Bloomberg News

HP Sues ‘Bitter Antagonist’ Oracle Over Broken Contract Claims

June 16, 2011

June 16 (Bloomberg) -- Hewlett-Packard Co. sued Oracle Corp. over claims that in a period of eight months Oracle went from partner to “bitter antagonist” and has breached its contract.

The lawsuit, filed yesterday in state court in San Jose, California, cites Oracle’s hiring of Hewlett-Packard’s former Chief Executive Officer Mark Hurd last year and Oracle’s March announcement that it would no longer support its database software on Hewlett-Packard computer servers that use the Itanium chip. Oracle also has used “strong-arm tactics” in forcing customers to “shift from HP’s Itanium server hardware to Oracle’s own server hardware,” the suit said.

The suit, which also cites libel claims, follows Hewlett- Packard’s June 8 letter to Oracle demanding that the software maker keep supporting a server chip made by Intel Corp., reiterating its concern that the move will hurt customers and trammel competition.

On March 22, Oracle said that it would stop developing software for Intel’s Itanium chip that powers Hewlett-Packard’s line of Integrity servers, which can cost hundreds of thousands of dollars.

Mislead Customers

Oracle, in an e-mailed statement, said Hewlett-Packard knew of Intel’s plans to terminate its Itanium processor, and said the company attempted to mislead customers and shareholders into believing such plans don’t exist. Hewlett-Packard’s claim that Oracle breached an agreement to support Hewlett-Packard’s Itanium processor is false, Oracle said.

“HP explicitly asked Oracle to guarantee continued support for Itanium, but Oracle refused, and HP’s Itanium support- guarantee wording was deleted from the final signed agreement,” Oracle said in the statement.

Oracle, based in Redwood City, California, previously had said it would no longer develop software for Itanium-based servers because the processor is “nearing the end of its life.” Hewlett-Packard, based in Palo Alto, California, has said the move would jeopardize customers and cost hundreds of millions of dollars in lost productivity.

Hewlett-Packard spokesman Bill Wohl said in an interview that its lawsuit is an attempt to address harm to its customers.

The company demands Oracle reverse its decision on Itanium support and change its licensing scheme for the Itanium processor, Wohl said.

The suit seeks unspecified damages and an order prohibiting Oracle from making false statements about Itanium processors and servers.

Profitable Line

Josh Greenbaum, a software industry analyst at Enterprise Applications Consulting in Berkeley, California, said Hewlett- Packard filed the suit to protect a profitable line of computer servers using the Itanium chip.

Oracle’s decision to discontinue support of its software running on Itanium could be costly to customers, since Oracle databases underpin long-running systems at companies, who are loathe to replace them.

“Databases are some of the most long-lived pieces of software in existence,” said Greenbaum. If customers were forced to move programs off Itanium servers, they would have to buy new database licenses from Oracle, he said.

Kari Aakre, spokeswoman for Santa Clara, California-based Intel, said the company has reaffirmed its commitment to manufacturing the Itanium chips, and “that still stands.”

“Our work on Itanium continues both on the processors and the platforms that support it,” Aakre said. “We’ve got multiple generations of chips in development and on schedule.”

Hewlett-Packard is the main user of Itanium chips in servers sold to run large corporate databases and other demanding computing tasks, after jointly developing the chip with Intel. Oracle is the largest maker of database software and became a competitor to Hewlett-Packard in servers through its acquisition of Sun Microsystems and its Sparc range of chips.

The case is Hewlett-Packard Co. v. Oracle Corp., 111CV203163, California Superior Court, Santa Clara County.

--With assistance from Ian King in San Francisco. Editors: Mary Romano, Fred Strasser

To contact the reporters on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net; Aaron Ricadela in San Francisco at aricadela@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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