One thing Judge James Kleinberg did was dismiss a fraud claim by Oracle that said HP had been all sneaky when it concluded a settlement with Oracle that included an agreement to continue building software for systems using the Itanium chip. The settlement was struck only a few weeks before HP hired Léo Apotheker as its CEO and Ray Lane as its chairman.

But that’s not the important part of what Judge Kleinberg did. The most important aspect of yesterday’s action in Hewlett-Packard v. Oracle was the release of the unredacted version of Oracle’s cross-complaint. And it’s a juicy read.

I’ve posted the redacted version before. Now you can read all the bits that were blacked out.

What you’ll find is a lot of information that goes to the core of Oracle’s argument that HP has a lot to lose if the Itanium chip goes end of life, which is exactly what Oracle has said Intel plans to do. As the only major server vendor who sells boxes running Itanium chips, HP makes a lot of money — billions of dollars, according to a newly unredacted statement in the filing — on service-and-support contracts with its Itanium customers. As one HP executive is quoted on page four of the filing, without Itanium, HP would be “strategically screwed.”

Intel, on the other hand, was more or less ready to let the chip die. Having spent billions, dating back to 1989, to develop the Itanium chip, which outside of HP never saw any market success, Intel had to be convinced to keep building them. To do that, HP, the filing reads, paid Intel $440 million to keep Itanium chips in production for a few more generations, through 2014. The deal didn’t even cover the cost of the chips, as HP had to pay for them, as well, the filing reads. Oracle calls the arrangement a “pure pay-off to induce Intel to keep churning out processors that it really wanted to kill.”

And while there’s nothing specifically wrong with the arrangement by itself, Oracle’s point is that HP was misleading the marketplace about the true status of the keystone product in its Business Critical Service business. That unit, in no small part because of the uncertainty wrought by this lawsuit, saw its sales fall by 23 percent in HP’s most recent quarter.

Having won the release of the unredacted complaint, Oracle claimed something of a victory in a statement:

“Oracle is delighted that the Superior Court of the State of California, Santa Clara County, has rejected HP’s attempt to hide the truth about Itanium’s certain end of life from its customers, partners and own employees. We look forward to seeing all of the facts made public that demonstrate how HP has known for years that Itanium is end of life.”

It all sounds very reasonable, until you take into account the fact that Oracle acquired Sun Microsystems in 2010 and is now a big server vendor that competes with HP, and would by no real stretch of argument benefit from an exodus of HP’s Itanium customers toward other vendors. HP called the decision by Oracle to cease support for Itanium part of a “calculated business strategy” to mess up HP’s Itanium business and capture those customers. Yet the evidence so far suggests that the one benefiting from this fight is actually IBM.

HP claimed victory of its own, in a statement:

“HP is pleased that the Superior Court of the State of California, Santa Clara County, has rejected Oracle’s attempt to use a fraud claim to undo its contract with HP. We look forward to seeing the facts made public that demonstrate how Oracle’s March 2011 announcement to no longer develop software for Itanium servers was part of a calculated business strategy to drive hardware sales from Itanium to inferior Sun servers. This further demonstrates the fact that Oracle breached its contractual commitment to HP and ignored its repeated promises of support to our shared customers.”

HP has portrayed itself as the defender of the interests of Itanium customers, under attack by Oracle. As HP puts it in its statement, Oracle tried to induce customers running Oracle software on HP Itanium systems into replacing that hardware by limiting support and withholding software patches and bug fixes. “Customers were left without options to address bugs and other defects in their Oracle software,” HP says.

For HP, this is all a simple argument over whether or not Oracle can be held to the contract they agreed to in 2010.

The agreement stems from the circumstances of former HP CEO Mark Hurd’s resignation, and his subsequent hiring by Oracle as its president. HP sued Hurd and Oracle, and soon they settled. HP says that a clause in that settlement included a provision that Oracle would continue to port its database software to HP servers running the Itanium chip. Oracle has argued that this clause is not part of the final agreement. The settlement document itself remains confidential, but its details will likely emerge in the trial. Expect lots of arguing over different versions of the agreement.

I have embedded two documents below, for your reading pleasure. The first is Oracle’s unredacted cross-complaint, with all the blacked-out bits from the previous version now fully revealed for the world to see. Below that is a Case Management Conference Statement filed by HP lawyers, also unredacted, where it seeks to expose Oracle as making cold-blooded moves that would appear to be attempts to spur Oracle’s own software customers to abandon HP hardware. It’s not quite as juicy as Oracle’s document, but it has its moments, too. Enjoy them both:

HP v Oracle – Amended Cross Complaint

0077a 2011121 Hp Cmc Stmnt Unredacted

It’s been a few days since the world devoured and digested the contents of the June 2010 letter to then-Hewlett-Packard CEO Mark Hurd, alleging a pattern of sexual harassment of a marketing contractor during a period running from 2007 to 2009.

The facts are pretty simple: HP investigated, found that its sexual harassment policies hadn’t been violated, but in the process found irregularities with expense reports that made HP’s board of directors lose their trust in Hurd. He resigned on August 6, 2010, following a settlement with the contractor, Jodie Fisher, who wrote a letter saying there were unspecified “inaccuracies” in the original letter.

So what have we learned from this visit back to the summer of 2010? And, are there any larger implications for Hurd or for his current employer, Oracle? Or, moreover, for the world at large?

The short answer to the second question is, of course, no. Immediately in the wake of Hurd’s departure from HP, Oracle CEO Larry Ellison rushed to Hurd’s defense, then offered him a job. There’s no indication that any of the new revelations have tarnished Hurd’s standing with Ellison or within Oracle.

So long as Ellison is happy with Hurd as Oracle’s co-president, Hurd is secure. The way Ellison appears to see it, HP was dumb to let Hurd go over what was ultimately a problem with expense reports. Hurd is human, but on game day he plays to win, so Ellison made space for him on team Oracle. The day Hurd doesn’t play to win is another matter.

HP investors can now evaluate and debate whether that company’s board of directors overreacted to the matter, although in reality it doesn’t matter. What’s done is done, and HP’s new CEO, Meg Whitman, has plenty on her plate for the year ahead, not the least of which is undoing some of the damage to its share price done under Hurd’s replacement, Léo Apotheker.

What else have we learned? Hurd’s not the first, nor sadly the last, senior executive to be accused of sexual harassment. For every letter like this one that sees the light of day, there are thousands more that the public never reads.

The U.S. Equal Employment Opportunity Commission has tracked the number of sexual harassment claims it investigates each year since 1997, when there were 15,889 cases. It is perhaps encouraging to learn that the number of such cases investigated by the EEOC has dropped by 26 percent to 11,717 as of 2010. (And here’s an interesting fact — 16 percent of these claims were from males.)

On average, these investigations lead to about $50 million each year in monetary benefits paid to the people who file claims, and these don’t include cases that go to court.

And the fact remains that HP’s own internal investigation exonerated Hurd of sexual harassment, and Fisher has stipulated that there were “inaccuracies” in the original letter.

Still, none of it has to be true for the contents of the letter to be a perfect case study in what not to do. As such, it should be required reading for executives at every level of seniority. In that sense, painful and tawdry as it must have been for those concerned, the letter’s release constitutes a public service.

(And speaking of public service, the image above is the early 1990s-vintage graphic from NBC’s public service announcement campaign.)

The readers of Footnoted, the Morningstar-owned blog that follows the surprisingly fascinating world of SEC filings, annually select its worst footnote of the year — in other words, the best/worst disclosure of 2011. Hewlett-Packard won.

And what prompted the voters to award the world’s biggest tech company this dubious distinction? Its severance payment to former CEO Léo Apotheker, who, according to Footnoted’s reckoning, walked away with $25 million to $33 million following an 11-month stint at HP’s helm, during which its market capitalization declined by more than 40 percent.

Footnoted’s Michelle Leder calculated that range, having dug through the byzantine details of Apotheker’s employment contract as well as the separation agreement that HP filed after he left, and concludes the amount was probably closer to $36 million.

Before he was let go, I had taken a stab at the terms of Apotheker’s contract myself and came to a similar range of $28 million to $33 million. Then, after Apotheker’s departure, I trimmed that estimate a bit based on an HP 8K filing. It’s a tricky business running the numbers on these things, but as Footnoted says, we’ll probably get a final accounting when HP files its annual proxy statement early next year.

Apotheker’s package was part of what likely prompted HP to revise its severance policies, as The Wall Street Journal reported earlier this month. From now on, senior HP execs who get pushed out will have to leave behind unvested stock options and grants of restricted shares.

It’s also worth noting that HP beat out rival IBM in the worst footnote selection. Big Blue was in the running for its disclosure of outgoing CEO Sam Palmisano’s $170 million retirement benefit package, which includes, among other things, a $30 million pension that pays $3.2 million a year for life.

But it’s not the first time that HP has taken fire for the size of its payouts to ousted CEOs. When Mark Hurd resigned in 2010, he walked away with a severance deal worth about $35 million, but then later gave some $13 million back by forfeiting a batch of HP shares as part of a legal settlement with HP that followed his joining Oracle as co-president.

While much of the attention may focus on the original letter written by Gloria Allred to Mark Hurd claiming a pattern of sexual harassment of the marketing contractor Jodie Fisher, the fact remains that he was fully exonerated of those allegations by an internal Hewlett-Packard investigation conducted by the law firm of Covington & Burling on behalf of HP’s board of directors.

In fact, what got Hurd ousted from his job as HP’s CEO on Aug. 6, 2010, were questions related to his expense reports.

So what do they show?

AllThingsD has obtained some background notes that were prepared in connection with the so-called Covington Report — which a Delaware judge has ruled will remain under seal — delivered to HP’s board during the summer of 2010. The one page of notes goes into some detail about the nature of the four of Hurd’s expense reports that specifically name Fisher as having been in attendance.

This is a key detail because HP’s official reason, as explained by then general counsel Michael Holston on Aug. 6, 2010, was that Hurd’s expense reports were prepared in a way that “had the effect of concealing Mark’s personal relationship with the contractor.”

How might Hurd have arguably used an expense report in this way? By leaving her name off of reports claiming expenses for certain dinners.

But here are four examples of expense reports where Fisher was specifically named. By way of explanation, mentions of “Fimbres” refer to Hurd’s assistant Caprice Fimbres, who had hired Fisher in the first place.

A third person is listed as being in attendance on three of the four occasions. In one instance, it is Hurd’s assistant Fimbres, who arranged the dinners — but might not, in fact, have attended.

