HP wins a battle, but war with Oracle rages on

Hewlett-Packard won a tactical battle last night when a judge hearing the bitter dispute it’s waging with Oracle tossed out an Oracle fraud claim. But it also lost one when the judge unsealed previously redacted documents that showed just how desperate HP was to keep Oracle working on software for HP’s Itanium servers. So the battle over who did what to whom will rage on with a trial likely to kick off in April.

This whole case is an example of two tech giants using the courts to shore up their competitive position. HP wants Oracle to keep building software for Itanium-based HP servers. Oracle wants to stop doing so. The reason for the impasse is that the two erstwhile partners are competing head on for more of their customers’ software and hardware dollars. HP is building its enterprise software business with Autonomy and other deals, while Oracle tries to make a go out of its Sun Microsystems server business.

As backstory, all of this is wrapped up in Oracle’ s hiring of deposed HP CEO Mark Hurd, a “hardware guy,” back on Sept. 6, 2010. Within three weeks, HP hired two “software guys” in former SAP CEO Leo Apotheker and former Oracle president Ray Lane as CEO and chairman, respectively.

Last night, California Superior Court Judge James P. Kleinberg dismissed Oracle’s claim that HP committed fraud by not informing Oracle of its plans to hire Apotheker and Lane. HP sued Hurd after he left, and when Oracle hired him, the two companies worked out a secret “Hurd Agreement” whereby HP dropped the lawsuit and Hurd gave up $ 30 million in compensation. Oracle’s point is that by hiring Apotheker and Lane, HP was moving into enterprise software to compete with Oracle, thus changing the dynamic of the vendors’ relationship.

In theory anyway, the current suit is all about Itanium. According to the unsealed Oracle court filing, HP’s positioning of Itanium-based Integrity servers as its go-to option for mission-critical enterprise applications at a time when Intel Xeon servers were taking off, put it in a corner. Without Itanium, HP would be “strategically screwed,” according to an unnamed HP executive quoted in the unredacted Oracle documents.

Oracle claimed HP was funding the bulk of Intel’s Itanium work, but wanted to keep that fact to itself. The document quotes another HP executive saying the “Itanium situation is one of our most closely guarded secrets.” That secret is now out of the bag.

The current legal tussle started last June when HP charged Oracle with breaching its promise to keep developing Oracle software for HP Itanium-based servers. Oracle had said it was de-emphasizing Itanium development because there was little demand and that Intel itself, which builds the chips, had no long-term plans to keep building them. HP, the only mainstream server company to use the chips, cried foul.

But the rhetoric had been ramping up for some time. Last March, I heard HP server and storage chief Dave Donatelli implore HP channel partners to lobby Oracle to change its tune on Itanium. It was an odd moment, to say the least.

Barring a settlement, which seems highly unlikely, this battle will be raging on for months and months to come.

Photo courtesy of Flickr user mrbill

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