooooows….pig with lipstick, at best.”

Earlier in the same exchange, he discusses how he thinks Mark Hurd, the former Hewlett-Packard CEO who’s now co-president at Oracle, should be CEO of Oracle. That probably didn’t score him any points with Larry Ellison.

Oracle hasn’t returned any of my messages seeking comment on this, and given how close it is to reporting its fourth quarter earnings — it reports this Thursday — probably won’t.

And while it certainly doesn’t look good for Oracle’s head of North American sales to be slamming products of the company it acquired in 2010, his comments aren’t entirely off the reservation. As Ellison himself pointed out during his appearance at D: All Things Digital on May 30, the unprofitable portion of Oracle’s hardware business — the older line of Sun servers — are on the decline and being replaced by the Exa- generation of products. As Ellison put it: “Sales are going down in hardware, but the unprofitable part is going away. Our margins are the highest of anyone in the server business. The sales are down 20 percent, but the profits are up.” Hard to argue with that, though clearly Block could have put it a little more diplomatically.

So about those results: What do the analysts expect? The consensus estimate calls for Oracle to earn 78 cents a share on $11.9 billion in sales, which would amount to sales growth of less than 1 percent.

I talked with Brent Thill, analyst at UBS: He expects a tough comparison this quarter, despite the fact that the period ending in May is always seasonally strong for Oracle. “The set-up for the quarter is a little difficult,” he said.

And yes, the hardware business is going to look a little dicey. As Rick Sherlund of Nomura Securities put it in a research note issued to clients today, Oracle’s hardware business will continue to look troubled while the Sun portion continues to shrink and the Exa lines continue to ramp. “The good news is the commodity business is declining rapidly and by the November quarter, we expect the hardware business to turn positive as the rapid growth in high margin Exa-series products ramps to scale and begins to offset the rapid decline in the commodity business,” Sherlund wrote.

Sherlund said Hurd and Ellison were also personally involved with closing two big deals right at the end of the quarter, one worth about $75 million with a major retailer and another of unknown size with a part of the Australian government, and it was unclear whether they closed or not.

Even so, currency effects are going to hurt. What was expected to be a 3 percent headwind on currency effects turned out to be a 5 percent headwind, thanks to the ongoing difficulties with the euro.

Remember that the fight between the two companies had its genesis in a settlement that arose from a lawsuit HP filed after Oracle hired former HP CEO Mark Hurd as co-president. In that settlement agreement — which ended HP’s suit over Hurd — is a paragraph that is at the core of the current dispute.

Here it is:

Reaffirmation of the Oracle-HP Partnership. Oracle and HP reaffirm their commitment to their longstanding strategic relationship and their mutual desire to continue to support their mutual customers. Oracle will continue to offer its product suite on HP platforms, and 1-IP will continue to support Oracle products (including Oracle Enterprise Linux and Oracle VM) on its hardware in a manner consistent with that partnership as it existed prior to Oracle’s hiring of Hurd.

This is the $4 billion paragraph that HP has sued Oracle to enforce. The agreement has been public for a while, but it bears a rereading as the case continues today. HP contends that this constitutes an enforceable agreement that requires Oracle to continue to port its software to HP’s Itanium-based server platforms, something Oracle said in March of 2011 that it no longer wants to do.

In the document drop embedded below, you’ll see what I think is the final version of the document, along with various drafts of the settlement document drawn up by Oracle and HP lawyers, and some of the emails related to it.

Oracle basically contends that its typical porting agreements are substantially more complicated documents, and has included a porting agreement struck with HP in 2006. If nothing else, you can see how verbose and detailed typical porting agreements tend to be.

Anyhow, as I understand it, it is upon the enforceability of that paragraph that much of the case will turn. If the judge agrees that it amounts to a contract and Oracle has to honor it, then a jury will come in and determine whether or not Oracle has violated it, and, if so, how much money HP should get for its trouble. HP has argued that the right figure is about $4 billion; according to Bloomberg News, it based that estimate on an extrapolation of its losses in its Itanium business out to the year 2020. As HP CEO Meg Whitman conceded in an extensive interview with AllThingsD yesterday, this ongoing mess over Itanium is hurting HP big time.

hp-day2-part1-1655517

A report by Business Insider yesterday pegged the range of cuts at HP to between 10 percent and 15 percent of its current work force of 320,000 people. But sources familiar with HP’s plans tell AllThingsD that the cuts will be carried out over a relatively long period of time, perhaps a year or more. A report by Bloomberg News out minutes ago puts the target at 25,000. The exact number of cuts, one source told me, is still considered a “moving target” and could grow or shrink.

