Bloomberg News

HP Executive Was ‘Furious’ at Oracle Switch on Server Chips

June 05, 2012

A top Hewlett-Packard Co. (HPQ:US) executive testified she was “furious and appalled” when Oracle Corp. announced in a 2010 press release that it would no longer support Itanium chips used in Hewlett-Packard servers.

Ann Livermore, then a Hewlett-Packard executive vice president and now a member of its board, today told a state court judge in San Jose, California, that the announcement came without warning the day before Hewlett-Packard’s annual shareholder meeting.

Livermore, who was the first witness in a trial that began yesterday, said she called Oracle Co-President Safra Catz and yelled at her.

“Do you understand what you’ve done?” Livermore recalled saying to Catz. “This was a blatant violation of the agreement we signed just six months ago.”

She said Catz had little to say in response except that she would discuss it with Oracle Chief Executive Officer Larry Ellison.

Hewlett-Packard, the world’s largest personal-computer maker, seeks a court order requiring Oracle to continue developing software for its servers that run on Intel Corp. (INTC:US)’s Itanium chips and about $500 million in damages, according to a person familiar with the matter.

$4 Billion

Without such an order, Hewlett-Packard estimates it should be awarded more than $4 billion in damages, based on an extrapolation to 2020 that accounts for projected losses, said the person, who didn’t want to be identified because the court document containing the damages request is confidential.

In the first phase of the trial, which is scheduled to last about three weeks, Superior Court Judge James Kleinberg must determine whether Oracle is contractually obligated to continue developing software for Hewlett-Packard’s Itanium-based servers. If so, a jury would determine in a second phase whether Oracle broke the contract and what, if any, damages should be awarded.

In its 2011 complaint, Hewlett-Packard accused Oracle of violating a portion of an agreement they negotiated over Mark Hurd’s move from CEO of Hewlett-Packard to co-president at Oracle. Hewlett-Packard contends the accord included a “reaffirmation of the Oracle-HP partnership.”

Settlement Agreement

Oracle has said in court papers that the two-sentence paragraph of Hurd’s settlement agreement at issue doesn’t give Hewlett-Packard any rights to continued software development, guaranteed pricing, or “any such rights that existed in the Oracle-HP ‘partnership’ before the Hurd agreement was signed.”

In cross-examination today, Oracle attorney Dan Wall asked Livermore if she had heard Itanium called “Itanic,” a reference to the “Titanic” oceanliner sinking.

“I’ve heard lots of terms,” Livermore said. “I understand the reference they are making and I don’t like it. It is not done by anyone I like or respect.”

Livermore acknowledged under questioning that Intel demanded $488 million over five years to keep up production of Itanium in a waning market for the chip. She said that to her knowledge, Oracle was never told about the arrangement with Intel.

‘Not Share’

“We did not share what we were paying Intel,” she said.

Oracle claims in court filings that Intel “really wanted to kill” the Itanium chip, which was on “life support.” Oracle accuses Hewlett-Packard of engaging in a “campaign of secrecy and deception” and “pay-off” to Intel to induce it to continue making the chips.

In its counterclaims, the database maker seeks a court order barring Hewlett-Packard from making false statements about Oracle’s business practices and commitment to customers, and unspecified damages.

The Itanium chip is a niche technology different from the Intel Xeon chips used in most computer servers. Sales of Hewlett-Packard’s Itanium-based Integrity and Superdome machines, which the company describes as “business critical systems,” have been declining since Oracle made its March 2011 announcement that it would stop developing software for Itanium.

The case is Hewlett-Packard Co. v. Oracle Corp. (ORCL:US), 11- cv-203163, California Superior Court, Santa Clara County (San Jose).

To contact the reporter on this story: Pamela MacLean at pmaclean@pacbell.net

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


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Companies Mentioned

  • HPQ
    (Hewlett-Packard Co)
    • $34.74 USD
    • 0.92
    • 2.65%
  • INTC
    (Intel Corp)
    • $32.61 USD
    • 1.03
    • 3.16%
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