In another, it is Denis Lynch, Hurd’s security guard, who also might have been nearby but not at the actual dinner.

In another, it is John Spires, but it is unclear exactly who he is. (Note: The expense note could be referencing John Spiers — spelled differently — who was CTO and founder of LeftHand Networks, which was sold to HP in 2008; he is now CEO and founder of NexGen Storage.)

September  12,  2007 — Fimbres later seeks reimbursement for “Dinner with HP Host for CEO Events” for the night of September 12. Dinner was billed to Sullivan’s and the listed attendees are Hurd and Fisher. Total reimbursed amount is $99.86.

October 26, 2007 – Fimbres later seeks reimbursement for dinner at the hotel the night of Oct. 26 in the amount of $319.47. The listed attendees are Hurd, Fisher and Denis Lynch (HP employee).

July 30, 2008 — An expense report filed by Caprice Fimbres shows a charge for “dinner with three people” – Fimbres, Hurd and Fisher — in midtown Tokyo for $326.50.

August 3, 2009 – A Fimbres expense report shows a $347.42 charge for dinner at W Steak in Beverly Hills. Listed attendees are Hurd, Fisher and John Spires. Stated business purpose is “Dinner while in Los Angeles with HP Customer Roundtable Host,” and there is the following expense comment: “High Cost restaurant although didn’t order that much.”

The first meeting mentioned in this group would appear to coincide with a meeting in Denver described in the Allred letter. Fisher, as Allred tells it, was being considered for a job, but the meeting “felt more like a date.”

HP has never disclosed the detailed accounts of the problems with Hurd’s expense reports that led to his resignation, and probably never will. Hurd was, after all, two CEOs ago now, and HP obviously has other priorities.

And Hurd is now co-president at Oracle, HP’s bitter rival.

But these details, if nothing else, raise some additional questions about the circumstances that led HP’s board to conclude that it had lost its trust in Hurd.

Finally, you can read for yourself about the controversial allegations of sexual harassment that eventually led to the departure of Hewlett-Packard’s CEO Mark Hurd from his job.

Here’s the entire letter. Yes, that letter.

AllThingsD has finally obtained the June 24, 2010, letter that celebrity attorney Gloria Allred wrote to Hurd, then-CEO of HP, on behalf of Jodie Fisher, the onetime actress and marketing contractor who had worked for HP as a greeter and hostess at company events.

It was set to come out soon enough, following a decision earlier today by the Supreme Court of Delaware requiring that its contents be made public.

And it is as full of drama as expected.

“It is appalling that you would use HP revenues for the purpose of procuring female companionship and romance under the guise of HP business,” reads the letter, in a more sedate part.

In reaction to a query from ATD about the missive, Ken Glueck of Oracle, where Hurd now serves as co-president, said: “This letter was recanted by Ms. Fisher. She admitted it was full of inaccuracies.”

He-said-she-said aside, as you’ll read below, the letter — copiously and often in soap-operatic terms — details the alleged sexual harassment and other improprieties that ultimately led to Hurd’s resignation from HP in 2010.

AllThingsD has also obtained copies of related letters that paint the most complete picture yet of what happened in the days leading up to and following Hurd’s resignation, and his subsequent hiring by rival Oracle later that year. (We’ll post those separately.)

But the first letter, which is the most critical and which contains only minor redactions, is where it all started.

It accuses Hurd of “using your status and authority as CEO of HP and HP monies,” and that he “had designs to make her your lover.”

It outlines a two-year period beginning in 2007, during which Fisher accuses Hurd of engaging in an “uncomfortable dance,” of variously pursuing her romantically and then backing off as she voiced discomfort with the situation. This happened over the course of working on a contract basis as a hostess at six HP events, for which Fisher was paid $30,000.

The first incident described in the letter occurred in October of 2007 at the Ritz Carlton Hotel in Atlanta, when Hurd and Fisher had dinner together after an HP event. Hurd told Fisher that he was about to fly to China to meet Madame Wu Yi, China’s vice-premier.

“As you were walking back to the Ritz, you invited Ms. Fisher to come up to your room. You said there were some documents that you wanted to show her pertaining to Madame Wu Yi,” the letter read.

It then describes how a distraught Fisher called her Alcoholics Anonymous sponsor seeking advice before going to Hurd’s room. Fisher, the letter noted, had been clean and sober 20 years by this time. The sponsor said that Fisher didn’t have to do anything that compromised her integrity.

Thus reassured, she went up to Hurd’s hotel suite, where Hurd asked her to stay the night. Fisher’s reply: “Absolutely not. I barely know you and you are my boss.” An hour later, after more alleged pressure from Hurd, Fisher said she wanted to leave and did, the letter said.

Asked to dinner with Hurd again the next night, Hurd admitted, the letter said, that he “didn’t handle that right,” but then proceeded to tell her how many women liked him, including the singer Sheryl Crow. Fisher was the lucky one, the letter said Hurd told her.

“However Ms. Fisher did not feel lucky at all,” read the letter. “She felt manipulated.”

The situation continued two months later at an HP event in St. Louis. Hurd, the letter said, told Fisher that he was frustrated that he was “doing all the work” in the relationship. Fisher, the letter recounted, again told Hurd she wasn’t interested in him romantically. Later, the letter said, Hurd kissed her on the lips and quickly walked away.

In January of 2008, the letter read, Fisher was scheduled to work at an HP event in Toronto. As she was boarding her plane to fly there she received a call from Hurd’s assistant, Caprice Fimbres, saying that the event had been cancelled.

She later learned it hadn’t been cancelled. Hurd had told Fisher, the letter alleged, that he regularly slept with one woman in New York and another in San Francisco. Fisher suspected that the “New York woman” flew up to Toronto on short notice and that this is why she was told not to come to Toronto.

The letter went on to explain how Fisher’s publicist, aware of Hurd’s advances, sought to negotiate more money for Fisher, because the dinners she was was required to attend repeatedly were not HP events. Hurd was upset when he heard about this and demanded that Fisher fire the publicist, the letter said, if she wanted to keep her job. Fisher complied, “but thereafter felt completely alone.”

It goes on … and on.

At another meeting in Madrid in March of 2008, Hurd wanted to walk around the city with Fisher and sought to impress her, the letter said, by showing her a million dollar balance on an ATM machine.

In a serious corporate allegation, also during the Madrid trip, Hurd allegedly called her room and told her about a then-undisclosed deal in the works, in which HP was going to acquire the tech consulting firm EDS. Fisher had heard of the company, having lived before in Dallas. Hurd told her to keep what she knew about the deal secret.

This back and forth continued for another year and a half, the letter said, with HP global events in Philadelphia, Boston, Boise, Idaho and Tokyo.

“She continually had to put you off, make excuses, scurry away or simply leave,” the letter read. “Oftentimes, you would be irritated and angry and on a few occasions, you were so angry when she put you off, she expected to get fired.”

Yet Hurd would always engage her again, the letter recounted. But, by 2009, the letter said, it was clear his patience was wearing thin.

He tried another tack, offering her money, asking if there was anything she needed. Hurd confessed that he felt he could spend the rest of his life with her, but would have to see “how the chemistry in bed was.”

She told him, the letter said, that she wasn’t interested in dating a married man. At this point in the letter, a lengthy passage was redacted. Sources familiar with the matter said the sections deal with the state of Hurd’s marriage at that time.

Hurd, the letter read, persisted, offering Fisher more HP events and a $100,000 a year job. “With [Hurd's] obvious growing irritation with her put-offs, these opportunities never came to pass,” the letter said.

Finally, at an October 2009 meeting in Boise, Hurd allegedly grabbed Fisher and kissed her. Fisher said she wasn’t feeling well and wriggled free.

“You were angry,” the letter said about Hurd. “It was becoming clear. She knew that if she did not have sex with you soon, her job was over, which is exactly what occurred. All your advances were unwelcome, awkward, and were never reciprocated in any way.”

The letter threatened a lawsuit, but offered an out-of-court settlement, which was concluded on August 4, 2010.

The next day, Fisher recanted much that was in the original letter. In that letter to Hurd dated Aug. 5, it reads in full:

Dear Mark,

Upon further reflection and review, I wanted to clarify certain issues related to the correspondence that was sent to you on my behalf on June 24, 2010. First, I do not believe that HP engaged in any inappropriate conduct towards me in any way. Second, there are many inaccuracies in the details of the June 24, 2010 letter. I do not believe that any of your behavior was detrimental to HP or in any way injured the company or its reputation.

The Delaware Supreme Court ordered the first letter from Allred to Hurd released after he lost an appeal to that court seeking to keep it under seal. The court handed down its latest decision on Wednesday.

Hurd had intervened in a shareholder lawsuit against HP earlier this year, in which an HP investor, Ernesto Espinoza, sought to make public the Fisher letter as well as the contents of an internal HP report on the matter. Espinoza had argued that shareholders are entitled to read them in order to investigate possible corporate wrongdoing and waste arising from the relationship and Hurd’s subsequent resignation, including information about Hurd’s severance package from HP.

The letter led to a sequence of events that prompted Hurd to resign as HP’s CEO on August 6, 2010. An internal HP investigation conducted on behalf of its board of directors exonerated Hurd of the sexual harassment claims, but found inconsistencies in Hurd’s expense reports that it said violated HP business conduct policies.

Exactly one month after leaving HP, Hurd joined Oracle as co-president, following a series of blistering comments by Oracle CEO Larry Ellison defending Hurd and excoriating HP’s board of directors.

Confusing? Yes, it is.

Here’s the full original letter, so you can judge for yourself:

Allred Letter Redacted New

Hurd had intervened in a shareholder lawsuit against HP earlier this year, in which an HP investor, Ernesto Espinoza, sought to make public both the Fisher letter and a report documenting the results of an internal investigation conducted by HP’s board of directors. Espinoza had argued that shareholders are entitled to read them in order to investigate possible corporate wrongdoing and waste arising from the relationship and Hurd’s subsequent resignation, including the terms of Hurd’s severance package from HP.

“In the Court of Chancery, documents filed in a court proceeding are public records unless a party seeking confidentiality demonstrates ‘good cause,’” the court’s opinion reads, referring to the Delaware court where the case began. “The Court of Chancery decided that the intervenor” — referring to Hurd — “did not establish good cause to maintain the confidentiality of the letter. We agree and affirm.”

The court had earlier ruled that the internal HP report conducted by the law firm Covington & Burling will remain confidential.