Additionally, sources say, Whitman will, during a conference call with analysts, portray the cuts as necessary — not to bolster HP’s earnings and satisfy shareholders, but rather as a means to make needed investments. On this point, Whitman will be borrowing a bit from the playbook of her short-lived predecessor, former HP CEO Léo Apotheker.

Whitman will argue that many of the cuts made at HP during the five years that Mark Hurd was at its helm were made without corresponding investments in new and growing initiatives. This “cut and reinvest” theme will apply across the company, sources tell me. The process has been an intense one among HP’s senior executive ranks and has, as one source put it, “consumed the company.”

Much like what happened at networking giant Cisco Systems, the restructuring will include a combination of voluntary retirement packages, the precise details of which are still under consideration, combined with outright cuts. The target for voluntary retirement, sources tell me, is about 5,000 people.

Brian Marshall, an analyst with ISI, in a May 3 note to clients estimated that a job reduction of about 18,000, amounting to about 5 percent of HP’s work force would, would save HP in the neighborhood of $1.2 billion and boost year-end earnings per share by about 50 cents, assuming a cost of about $100,000 per employee. “If HP institutes a reduction in force as we expect, we wouldn’t be surprised if calendar year 2013 EPS estimates eventually approach $5.00 as the business stabilizes, growth returns in the Jan 2013 quarter and the organization is streamlined,” Marshall wrote.

They’re not quite as juicy — Oracle has always had the better flair for the dramatic in this case — but in releasing them, HP clearly intends to paint Oracle, the new owner of Sun Microsystems, as out to hurt HP by kicking it straight in the teeth by damaging its Business Critical Server operation.

The first of the batch is an instant message exchange between some Oracle sales guys, who happen to use salty language in relation to HP. (Sorry about that.)

The second appears to show that Mark Hurd, while still CEO of HP, was informed about Intel being both aggressive and excited about a forthcoming version of the Itanium chip, which would seem to run contrary to the argument Oracle has made that Intel was prepping for the Itanium line’s end of life, while allowing HP to lie about it to its server customers. In the message, Martin Fink, who figured so prominently in Oracle’s document dump today, writes to Hurd: “I’m not sure what exactly this means, but I have rarely seen Intel so agressive on anything to do with Itanium EVER, and they are working very hard to get this moving forward.”

Another, from February 2011, appears to show Oracle unwilling to release a security software patch for a version of one of its applications that runs on HP-UX and therefore on an Itanium-based server. Another from the same day is an email from Oracle CEO Larry Ellison to Thomas Kurian, senior vice president of Oracle’s server technologies, asking if support documents had been updated to specify “no more one-off patches for Itanium.” The date is key because Oracle first announced that it would no longer support Itanium systems on March 23 of that year. It should surprise no one that the top echelons of Oracle management knew this announcement was coming.

The next is an email showing HP getting ready for a big strategy launch. “Kinetic” was HP’s internal name for a strategy that leveraged all of HP’s IP that enabled mission-critical products into a cohesive whole. Plans for Kinetic included extending HP-UX and Integrity, HP’s line of Itanium-based servers, indefinitely, as well as bringing up X86 chips, like Intel’s more mainstream Xeon, under the “mission critical” umbrella. As HP sees it, this was the plan all along.
 
Finally the last one is another IM exchange between Oracle sales execs. Toward the end, one of them complains about being forced to sell Sun hardware that is described as a “pig with lipstick at best.” Again as HP sees it, once Oracle owned Sun it had every motivation to do whatever it could to hurt HP, including ducking out of previously contracted commitments.

As I did with the Oracle dump this morning, I collated everything into a single PDF. I think I got everything in chronological order this time. Read for yourselves!

HP-Itanium-docs.pdf