Oracle-HP ruling highlights risks of IT vendor partnerships

Business terms need to be spelled out in detail, and they often are, analysts say

The strongly worded order by a California judge saying Oracle has to keep porting its software to Hewlett-Packard's Itanium-based servers is not the end of the nasty legal battle between the two companies, but it could have an effect on the broader IT industry.

Oracle has to keep porting its database and other software to servers based on HP's Itanium HP-UX platform for as long as those servers remain on sale, Judge James Kleinberg of the Santa Clara County Superior Court wrote in a proposed ruling on Wednesday. Oracle said it would appeal the decision, and it has 15 days to do so.

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The judge's decision concludes the first part of the trial, which was limited to determining whether the two companies had a contract and what its terms were. Assuming the decision becomes final, the case will move on to a second phase in which a jury will determine whether Oracle breached that contract and what damages it should pay HP. The next court date will be a case management hearing on Aug. 22.

But Kleinberg's order on Wednesday signaled that the so-called Hurd Agreement, which the companies negotiated after former HP CEO Mark Hurd left the company and joined Oracle, will be taken seriously as a legal commitment. Oracle co-President Safra Catz had dismissed the first part of the document, in which the companies said they would keep working together just like before the fight over Hurd, as a non-binding "public hug."

The judge saw things otherwise. He interpreted the Hurd Agreement as a contract, pointing to a key sentence in the first paragraph: "Oracle will continue to offer its product suite on HP platforms ... in a manner consistent with that partnership as it existed prior to Oracle's hiring of Hurd."

"The sentence can only be reasonably interpreted as requiring Oracle to continue offering its product suite on HP's Itanium platforms," Kleinberg wrote. He then said Oracle must continue porting all products that it made available for Itanium at the time of the deal, on Sept. 20, 2010, until HP discontinued the chip platform. That would include all new releases, versions and updates, he wrote.

The lengthy, dramatic and often personal conflict between HP and Oracle is not quite like any other relationship in the IT industry. The companies were close partners for years until Oracle acquired Sun Microsystems at the beginning of 2010, which sent the database software giant into hardware competition with HP. After Hurd left HP in August of that year and joined Oracle as co-president in September, things went farther downhill.

The Hurd Agreement was drafted to patch things up, but by March 2011, Oracle said it would stop porting software to Itanium. HP sued shortly afterward, and Oracle countersued with a claim that HP was secretly phasing out Itanium.

"While the situation between HP and Oracle seems extraordinary, I expect the ruling will lead many companies to be more careful in crafting partner agreements," Pund-IT analyst Charles King said in an email interview.

"The judge's decision to find so broadly in favor of HP based on the agreement related to Hurd's hiring by Oracle was surprising," King said. "It certainly seems to emphasize the value of rhetorical specificity."

Analyst Ray Wang of Insider Associates also said the ruling held a warning for other companies.

"You're never going to see a deal like this again," Wang said. "You always have a start date and an end date."

In fact, behind the often vague expressions of devotion in partnership announcements between technology vendors, most such deals are spelled out in great detail, said Enterprise Strategy Group analyst Evan Quinn.

"If you were to go and dig into the vast majority of these types of contracts, you would find a fair amount of legalese," including terms governing how long the partnership will last and procedures for renewing it, Quinn said. This is especially true of software deals, which are particularly ripe for finger-pointing when something goes wrong for a mutual customer, he said.

For existing users of Oracle software on Itanium, which HP estimates make up 84 percent of enterprises using the platform, Kleinberg's decision may be a hopeful sign in a generally worrisome situation, according to Quinn. Pure business sense demands that Oracle make an honest effort even for strictly court-ordered software versions, he said.

"I do not believe Larry Ellison is going to go back to his database technology team and (say) 'Throw your worst five engineers on the port to Itanium," Quinn said.

At the same time, "Oracle has been pretty blatant about their distaste for Itanium," he added. And Quinn believes the industry as a whole is moving away from processors primarily associated with one system maker, such as Itanium, and toward standard x86 platforms. "Some of these relatively proprietary chipsets and server combinations, they're kind of out of vogue," he said.

Stephen Lawson covers mobile, storage and networking technologies for The IDG News Service. Follow Stephen on Twitter at @sdlawsonmedia. Stephen's email address is stephen_lawson@idg.com.

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