The eight-page letter, dated June 24, 2010, was addressed to Hurd and was written by Jodie Fisher’s attorney, Gloria Allred. Hurd turned the letter over to HP’s then-general counsel, Michael Holston, who then turned the matter over to HP’s board of directors. An internal investigation exonerated Hurd of the sexual harassment claims; it found instead inconsistencies with expense reports that came to light in the course of the investigation that violated its business conduct. The finding prompted Hurd to resign on Aug. 6, 2010.

Hurd denied having an inappropriate relationship with Fisher, and after leaving HP, he joined rival Oracle as co-president.

At least some of the letter’s contents are known, in broad brushstrokes. Last year, The Wall Street Journal reported that the letter contains allegations that Hurd told Fisher of HP’s then-secret plan to acquire EDS at a meeting in Madrid in March of 2008. HP announced and ultimately completed a $13.9 billion deal to acquire EDS in May of that year. HP never disclosed that particular claim in the letter, but it provided information to federal regulators about the circumstances of Hurd’s departure. Fisher and Hurd have both said, without elaborating, that the letter contained many inaccuracies. They reached a private settlement of the matter on Aug. 4, 2010, two days before HP announced Hurd’s resignation.

Shortly after Hurd’s resignation, Espinoza, an HP shareholder, wrote to Holston demanding to see the letter and other records from HP’s investigation of the matter, claiming he wanted to look into alleged corporate wrongdoing and waste arising from the relationship and Hurd’s subsequent resignation. Hurd and Fisher both balked at the attempt, and advised HP that it was confidential. HP initially agreed to furnish a copy to Espinoza, on the condition that he keep it confidential as an accommodation to Hurd. Espinoza finally sued in November of 2010, and the letter has remained under seal since then.

A judge in a lower court ruled in March that the letter should be made public, prompting the appeal by Hurd.

The higher court essentially agreed with the decision of the lower court: “First, although it was marked ‘Personal and Confidential,’ the Allred letter was sent to Hurd in his capacity as CEO of HP, at the company’s address,” the decision reads. “Second, the letter stated that Fisher’s claims were against Hurd and HP. Third, the substance of Fisher’s claims was widely reported in virtually every media. Finally, although the letter goes into embarrassing detail about Hurd’s behavior, it does not describe any intimate conversations or conduct. In sum, we conclude that the Court of Chancery acted well within its discretion in holding that the Allred letter (as redacted) should be unsealed.”

A spokeswoman for Oracle had no comment on the ruling. A spokesman for HP declined to comment. A spokesman for Hurd had no comment.

The court’s full decision is below:

hurd-delware-supremecourt

The revised severance policy, disclosed in the technology giant’s annual report filed Wednesday with the Securities and Exchange Commission, means any executive officer terminated without cause will have to leave behind restricted shares or options that aren’t vested at the time they leave the company.

Read the rest of this post on the original site »

Oracle paints a picture of HP desperate to preserve the profits it makes on support and service contracts generated from customers using Integrity servers, cutting arrangements with Intel to keep pumping out Itanium chips that no one but HP buys, and which Intel would secretly like to forget in order to focus on its highly profitable line of mainstream Xeon server chips. Oracle describes an agreement between HP and Intel called the “Itanium Collaboration Agreement” and calls it a “a pure pay-off to induce Intel to keep churning out processors that it really wanted to kill.”

Here are some other interesting highlights. Remember yesterday how I said that the main issue, at least from HP’s perspective in this suit, is whether or not Oracle agreed to continue to port its software to HP-UX so that it could run on HP’s Integrity servers that use Intel’s Itanium chip.

HP has argued that when the two companies settled a lawsuit concerning Oracle’s hiring of former HP CEO Mark Hurd, that Oracle agreed to do just that. Oracle has argued that it agreed to no such thing and so is perfectly within its rights to walk way from the Itanium platform.

Pick up the action on page 27. You read how, as Oracle tells it, HP sought to insert language into that settlement that included an Oracle pledge to stick with Itanium, which Oracle rejected twice.

It quotes an email from Oracle General Counsel Dorian Daley to HP lawyers proposing the following langauge in a draft agreement:

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 HP will continue to support Oracle products (including Oracle Enterprise Linux and Oracle VM) on its hardware in a manner consistent with that partnership.

HP, Oracle says, then responded with the following proposed language:

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 HP will continue to support Oracle products (including Oracle Enterprise Linux and Oracle VM) on its hardware in a manner consistent with that partnership. Oracle will continue to support all ongoing versions of HP-UX with Oracle’s relevant database, middleware and application products with the availability, marketing and pricing in competitive terms that Oracle has provided HP for the past five years. Oracle will continue to provide access to the Java technology and tools such that HP can continue to support its operating systems (e.g., HP-UX, OpenVMS, Nonstop) in a manner similar to the way it does today. Oracle agrees to continue to provide Solaris for HP’s x86 platforms in a manner similar to what it provides HP today. Oracle agrees to continue to purchase HP server hardware for internal use at a rate similar to what Oracle purchases today.

Oracle rejected it, and by its account, no mention of Itanium or HP-UX was in the final version of the settlement that both signed. The final version was nearly identical to the draft that Daley proposed above. This sequence of events and what the final version of the agreement actually says will be a key issue in the trial. A lot of the rest of the stuff is a bit of Oracle bluster, though it’s interesting bluster.

For instance, Oracle accuses HP of having “fraudulently induced Oracle to enter into the very contract” at the heart of the lawsuit, by negotiating at a time when people on the HP side would have known that the company was about to hire Léo Apotheker and Ray Lane as CEO and chairman. As Oracle puts it:

“Given the well-documented animosity between Oracle and Messrs. Apotheker and Lane, HP knew that had Oracle known of HP’s imminent plans to hire these individuals, Oracle would not have signed the Hurd Agreement, especially any ‘partnership’ commitments or other business restrictions … unrelated to Mr. Hurd’s move to Oracle. … HP had a duty to disclose this exclusively-held material information. Instead, HP knowingly and actively withheld this information.”

HP naturally isn’t taking the latest round of accusations from Oracle silently. The company just issued a statement basically accusing Oracle of trying to distract us all from the fact that it’s in breach of a contract. And the key phrase in the contract — all that back and forth between the Oracle and HP lawyers above — is this one: “An agreement to continue to work together as the companies have,” meaning work together as they did when Oracle still supported Itanium.

This all started back in March when Oracle said it would stop software development for Itanium. It prompted a lot of shocked and angry pronouncements from HP and Intel and counter-claims from Oracle. Itanium customers then rallied to its defense and sought to change Oracle’s mind. It didn’t work. Months passed, and HP resorted to a lawsuit in June that has seen many colorful arguments, and even the odd pop-culture reference.

HP’s press-release rebuttal is below and the full PDF of Oracle’s filing — complete with all the redactions is below that.

PALO ALTO, Calif., Dec. 2, 2011 – HP today issued the following statement in response to Oracle’s amended cross-complaint in the Intel Itanium litigation:

Today’s filing is another example of Oracle attempting to distract from the undeniable fact that it has breached its contractual commitment to HP and ignored its repeated promises of support to our shared customers.

Here are the facts:

— On Sept. 20, 2010, Mark Hurd, Oracle and HP entered into a written settlement agreement. Pursuant to that agreement, HP dismissed its lawsuit against Hurd, and did not further challenge Hurd’s employment at Oracle. In exchange, Oracle contractually committed that it would “continue to offer its product suite on HP platforms … in a manner consistent with [the Oracle-HP] partnership as it existed prior to Oracle’s hiring of Hurd.”

— Oracle confirmed that it was agreeing to continue to port its software products to HP’s platforms in the same manner as it had done prior to its hiring of Hurd. In an email sent to HP on Sept. 12, 2010, Oracle’s general counsel wrote that this provision was “an agreement to continue to work together as the companies have – with Oracle porting products to HP’s platform and HP supporting the ported products and the parties engaging in joint marketing opportunities – for the mutual benefit of customers.”

— Oracle now claims that this provision does not require Oracle to continue to port its database and other software to HP’s platforms. Yet that is exactly what the contract says, and that is exactly what Oracle committed to do in order to convince HP that Oracle’s hiring of Hurd would not alter the relationship between the companies or be used unfairly to undermine HP’s business.

— Oracle initially tried to justify its Itanium decision by falsely ascribing to Intel the position that Itanium is at end of life. Due to Intel’s unequivocal and repeated statements to the marketplace that Itanium is not at an end of life, Oracle has been forced to revise its rationale.

— In its cross-complaint, Oracle tries to rationalize its Itanium decision by arguing that, despite the undisputed existence of committed support for Itanium that stretches to the end of this decade and beyond, Intel would not have made this commitment to Itanium if it were not for a contractual agreement with HP.

— The existence of such a contract completely undermines Oracle’s stated rationale for discontinuing Itanium support by taking the future of Itanium out of the realm of speculation and firmly establishing as a matter of undeniable fact that there is a committed Itanium roadmap that extends out toward the end of this decade. Oracle has the relevant Itanium roadmaps in its possession, yet it continues to refuse to discuss those roadmaps.

— What has become very clear in the course of the litigation is that Oracle’s claim in March 2011 that it was ending support for Itanium because Itanium was at or near an “end of life” was false and a pure pretext to hide Oracle’s real purpose: to take away the choice of Itanium from customers and restrict the competition faced by its Sun servers.

— Indeed, Oracle’s internal documents make clear that its announcement in March 2011 that it would no longer develop or support software for Itanium servers was implemented as part of a business strategy to leverage Oracle’s dominance in database software to try to force Itanium customers to purchase Sun servers. The tactics employed by Oracle in support of this purpose included pricing misconduct, withholding of benchmarking scores for HP servers run on Oracle software, and abusing customers on support issues.

— Oracle is in breach of its contractual commitments to HP, and it has failed to honor its promises to customers. Oracle should be addressing and rectifying this conduct rather than making up claims against HP.

70777_xREDACTEDxxAmendedxCrossxComplaint

The expected filing is Oracle’s amended cross-complaint, wherein the company will lay out the basis of its legal argument explaining why its March 23 decision to stop building software that runs on servers using Intel’s Itanium chip was not only justified but doesn’t violate an agreement struck last year between Oracle and HP.

Oracle has made several colorful claims in court. Last month, for example, it compared an arrangement between HP and Intel to continue to produce and evolve the Itanium chip to a remake of the film “Weekend at Bernie’s.” And in August it argued that HP engaged in fraud by not telling Oracle that it was about to hire Léo Apotheker as its CEO and Ray Lane as its chairman when it was negotiating a settlement to a 2010 lawsuit over Oracle’s hiring of former HP CEO Mark Hurd.

But the real issue is a simple one, say people familiar with HP’s thinking in the case. Did Oracle agree to a contract with HP to continue to support Itanium — as it has been doing for years — or not?

The year 2010 was a weird one for executive moves among tech companies. Hurd resigned as CEO of HP, and took a job as president of Oracle just as Oracle was in the process of acquiring Sun Microsystems. HP sued Hurd and Oracle, and soon they settled. HP says that a clause in that settlement included a provision that Oracle would continue to port its database software to HP servers running the Itanium chip. Oracle has argued that this clause is not part of the final agreement. The settlement document itself remains confidential, but its details will likely emerge in the trial. Expect lots of arguing over different versions of the agreement.

One key part of Oracle’s argument has been that HP has been paying Intel to keep the Itanium chip alive in the face of its failure to gain traction in the mainstream server market over the last decade. This is something that HP readily concedes, since it and Intel developed the chip together in the early 1990s, and regularly renew their agreements — in 2004, 2007 and again in 2010 — to commit resources to build it and to design new generations of the chip every few years. The latest agreement calls for Intel to build two new generations of the chip.

Another argument Oracle has made concerns HP’s management during the last year. When the 2010 agreement ending the Hurd lawsuit was struck, HP was nearing the end of its search to replace Hurd. CFO Cathie Lesjak was interim CEO at the time. Ten days later, HP announced that Apotheker would become CEO. In a filing in August, Oracle argued that it never would have agreed to the Itanium partnership had it known that Apotheker, a onetime co-CEO of SAP and a figure in a contentious Oracle-SAP lawsuit, was about to become HP’s CEO. Ditto Ray Lane, a former Oracle president who was named HP’s chairman earlier this year.

People familiar with the case say that Oracle seemed unconcerned about HP’s ongoing search for a CEO, and didn’t raise any questions about it during settlement negotiations for the Hurd case. These people say that HP wasn’t deceptive, but that even if it had been it will be difficult for Oracle to argue that it’s not bound by the terms of the settlement. The language is clear and unambiguous enough that Oracle would have to argue that the Itanium clause in the agreement means nothing, these people say.

One thing is certain: The damage that HP is suffering from the ongoing uncertainty in the marketplace over its Itanium-based servers is starting to sting. HP calls these machines its “business critical” servers, and they are industrial-strength computers that aren’t sold in large numbers. Indeed, HP is the only vendor of note that even buys the Itanium chip.

But it’s a historically profitable business — HP won’t say exactly how profitable — on which HP charges its customers large service and support fees. In 2010, HP reported revenue of $2.3 billion from its business-critical operation, amounting to less than 2 percent of its $126 billion in sales that year. In 2011, HP reported that sales in its business-critical unit dropped 23 percent in the fourth quarter over the same period a year ago; sales for the year fell to just above $2 billion.

HP has argued that Oracle’s motivation is to steer HP customers toward its Sun hardware. If that was the strategy, sources briefed on the case say, it isn’t quite working out that way. One lucky party benefiting from the fight, they say, is IBM, who is winning business from some former HP customers. It’s one reason that HP is arguing for a speedy trial.

How else to explain the weird kerfuffle that exploded like a firecracker last night at Oracle’s OpenWorld conference in San Francisco? Benioff has delivered keynotes at OpenWorld before, in 2009 and 2010 and probably earlier than that, though I didn’t conduct an exhaustive search.

As we all know, Ellison ordered Benioff yanked from the OpenWorld speaker’s roster yesterday. Officially, his talk was moved from 10:30 am today to 8:30 am Thursday, the final day of the conference, when no one but the stragglers are likely to be in attendance.

“At 3:30 today [Tuesday] we were notified we were cancelled,” Benioff told me by email last night. “Then we were told we were moved to Thursday morning when there are no other presentations. We view this as a cancellation.”

His response was to schedule a speech at an alternative venue, the Ame restaurant inside San Francisco’s St. Regis hotel, for the same time slot. (See the press release here.)

So what’s the wrangle really about? On the surface, it’s a difference of vision, a geeky technical debate. What exactly is cloud computing? To Benioff, the cloud is something that can’t be delivered to the customer on a forklift because it’s a service delivered via the pipes of the Internet. Everything that makes it go lives in one or more remote data centers that the customer never touches and rarely, if ever, thinks about. Just like Salesforce.com, where the customer needs nothing more than a browser running on an Internet-connected computer or iPad or smartphone to get started. Or Amazon Web Services. Or Google Apps. Customers pay for what they use, have nothing to manage, install, maintain or upgrade, and stop using it when they no longer need it. Easy, economical, cheap and accessible to everyone.

To Ellison, the cloud can be a hybrid. Certain customers — like the many large companies that are Oracle’s stock in trade — fundamentally distrust the notion of handing their data off to a third party. They run software applications on hardware that’s installed on their own property, or in combination with hardware that Oracle runs for them. On this side of the debate you’ll find not only Oracle, but also other companies with established IT hardware businesses, IBM and Hewlett-Packard among them. Expensive and time-consuming it may be, but real companies doing real things traditionally own their own assets, the argument goes.

As Benioff tells it, this is the “false cloud.” He’s been using that phrase incessantly for some time, and he seems in recent weeks to have deliberately stoked the controversy. At a follow-up panel to his OpenWorld keynote in 2010, he was more direct. Hardware of the type that Oracle sells can be eliminated entirely in the age of the cloud. Fighting word for Oracle, especially when uttered in front of Oracle customers.

And Benioff isn’t the only one throwing punches. In 2009, Ellison described Salesforce as an “itty bitty application” that happens to run on Oracle databases.

But as is always the case with public grudges, it’s more complicated than it seems. There is a personal element to it all. Before starting Salesforce in 1999, Benioff was Oracle’s star employee. He spent 13 years at Oracle. At 23 he was named the company’s Rookie of the Year, and at 26 was the youngest person promoted into the VP ranks. He was in many ways Ellison’s star student. Charles Babcock, writing in Information Week, remembers an Oracle event where Ellison tapped Benioff to address a customer question, and he commanded the stage in a manner one could describe as Ellison-esque.

When Benioff left to start Salesforce, Ellison was an early investor and sat on the Salesforce board until a falling out — spurred largely by Ellison’s backing of Netsuite, another cloud outfit started by two other Oracle alums, Evan Goldberg and Zach Nelson, whose offerings overlap competitively with those of Salesforce.

Obviously Benioff learned well from the master. A classic tactic from the Ellison business playbook is to prod or cajole your quarry into a public PR fight. Look at all the times where Ellison has been brazenly outspoken: Defending, then hiring Mark Hurd after his sudden resignation from HP last year; publicly chasing Hurd’s replacement Léo Apotheker out of his office on his first official day on the job by attempting to serve him with a subpoena; squabbling with Autonomy CEO Mike Lynch.

So who won this round? The conventional wisdom has to give this one to Benioff. With the cancellation of his speaking gig, he’s attracted more attention than he would have otherwise saying whatever he wanted from Oracle’s stage, a fact about which Benioff crowed to the New York Times last night, calling it the “best possible outcome.” It does look like Benioff planned for this result.

However, this long-simmering feud, now that it has boiled over so publicly, is far from over.

Benioff tweeted tonight that he’s been bounced from the speakers roster at the Oracle OpenWorld conference in San Francisco, and he’s blaming the decision directly on Ellison.

Larry just cancelled my keynote tomorrow! Sorry #oow11! Join me @ St. Regis AME Restaurant at 10:30AM! The show must go on! Sorry Larry!

October 4, 2011 4:52 pm via Twitter for BlackBerry®ReplyRetweetFavorite

@Benioff

Marc Benioff

I just got a statement from Oracle’s Deborah Hellinger, who says the move was simply a change in schedule, and had more to do with the heavy attendance at the conference than anything else.

“Due to the overwhelming attendance at Oracle OpenWorld we had to make several session changes,” Hellinger wrote. “The Salesforce.com Executive Solution Session was moved to Thursday at 8:00am in the Novellus Theatre.”

Thursday is, notably, the last day of the conference — there are no other speaker sessions on the roster for that day, and this change to Thursday’s schedule hasn’t been made to the Oracle OpenWorld Web site. However, it has been updated: There’s no longer any mention of Benioff’s once-scheduled Wednesday keynote.

Benioff, who is a former Oracle employee, had been scheduled to speak at the Novellus Theater at the Yerba Buena Center for the Arts on Wednesday at 10:30 am. He has since set up an alternate venue — a restaurant at San Francisco’s St. Regis Hotel.

Here’s one possible reason: Benioff’s recent Dreamforce conferences, held in San Francisco and elsewhere, have contained a lot of references to the “false cloud,” and have included Oracle in that description.

Also, it wasn’t for nothing that Oracle, which does a significant business in Customer Relationship Management (CRM) software, advertised heavily around the time of Salesforce’s recent Dreamforce conference. Salesforce, as we all know, does CRM in the cloud, and has a lot of momentum behind it of late. This could just be Larry Ellison’s way of expressing his unhappiness with Benioff.

Chances are there will be more of a backstory to this new round of Oracle mishegas in the morning. For now, here’s an excerpt of a recent Benioff speech in Boston, in a video shot by IDG’s Computerworld. The final slide shows an Oracle Exadata machine with its logo barely obscured. Makes you wonder why Oracle offered Benioff a speaking slot in the first place — and why Benioff accepted it.

Update: Well, here’s an interesting wrinkle. It seems that when CEOs speak at these conferences, often, but not always, they pay a fee for the privilege to do so. In this case, as Benioff has told Quentin Hardy at the New York Times, Benioff had paid Oracle $1 million for stage time at Oracle’s conference, and would have likely delivered some variation of the “false cloud” speech he’s been giving of late. Someone at Oracle may not vetted speakers carefully enough and gave Benioff a slot — he did have one last year. Ellison, I’m told, got wind of it, and being aware that Benioff has been slamming Oracle in his speeches lately, canceled the date.

Still, Benioff can declare victory — and he is doing just that. Taking a page from Ellison’s own playbook, he’s managed to pick a fight, and is scoring some publicity points from having drawn Ellison’s ire. As Benioff told the Times: “This is the best possible outcome … “It’s free publicity, and it is clear that Oracle is threatened by us.”

Also? He gets his money back.

Rather than become an HP executive, Autonomy CEO Mike Lynch, who’s been described as Britain’s first software billionaire, will remain head of Autonomy, which HP will operate as a wholly owned subsidiary, though he will report to Whitman.

Of course, the deal didn’t get done without some drama — what does get done at HP without drama these days? First there was the shock at the price paid, which represented a 64 percent premium over Autonomy’s share price. It was just one of the things that led to a shareholder lawsuit against HP.

There were certainly enough questions about the deal to cause some speculation around the notion that HP might try to back out of it. Those ideas gained some currency when HP’s board of directors fired former CEO Léo Apotheker, but not before giving him a pricey exit package.

Then there was the Oracle shopping scandal. Asked about Oracle’s position in the unstructured data market two weeks ago, CEO Larry Ellison said that his company had passed on a chance to acquire Autonomy because the price was too high. Lynch, apparently falling into a PR trap laid by Oracle, took issue with Ellison, saying Autonomy had never been shopped to Oracle, prompting Oracle to publicly call Lynch a liar, then produce a set of PowerPoint slides as evidence. Lynch then went on to blame his eager banker, Frank Quattrone. Of course, it was widely known that Autonomy had been quietly shopped around for months.

So that little kerfuffle is over, now that HP is in control and its corporate communications team, led by Lynn Anderson, is in charge.

Meanwhile, there’s the larger mission to worry about: HP has to prove that Autonomy was worth all that money, and there’s an awful lot at stake. HP shares are still trading near their lowest levels in six years, and closed today at $22.20, down 25 cents. According to the disputed slides prepared by Qatalyst partners that were shared at one time or another with Oracle, Autonomy is expected to bring in $1.1 billion in revenue next year, which would amount to less than 1 percent of HP’s forward revenue projection for 2012 of $127 billion. It’s going to be tough to make it pay. But like it or not, HP is stuck with it now.

But apparently it all did lead up to something. For those just tuning in, here’s how it went down.

About two weeks ago, on Oracle’s quarterly earnings conference call, Ellison was asked by an analyst about Oracle’s position in the market for analyzing and pulling useful intelligence from unstructured data — transcripts of videos and contents of emails, and scores of other things that aren’t neatly arranged in databases. It’s kind of a big deal, as companies grapple with the so-called “big data” problem, and the question was a natural jumping-off point to discussing Hewlett-Packard’s $11.7 billion acquisition of Autonomy. Ellison, by way of an answer, portrayed unstructured data as a feature of the existing Oracle database software, called it “nothing new,” and then slammed HP for paying too much for Autonomy, the British software firm whose specialty happens to be — you guessed it — unstructured data. And, oh, by the way, Ellison said he took a pass on Autonomy when it had been shopped to Oracle because he thought the price was too high.

Much drama then ensued. Autonomy CEO Mike Lynch said his company had never been shopped to Oracle. Not so, said Oracle — and oh, by the way, you left your PowerPoint slides behind. “Those slides?” Lynch countered. “Never seen ’em before in my life. Maybe you need some help with your unstructured data, because you seem confused at the sequence of events.”

You see, the spat occurred just a few days before Oracle OpenWorld, and got Oracle in stories containing the phrase “unstructured data” numerous times.

And what did Ellison talk about in his keynote address Sunday night? Lots of things. One of them was an appliance called the Exalytics Intelligence Machine that does — guess what? — unstructured data. It’s designed, Ellison said, to do all its analysis while the data is loaded into the machine’s main memory, while four 10-core Intel Xeon chips make it scream on the processor side. “Databases run faster, everything runs faster if you keep it in DRAM, if you keep it in main memory,” he said, describing it as data analysis at the “speed of thought.” Structured data, relational data, unstructured data — it does it all, Ellison said. Now all that mishegas makes sense. It’s all about having the last word.

Ellison’s keynote — an hour and change long — is below. If you want to skip forward to the Exalytics stuff, it starts at about the 57-minute mark.

As we reported Wednesday, Oracle decided to slap Lynch silly with a public rebuke concerning his comments to The Wall Street Journal that his company had never been shopped to Oracle.

Always eager to clear up the record — just, well, you know, because — Oracle went on to publish the PowerPoint slides sent by investment banker Frank Quattrone of Qatalyst Partners to Mark Hurd in January. The slides may or may not have had anything to do with a meeting held by Lynch, Quattrone, Oracle President Mark Hurd and its head of M&A, Douglas Kehring, in April. Or not! You see, the stories vary.

(Oracle, by the way, has since taken down the slides, but you can still read them here. Update: And we’re now told the slides are back up. Interesting!)

But what about the email those slides arrived with originally? Well, a kindly source has sent it to us. Dated Jan. 26 — you can read it below — it was sent to Hurd by Quattrone (whose address I’ve deleted as a courtesy). Judge for yourself, but to me it sure reads like the windup to a sales pitch.

From: Frank Quattrone
Date: January 26, 2011 7:48:37 AM PST
To: “‘mark.hurd@oracle.com’”
Subject: Fw: Autonomy slides

Hi Mark,
It was great to catch up earlier this month. I wanted to follow up by sending the slides I promised on Autonomy. Given its strong position in managing unstructured data (such as video, voice and photos), “meaning based” contextual enterprise search, data protection, compliance, archiving and content/web management, I beleive it’s a very strategic asset that could alter the balance of power in the industry for whoever might acquire it. And despite its strong track record of growth and very high profitability (50 pct margins), it trades at less than 20x earnings and around 11x Ebitda, huge discounts to the other strategic software assets of scale. Please let me know if you would like me to follow up with you, Doug K or otherwise.
Thanks
Frank

And it was! At least the email part. Quattrone weighed in on the whole kerfuffle via an email to Lynch, which Lynch then shared with the Financial Times Alphaville blog:

“The slides Oracle posted publicly were sent by me to Mark Hurd in January, were prepared by Qatalyst and were for the purpose of our independently pitching Autonomy as an idea to Oracle. These slides were not used in our April meeting with Mark and Doug.”

So what of the meeting in April? Well, apparently it wasn’t a sales pitch at all. No, really. As Autonomy said in a statement also sent to the FT:

“In April 2011, there was a meeting for approximately thirty or forty minutes between Autonomy and Mark Hurd, which was set up by Frank Quattrone as an introduction to Mark Hurd. Oracle is an Autonomy customer. It was made clear that Autonomy was not for sale and no sale process was under way. Mr. Quattrone’s company was not engaged by Autonomy at that time. There has been no other contact with Oracle since then. …

“Qatalyst have informed us that the slides Oracle has recently posted on its website were prepared and sent independently by Qatalyst to Oracle on 26 January (the content is clearly from January). This is the first time we have seen them. Autonomy was not involved in this nor was Qatalyst engaged by Autonomy until mid-year. Autonomy did not present these slides in the meeting.

“Oracle seems a little confused about the sequence of events and origins of the data it has received, something that would suggests it needs better management of and insight into the unstructured data on its internal systems. We would be delighted to help.”

Oh, snap! At least Lynch is learning the art of the snarky retort. So the slides were the work of eager bankers trying to get a deal cooking. And the meeting was just a friendly call by Autonomy’s CEO on a customer? With an investment banker and another company’s head of M&A — two people who have collectively done more Silicon Valley deals than any other people in the world — joining in just for kicks? Okay then.

While this tit-for-tat seems like a mildly entertaining tempest in a teapot, it’s a $12 billion teapot! One about which HP shareholders still seem to have a lot of questions, especially in light of the management change that has gone on there since the deal was announced. Time, however, is short: HP is said to be about ready to close on the deal Monday.

Why is it so important to Lynch that the world believe that Autonomy was not shopping itself, and not engaging in any discussions about selling itself? Because laws in the U.K. about corporate acquisitions are very strict, for one thing. And companies engaging in discussions about being acquired without disclosing that fact to shareholders quickly find themselves in hot water with regulators! That means CEOs in the U.K. get ticklish on this subject very easily.

Of course, the first official public disclosure about Autonomy being in discussions to sell itself to anyone crossed the wires at 1:32 pm New York time on Aug. 18, which, by my watch, is about two minutes after markets had closed in London. The disclosure, however, came about an hour and change after Bloomberg News reported that a deal was near. About 90 minutes after Autonomy’s disclosure in London — and with 52 minutes left before the close of markets in New York — came HP’s confirming statement that it was “in discussions.” Then, just after markets closed in New York, the deal was done. That leaves plenty of room for people on both sides of the Atlantic to ask all kinds of fun questions. Anyway.

And as we all know, Oracle — whether in January or April — passed on the opportunity to bid on Autonomy, primarily because the price was, as CEO Larry Ellison put it on a conference call last week, “shockingly high” at about $6 billion. And four months later — or eight, depending on when you start counting — on Aug. 18, Hewlett-Packard announced its plans to acquire Autonomy at nearly twice that price.

So what was the purpose of the April meeting in Oracle’s board room in Redwood Shores? Was it really a “lively discussion about databases,” as Lynch has previously claimed? Or an innocent customer call during which two masters of tech M&A just happened to be in the room? We don’t know exactly.

But we do know one thing: Having first characterized Ellison’s description of the matter as “just inaccurate,” then copping to a previously undisclosed meeting of some kind, Lynch does know how to change his story.

Given the recent feuds between the management teams at the two companies, Oracle’s acquisitive history and HP’s sudden weakness, it doesn’t take much for a popular narrative of Oracle buying HP to emerge. It would be a dramatic denouement to the events of the last year that have found HP and Oracle at increasingly caustic loggerheads. Oracle CEO Larry Ellison would take some kind of victory lap and mount HP on the wall like a of trophy.

The idea gained some currency with an Aug. 21 story in the New York Post (which, like this Web site, is owned by News Corp.) arguing that HP’s $11.7 billion bid for the British software firm Autonomy, having caused shareholders to knock $12 billion and change off HP’s market cap, would therefore make HP more attractive to Oracle.

The meme gained further currency with a Bloomberg News story saying that HP’s board was “concerned” that its weakened condition had left it vulnerable to Oracle.

Let me put it like this: No. Just, no.

The first problem with the notion is this: What parts of HP would Oracle want to own? Answer: Practically none.

First, let’s look at the condition of Oracle: Its mainline software businesses are showing healthy returns, while its hardware business, built on the foundation of Sun Microsystems, the IT hardware concern it acquired last year for $7 billion, is ramping up to full speed. But here’s a fundamental truth: Software carries a higher profit margin than hardware, so when software companies buy hardware companies, they can’t avoid seeing their overall profitability erode.

Consider Oracle’s operating margin during its fiscal fourth quarter — its seasonally strongest quarter — during the last three years. In 2009, before the Sun deal was closed, it was 43.4 percent. In 2010, after the Sun deal was closed, it was 38.3 percent. In 2011 it was 41.6 percent. And during Oracle’s most recent conference call, CFO Safra Catz said Oracle hopes to get back to “pre-Sun” operating margins soon.

Now let’s look at HP and its operating margins: In its most recent quarter ended July, HP’s enterprise, storage and networking business turned in operating margins of 13 percent, which were down from 14 percent in the prior year’s period. The story was the same in practically every other HP business unit: Operating margins in services fell from 15.7 percent to 13 percent; in software they fell from 28 percent to 19.7 percent; imaging and printing margins fell to 14.6 percent from 16.9 percent. The only place they increased was the personal systems group — the PC unit that’s being considered for a spinoff — where they grew year on year from 4.7 percent to 5.9 percent.

Conclusion: Owning HP would do nothing good for Oracle’s profitability, especially at a moment when the stated goal is to nudge them up.

There’s more. As Mark L. Moerdler, an analyst at Bernstein Research, argued in a research note to clients on Sept. 26, software accounts for about 2 percent of revenue at HP. And what software it has is not the type that Oracle typically likes. When Oracle does acquisitions, it grabs companies that make applications that plug holes in its own product portfolio. The majority of HP’s software offerings — Autonomy nothwithstanding — deal with infrastructure management, not exactly a priority for Oracle. It is, however, a business where IBM and Computer Associates participate.

And there are two historically important business units at HP that would be outliers at Oracle: PCs and printers. Oracle has no interest in either one, and it’s hard to see that changing. Combined they make up more than half of HP’s annual revenue. In the hands of Oracle, they would probably end up being spun out, either together or separately, but why buy a whole company only to chop off more than half of it — a half that’s shrinking at that — at what would have to be unfavorable terms.

Let’s not forget the valuation estimate of HP’s $40 billion PC business: Analysts have expected that a hypothetical buyer might pay as little as $8 billion for it, or about one-fifth trailing revenue. Why go to all that trouble?

Further: Why would Oracle buy a company that’s roughly one-quarter exposed to the consumer market. Sure, HP has a retail distribution network that’s the envy of the PC industry. But Oracle would rather sell those retailers systems to help them manage their businesses, not the PCs they in turn resell at razor-thin margins.

If that’s not enough, then there’s one key bit about HP that Oracle would actively dislike. HP, by virtue of being the biggest distributor of Windows-based PCs and servers, is the world’s largest reseller of Microsoft Windows. If there’s anything more utterly antithetical to Oracle’s core values than helping put money in Microsoft’s pocket, I haven’t heard of it.

Finally, there’s the issue of cash. Even in its weakened state, HP is trading at a market cap of $45 billion and change. Assuming a premium for the whole thing, that pushes a hypothetical price tag to $60 billion. That’s too rich, even for Oracle, whose balance sheet as of Aug. 31 contained a combined $31.6 billion in cash and marketable securities. It would have to take on a tremendous amount of debt — amounting to 82 percent of fiscal 2011 sales — to get such a deal started, let alone closed.

HP’s directors and shareholders can rest easy. They have many worries about the Silicon Valley icon and the troubles in which it finds itself. But being acquired by Oracle isn’t one of them.

Léo Apotheker is gone from Hewlett-Packard, but he left so suddenly that the board of directors didn’t have time to finalize his severance package. That is until today.

HP just filed an 8k with the U.S. Securities and Exchange Commission that outlines the terms under which he has agreed to leave. He will receive:

• A severance payment in the amount of $7.2 million payable in installments over the next 18 months.
• Accelerated vesting of 156,000 shares of restricted HP stock granted valued at $3,557,800 based on today’s closing price.
• An aggregate of 424,000 of the 728,000 performance-based restricted stock units (PRUs) awarded under his contract. Apotheker has waived his right to receive the remaining 304,000 PRUs that would have vested on October 31, 2012. He’ll only get them if HP hits its annual cash flow targets and in that case it amounts to another $10 million.

He’ll also get:

• An annual bonus of $2.4 million under the Hewlett-Packard Company 2005 Pay-for-Results Plan for his nearly 11 months of service with HP, payable Oct. 31.
• Coverage of relocation expense back to Europe, and up to $300,000 coverage he incurs on the loss of the sale of his $7 million, six-bedroom house in Atherton, Calif.
• Health benefits or payment for health insurance premiums for Apotheker and his family for 18 months.
• Reimbursement of legal fees related to the negotiation of the agreement.

It could have been worse. According to the terms of his contract, which you can read here, Apotheker stood to walk away with somewhere between $28 million and $35 million, depending on how you added things up.

HP shares are trading at levels that are roughly half of what they were when he joined as CEO last year. With HP clearly worried that angry shareholders might sue over what might be perceived as an outsize severance deal after a rocky 11-month stint — which is exactly what happened after the ouster of former CEO Mark Hurd — the board of directors and Apotheker have negotiated the final terms of his exit with less trouble, sources said.

When he left last year, Hurd initially walked away with a package worth $35 million, prompting a shareholder suit against HP and its board of directors led by a Connecticut law firm that argued the board violated its fiduciary responsibilities.

Later on, after joining Oracle, Hurd forfeited 345,000 HP stock options then worth more than $13 million — but now worth only about $8 million — that were included in his severance package in order to settle a lawsuit against him and Oracle that was brought by HP.

In a statement that seems not to have circulated as an official press release, but was emailed to a few U.K.-based tech journalists such as Chris Mellor at the Register, Lynch gives a more detailed account of the real reason for his “trip to SF” and his meeting in April with Oracle president Mark Hurd.

On one of my trips to SF (April 2011), Frank Quattrone, whom I have known for a long time, offered to introduce me to Mark Hurd. Oracle was a customer and I have never met him, so it was a good opportunity. Frank does this from time to time on my visits, he has introduced me to many people… NOTE: Frank was not engaged by Autonomy and there was no process running. The company was not for sale. I recall meeting with Mark and someone else I believe called Doug. At the start of the meeting they joked that Frank was there to sell them something. Frank and I made it clear that was not the case. We then met and had a lively discussion about database technologies. The meeting lasted approximately 30 mins. Frank is happy to confirm this.

Oracle’s corporate communications department, working unusually late, issued a retort that crossed the wires sometime after 1 am ET, calling Lynch’s statement “another whopper.”

It was no “lively discussion of database technologies,” Oracle says. Why bring two PowerPoint decks all devoted to Autonomy’s financial performance? Oracle, making good on last night’s implied threat to publish the decks, did so, and you can see them for yourself below.

Oracle published the slides in hope, it says, of restoring Lynch’s memory of a meeting he initially said never took place. “Yesterday, the Autonomy CEO did not remember having any meeting with Oracle,” the company said. “Today, he remembers the April meeting and inaccurately describes how it came about and what was discussed. Tomorrow, he will need to explain his slides.”

The kerfuffle is over Lynch’s defense of a comment Oracle CEO Larry Ellison made on a conference call with analysts last week. Asked about the current buzzword “unstructured data” and Oracle’s capabilities around it, Ellison engaged in his favorite hobby and took a jab at Hewlett-Packard — which last month said it would acquire Autonomy in a deal valued at $11.7 billion. “Autonomy was a shock to us. We looked at the price and thought it was absurdly high. We had no interest in making the Autonomy acquisition,” he said then.

He also went on to say that unstructured data can readily be added to Oracle’s existing database technology. “We think we’re much better off with a couple of smaller acquisitions and to continue to innovate in that area, so that the unstructured data and the structured data both find their way into an Oracle Database,” he said.

That, of course, didn’t sit well with Lynch, who has so far quietly endured criticism that HP is overpaying for Autonomy. In an interview with The Wall Street Journal, he denied that Autonomy was ever shopped to Oracle, and characterized Ellison’s understanding of the unstructured data problem as “very weak.”

Those, of course, were fighting words to Oracle, which decided to remind him of his April meeting with Hurd and Oracle’s M&A head Douglas Kehring.

It’s also helpful to remember that late last year Autonomy was being mentioned as the target of a bidding war between Oracle and Microsoft, according to a rumor-based story planted in the U.K.’s Daily Mail. Though such stories based on “takeover chatter” occur practically every day, someone with some skin in the game clearly wanted the markets to think Oracle was kicking Autonomy’s tires.

Lynch, of course, is really a proxy for HP’s new CEO Meg Whitman and Chairman Ray Lane, who have to get the Autonomy deal done and live with the price that former CEO Léo Apotheker agreed to pay for it. I asked Whitman about it last week, and she said “It is what it is.” The most interesting thing that has emerged from all this, however, is that Oracle claims to have considered Autonomy overpriced at a $6 billion valuation. HP paid almost twice that. Game on.

Autonomy Presentation 1 503341

Autonomy Presentation 2 503342

In an interview with The Wall Street Journal today, Autonomy’s CEO Mike Lynch — the man sometimes described as the British Bill Gates — says Oracle was never approached as a possible buyer of his company late last year. Mentioned by bankers mulling possible acquirers, maybe, but never approached directly.

The statement came in response to a verbal slap by Oracle CEO Larry Ellison, made on an earnings conference call last week, that Oracle had been approached by Autonomy, and took a pass because the price was “absurdly high.”

Indeed, there were reports — one I remarked on at the time — suggesting that Oracle had kicked Autonomy’s tires, and Autonomy shares spiked on the very suggestion that the acquisitive Oracle would take the firm out. They obviously proved unfounded, and Autonomy went on its merry all-but-anonymous way until HP stepped in with an $11.7 billion offer that was announced on Aug. 18.

The latest version of events just emerged in a statement from Oracle. Oh yes, Oracle says, Lynch did indeed approach Oracle about a deal, and specifically made a pitch — complete with a PowerPoint presentation — to Oracle president Mark Hurd and to its M&A head Douglas Kehring. According to Oracle’s recollection, in a meeting attended by Lynch’s banker Frank Quattrone, Hurd told Lynch that he thought Autonomy was overpriced at $6 billion, roughly half of what HP paid. Also: Oracle still has the PowerPoint deck. Zing!

The full Oracle statement is below:

“After HP agreed to acquire Autonomy for over $11.7 billion dollars, Oracle commented that Autonomy had been ‘shopped’ to Oracle as well, but Oracle wasn’t interested because the price was way too high. Mike Lynch, Autonomy CEO, then publicly denied that his company had been shopped to Oracle. Specifically, Mr. Lynch said, “If some bank happened to come with us on a list, that is nothing to do with us.” Mr. Lynch then accused of Oracle of being ‘inaccurate’. Either Mr. Lynch has a very poor memory or he’s lying. ‘Some bank’ did not just happen to come to Oracle with Autonomy ‘on a list’.” The truth is that Mr. Lynch came to Oracle, along with his investment banker, Frank Quattrone, and met with Oracle’s head of M&A, Douglas Kehring and Oracle President Mark Hurd at 11 am on April 1, 2011. After listening to Mr. Lynch’s PowerPoint slide sales pitch to sell Autonomy to Oracle, Mr. Kehring and Mr. Hurd told Mr. Lynch that with a current market value of $6 billion, Autonomy was already extremely over-priced. The Lynch shopping visit to Oracle is easy to verify. We still have his PowerPoint slides.”

In a note to clients today, Sacconaghi says that HP is the “most inexpensive tech stock in the S&P 500 and the 10th most inexpensive stock overall.” There are very few precedents, he says, for large-cap technology stocks trading at HP’s current valuation. Before this month, there had not been a large-cap tech stock that traded at less than 5.5 times earnings — not in the last 20 years.

At that level, he says, HP’s current valuation implies that its annual free cash flow will decline by 9 percent a year forever or, put another way, that HP will be half its size within seven years. Usually companies that trade so low have significant structural problems. HP, for all its faults, doesn’t meet that standard. It’s not “a broken company,” he says, it’s on track to grow earnings by 6 percent this year, and it leads in three of its four key lines of business — PCs, printers and servers.

So why the crazy-low valuation? “Investor exasperation.” (There’s that word again!) Investors have discounted it too much given all the drama, making it, believe it or not, a buying opportunity for “patient investors.” He rates HP an “outperform” with a price target of $37. Investors seemed to warm to the idea. HP shares finished the day up more than 3 percent.

It was a pretty fast turnaround for Hurd, who resigned at HP following an unpleasant flap. But at the time, Oracle was in the process of acquiring Sun Microsystems and adding a sizable IT hardware business to its portfolio. Hurd, having earned a reputation for running a tight operational ship during five years at HP, was available and had already built a friendship with CEO Larry Ellison, who had publicly castigated HP’s board for acting rashly in dismissing Hurd.

Hurd has been quietly working away inside Oracle since then, getting to know its business and regularly speaking at small Oracle customer events, like one in New York in March. He’s also been a regular on Oracle’s earnings conference calls.

Now Hurd’s public profile at Oracle is about to rise considerably. With Oracle set to hold its annual Oracle OpenWorld conference in San Francisco next month, Hurd will be delivering a keynote address of his own and will from here on be taking on generally more public roles at Oracle. Make no mistake: He won’t be standing in for CEO Larry Ellison — what mere mortal could? — and Ellison will be doing two keynotes of his own at the Oracle event. But Oracle customers and investors will be seeing more of Hurd than they have before.

Hurd today granted AllThingsD his first on-the-record interview since joining Oracle. (We published a few highlights earlier today.) It comes on the heels of last week’s surprisingly strong earnings report by Oracle, which is what we talked about first. Hurd declined to offer any good-natured advice to Meg Whitman, HP’s newly named CEO, and also declined to answer any questions whatsoever about the circumstances surrounding his departure from that company 13 months ago. (I did ask, I swear!).

He also sort of diplomatically avoided naming competitors, so I’ll do that on his behalf. When he mentions database and middleware competitors, he means IBM. When he refers to “point products” and “boutique companies,” he’s referring to Salesforce.com and Workday, both cloud-based applications that compete with Oracle offerings.

The full transcript of our conversation is below.

AllThingsD: You had a pretty good quarter, in a tough environment. What in your view is going well at Oracle, and what could be better?

Hurd: Well listen, we released a quarter, that I think was a great quarter, that had 17 percent new license growth which is outstanding. In Q1 of 2011 we had 25 percent license growth. The good news is that it was 25 percent, and the bad news was that it was this year’s comparison, so when we grow 17 on top of 25 it’s just outstanding license fee growth. When you remember that last year we had 33 percent revenue growth and 33 percent earnings growth, these numbers we just posted are coming against a really good 2011. So they’re just outstanding. Also, we had Exadata growth that was just outstanding. We talked about that on the conference call. We had a good launch for Exalogic during the quarter. We had a growth in the T-series and M-series, which are the traditional Sun servers, during the quarter. Then I’d add that our industry verticals grew faster than Oracle overall. That’s an important strategy for us. We get deeper into these industry verticals, and they solve our customers’ most difficult problems. They’re very industry- and business-specific, and when you add to them the rest of our portfolio, it made for a strong quarter all the way around.

The other thing about the quarter is that you were strong in Europe at a moment when Europe seems to be melting down. Why is Oracle so strong when others would be seeing weaknesses? What is Oracle doing differently in Europe that others aren’t?

I wouldn’t comment on what others are seeing, because I only know what Oracle is seeing. It may be that it’s just Oracle-specific momentum more than anything else, but when I look at each segment of our business in Europe, if I actually read to you the growth rates of each of our product segments, it would sound very consistent. We didn’t have any one big deal in Europe, no big transaction. We didn’t have any one country that stood out. It was just broad-based, across-segments, across-countries performance. And the performance in Exadata, Exalogic, overall hardware growth, all very strong in the quarter. So forgetting the macro environment, Europe was a bright spot for Oracle last quarter and very strong. Also one quick note: Whenever you have a quarter in Europe where the applications growth in the quarter was 63 percent — when you grow like that it’s just great stuff.

Let’s talk about the hardware business a bit, which is still relatively new. You talked on the conference call last week about how you’re focusing more on hardware with higher content of Oracle intellectual property, and less on commodity stuff, what we often call the x86 servers that use chips from Intel and are less distinguished from what other companies offer. Where are you in that process and how long do you think it will take to get where you want to be?

I think you’ve got it right. We’re very focused on growth in Exadata and growth in Exalogic. You know this but it bears repeating, Exadata is a combination of server and storage and software technology integrated into a single solution that we think gives our customers a better total cost of ownership, or TCO. Some of the performance gains our customers are seeing are 30 or 40 or 50 even 70 times the performance improvement. Not 30 or 70 percent performance gains, but 30 or 70 times better than before. On top of all that we support them remotely, diagnose their problems remotely, sometimes before they even know they have them. And so growing that Exa line is very important to us. Now, next week at Oracle Openworld, we’re going to release more Exa lines and more technology than you’ve ever seen from the company at any one time. Last week we introduced an Oracle database appliance, which is very much an Oracle intellectual property stack focusing on mid-market and departmental solutions. While it’s not as big a system as an Exadata, it’s a manifestion of the same strategic directions we’ve had before. They’re integrated systems where we can bring a stack of value to our customers.

Your CEO Larry Ellison made a comment on the conference call last week that got a lot of attention: Essentially that Oracle would be okay with the x86 business going to zero. Now I know it’s a little more complicated than that. Would you care to revise and extend his remarks on that subject a bit?

What I would say is that we don’t have interest in selling products where there’s no Oracle intellectual property. We’re very focused on adding value to customers. If there’s no Oracle intellectual property in it, then you ought to buy it from someone else. We’re very focused on getting our technology into the market. We think we can do two things. All of our products are designed to be the best-of-breed, the best in the markets they serve, to work in heterogenous environments, to be open. That is clearly our strategy at every layer of our architecture. In addition to that, we vertically integrate some of these systems like we do in Exadata and like we do in Exalogic and like you’ll see in other manifestations over the next week, where we think we can deliver extreme performance, extreme TCO and extreme serviceability. If there’s some product that comes from a third party that just comes through Oracle where we add no value, that’s the stuff we have no interest in. If we add no value to it, you ought to buy it from someone else.

So that doesn’t mean you intend to get out of the x86 business entirely, only that you’ll want to sell hardware that is sold in combination with Oracle IP whether it’s software or something else.

Yes. We still have an x86 line. But Larry was trying to make a point.

Let’s talk about competitors. Who do you see showing up on deals you’re competing on? Who keeps you up at night?

We have competitors in the industry vertical markets that are really point products, and horizontal apps, there are some that are boutique companies that provide certain functional applications whether it’s in HR [Human Resources] or something like that. We certainly have competitors in database and middleware.

So it’s been a year since you joined Oracle. What’s it like working with Larry Ellison?

It’s great. It’s just great.

What defines success for you at Oracle? If we talk at this time next year, where do you want Oracle to be?

We’re releasing a whole new set of technology next week. Our opportunity is to drive that into the market and increase customer awareness of the portfolio. You’ve got all these smartphones running around the market. They’re basically computers in people’s hands, and they’re begging for data from enterprise applications, and those applications need to be modernized to make that happen. We can help our customers on innovation whether it’s e-commerce or any other environment they want to innovate in and at the same time we get the opportunity to make them more efficient. These engineered systems solutions deliver tremendous performance that help our customers server their customers better and help them get better efficiency at the same time. So we’ve just got a tremendous hand to play and that’s what we’re going to do.

You’ll be speaking at Oracle Openworld in San Francisco next week. What’s on your agenda?

I’ll be doing a lot of stuff. Larry has a keynote Sunday, and he’ll do another Wednesday, and I’ll be doing one Monday. But they’ll all be centered on our innovations and systems and software that we’re bringing to market, so that will be the primary agenda for the week.

Will we be seeing you in a much more public role at Oracle generally? Are you going to be more of a public face of Oracle going forward?

I have a job to do, so it won’t be to the exclusion of that. I spend most of my time working on customers and making sure we have the best team in the industry. Last year I’ve spent time on customers, people and products. I don’t see that changing. To the extent that we have things to announce I’m clearly going to be doing all that in addition. I’ve been seeing lots and lots of customers, and will be continuing to work on building our team and making sure I’m participating in the product process in every way possible. That’s what I’ll be focused on.

What are you hearing from those customers? What are they worried about? What are they telling you about their business?

They love our products, they love our people and want to get more deeply engaged with Oracle. It’s a huge opportunity for us, but it’s also a challenge, because frankly there’s a lot to be done. And frankly we can’t do everything, so we have to pick our spots to engage properly. It’s important for us to focus.

In his first on-the-record interview since joining Oracle last year, co-President Mark Hurd tells AllThingsD that Oracle is experiencing a lot of company-specific momentum in Europe, where it saw 14 percent revenue growth in quarterly results reported last week.

“When I look at each segment of our business in Europe, if I read to you the growth rates of each of our product segments, it would sound very consistent,” Hurd said. “We didn’t have any one big deal or transaction that stood out. Europe was a bright spot in the quarter for us.”

Hurd also talked about the state of Oracle’s hardware business, much of which it picked up in its acquisition of Sun Microsystems last year. Hurd reiterated previous comments that Oracle aims to focus more of its efforts on selling hardware that contains more Oracle intellectual property, and thus commands a higher price and profit margin, than on commodity hardware. Oracle CEO Larry Ellison raised eyebrows when he said that Oracle wouldn’t mind if its business selling hardware running Intel-based chips — its so-called x86 business — fell to zero.

“We’re focused on adding value to customers. If there’s no Oracle intellectual property in it then you ought to buy it from someone else,” Hurd said. “All of our products are designed to be the best-of-breed in the markets that they serve. If it’s some product that comes from a third party that comes through Oracle where we add no value, that’s the stuff we have no interest in.”

The comments came in an interview with AllThingsD today, Hurd’s first since he joined Oracle last year, which followed his resignation from HP a month before. A fuller version of the interview will be posted soon.

As the board of Hewlett-Packard gathers for a planned meeting — to say the least — there’s a lot to talk about these days.

Several sources said that a series of recent discussions among its members have been intense ones, focused in part on how to spin the company out of its current cycle of bad news and what to do about the situation, which could mean even more dramatic change at the company in the months to come.

There is certainly plenty of trouble to go around, even if solutions to HP’s woes seem hard to reach.

The talks by HP directors — who include venture investor Marc Andreessen and former eBay CEO Meg Whitman — comes just a day after the tech giant announced the layoffs of hundreds of employees in its Palm division.

This inevitable move came after HP’s sudden news in August that it was shuttering its webOS hardware business.

Add to that a proposed class action lawsuit, filed Sept. 13 in the U.S. District Court for Central California, along with another handful of law firms that are launching their own investigations of HP over the move.

In the suit, according to a report by Arik Hesseldahl, an “HP shareholder named Richard Gammel alleged that comments by CEO Léo Apotheker — concerning the company’s earnings expectations, the importance of its personal computer business and plans to move ahead with devices running the webOS operating system — gave a vastly different indication of actions HP took on Aug. 18, when it killed the webOS hardware business and announced plans to spin off the PC business and spend $10 billion to acquire Autonomy.”

In other words, lots to talk about for HP’s directors, who have been under siege, essentially, ever since the board fired former CEO Mark Hurd over a variety of allegations related to a sexual harassment inquiry more than a year ago.

Since Apotheker took over for Hurd soon after, HP’s stock has plummeted almost 43 percent in a year’s time. By comparison, rival Oracle’s shares are up more than three percent in the same period, and Apple stock has risen more than 50 percent.

That share decline, given a series of major moves and just as many gaffes, has put Apotheker in the hot seat for sure.

How much hotter it will get for him and the HP board remains to be seen.

What Oracle didn’t know at the time it negotiated the settlement to the Hurd Affair — it says in a new court filing today — is that HP was about to hire Léo Apotheker as its new CEO and Ray Lane, the former Oracle COO and president, as its new chairman. Had it known, it wouldn’t have agreed to anything of the kind. To that end, Oracle says, HP obtained its agreement from Oracle by way of fraud.

The whole Itanium thing is a very long story, but today’s filing shows it’s really not about Oracle supporting the chip or not. Yes, the terms of a contractual agreement that may or may not have been in force is the issue at hand, but Oracle’s filing makes clear that the issues are more about not wanting to do business with Apotheker and its right to walk away from what it considered an informal business arrangement.

That’s just part of a rather juicy counter-complaint filed by Oracle’s lawyers today in HP’s lawsuit over Oracle’s decision to walk away from Itanium-friendly versions of its software. (The 20-page filing is embedded below via Scribd.) But here’s the money quote:

Oracle would not have signed on to any settlement of the Hurd litigation had it known this information, and certainly the last thing it would have ever agreed to do was “reaffirm” a partnership that on the HP side would be led by Messrs. Apotheker and Lane. To the extent HP obtained the rights it claims in this suit, it did so by fraud.

So why is HP fighting so hard on this issue, especially given the fact that very few people buy Itanium-based systems in the first place? Oracle’s theory: Because it’s profitable.

HP is one of the last hardware or software companies in the world that remains seriously committed to Itanium, and it does so solely because Itanium support agreements likely account for a large percentage of its profits. Likely even Intel would end-of-life the Itanium platform of its own accord and focus on its x86 architecture; almost certainly, Intel continues to develop Itanium chips only at HP’s behest.

HP and Oracle concluded their settlement on Sept. 20, a mere 10 days before Apotheker was named as HP’s CEO.

Of course you know Apotheker and Oracle have something of a checkered history. Apotheker used to be co-CEO of SAP, which was caught stealing Oracle source code and was ultimately forced by a court to pay a few billion dollars in damages.

Lane on the other hand, as a former Oracle president infamously pushed out by CEO Larry Ellison, has been a frequent Oracle critic over the years. Suddenly, two of Ellison’s least-favorite people were at HP’s helm. Who needed these partnerships anyway, Oracle argues.

HP, Oracle says, sought to induce it into what it calls “an apparently perpetual and cost-free software development commitment for the Intel Itanium platform” while concealing “that it was days away from hiring a new board chairman, Ray Lane, and new CEO, Léo Apotheker, who HP knew Oracle distrusted so completely — and justifiably — that partnership would be impossible.

Well, there you go. Asked to comment on Oracle’s claims, an HP spokeswoman sent the following statement:

Rather than focusing on what is right for our joint customers, Oracle is relying on invented excuses to cover up its blatant disregard for its legal obligations. HP is resolved to enforcing Oracle’s commitments to HP and our shared customers and will continue to take actions to protect its customers’ best interests.

And here’s the filing.

66030_OraclexsxCrossxComplaint

Fire well-performing CEO Mark Hurd over expense-report irregularities and a juicy sexual-harassment claim that you admit has no merit. Fire four board members, as publicly as possible. Foment a mass exodus of key executives who actually know how to run the giant computer company.

Hire a new CEO from German competitor, SAP, which sells business software, not consumer products. Tell the new CEO, Leo Apotheker, that Mr. Hurd “left H-P in great shape.”

Draw public criticism from a major corporate-governance advisory firm, alleging Mr. Apotheker filled board openings with cronies.

Read the rest of this post on the original site »

It wasn’t until dinner this past Sunday night that CEO Léo Apotheker told Todd Bradley, the head of its Personal Systems Group, that he was about to push key parts of Bradley’s huge unit off the cliff.

That included stopping selling hardware — smartphones and TouchPad tablets — based on the webOS it acquired from Palm last year, a $1.2 billion deal that Bradley played a big part in.

In addition, HP said it was considering spinning out its PC business and would “explore options to optimize the value of webOS software going forward.”

But, until a few days ago, several sources close to the situation said, Bradley knew nothing of these plans and neither did webOS’s key driver of late, former Palm CEO Jon Rubinstein.

This surprising lack of disclosure by HP to two of its key execs begs the question: Will they stay or will they go now?

According to sources, staying put is the plan for both for now, although it depends on what such a spinoff will look like.

It’s clear at this point that Bradley — who was once the CEO of Palm himself and was once considered the most likely successor to former CEO Mark Hurd, before Hurd’s sudden resignation last year — is the leading CEO candidate of its spun-out independent PC company if that’s what HP decides to do.

But it’s not a lock, either. And, apparently, Bradley has not been locked in with regards to a spinoff either and would likely have a lot of offers from tech companies in Silicon Valley to choose from if he wanted.

“Who will they get if Bradley goes at this point, if they want to spin it off?” said one person at the company.

But, added another: “Bradley is in the catbird seat if he wants to be and it’s his to lose.”

That depends, of course, on what his is.

Questions include:

Will that new company include any of the consumer part of the printer business — a huge cash cow — if HP is indeed leaving the arena?

Will webOS go with the new set-up, so that it can take advantage of the patents and licensing income?

Will HP continue to be the brand name on the devices this computer company spinoff would make?

These are just a few of the issues in a deal of untold complexity. But perhaps the most obvious one is who would get custody of Rubinstein?

To begin: Bradley is a big fan and would certainly want him around if there were a spinoff, said several sources.

But to do what?

Rubinstein, a well-known tech exec, had been leading the webOS efforts for HP, but was recently moved upstairs to a larger but fuzzy role, to run product development and innovation for the PSG unit. He has been reporting to Bradley.

At the time, the move was seen by many as the first step out the door by Rubinstein, with one person joking that “he’d much rather be at his Mexican beach house than HP.”

Among the disgruntlements: Several sources said Rubinstein felt that TouchPad wasn’t ready to ship and that Apotheker has reneged on a public promise not to until the tablet was “perfect.”

That ire is no surprise, since the device was then subject to tough criticism, including by AllThingsD’s Walt Mossberg, who noted in his review:

“… In my view, despite its attractive and different user interface, this first version is simply no match for the iPad. It suffers from poor battery life, a paucity of apps and other deficits.”

In addition, unlike others there, Rubinstein has been more of a product guy and not an HP lifer. That begs the question of whether he’d like to sign up to another big company stint, even if he had more control.

“He’s been to that party before, and the reality is that he is not a career big company person,” said one person.

One important note: Rubinstein was unable to make webOS work when Palm was already a standalone independent company. And, although a new HP spinoff would be huge and better funded, it is still very much an uphill and competitive battle on the computer, smartphone and tablet fronts.

In addition, keeping a competitive operating system going is also a costly bear of an issue.

“It’s a cyclical, high-velocity business and there are other huge players from Apple and Google in smartphones and tablets to Lenovo and Dell in PCs,” said another source. “There might be a lot of great products in the pipeline for webOS, but it will not be easy to make them a success.”

That said, noted another person who knows Rubinstein well, “he really cares about webOS and does not want to see it go away.”

That might be true, although that is just what might happen if HP decides to sell it off to someone else or makes the spinoff a difficult endeavor.

In that case, it’s an offer Bradley and Rubinstein can refuse.

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• With HP’s Raising of the World’s Biggest White Flag, Will Jon Rubinstein and Todd Bradley Surrender Too?