Now that the 3Par bidding wars between Dell and HP are over, HP has a new drama to play out: a lawsuit with Oracle over the hire of its former president and CEO Mark Hurd. But Oracle's appointment may bring a different brand of drama to the company in the form of poor employee morale as Hurd sets out to make the Sun acquisition pay dividends for the tech giant.
HP filed a lawsuit seeking to block Hurd from joining Oracle's executive ranks after the PC-maker forced his resignation in August in the wake of sexual harassment allegations. HP claims Hurd's hire breaches an exit agreement and puts the company's trade secrets at risk. Oracle CEO Larry Ellison rapidly fired back at HP with what may sound to some like a threat.
"Oracle has long viewed HP as an important partner," said Oracle CEO Larry Ellison. "By filing this vindictive lawsuit against Oracle and Mark Hurd, the HP board is acting with utter disregard for that partnership, our joint customers, and their own shareholders and employees. The HP Board is making it virtually impossible for Oracle and HP to continue to cooperate and work together in the IT marketplace."
The Sun Train Wreck
While the public drama unfolds, some analysts see an internal drama heating up with the Sun integration. Oracle purchased Sun for $7.4 billion in January. Rob Enderle, principal analyst at The Enderle Group, says Oracle faces a significant problem integrating Sun into its business line.
"The Sun acquisition is a train wreck and they need someone who can come in and fix it before the market figures out that the acquisition is a train wreck and it impacts Oracle stock," Enderle said. "Hurd is probably one of the few people on the planet who, at least on paper, looks like he has those skills."
Hurd's background with NCR and HP highlighted his skills in trimming down overweight companies. But Sun doesn't fit that description -- and bringing in a turnaround operations exec like Hurd who made a name for himself cutting costs at the expense of employee loyalty and morale may not fix Oracle's woes.
"When you take somebody who has a skill set that is employee-hostile and put them in an environment where they have to attract and motivate people, that's where the paper and reality diverge," Enderle said. "Hurd may be the exact wrong person for what Oracle wants to do because his skill set is in the wrong place. Hurd could actually make things worse there."
Investing in Oracle
Oracle offered Hurd a salary of $950,000 and a bonus of up to $10 million for fiscal 2011, plus stock options, according to an offer letter filed with federal regulators on Wednesday. Hurd can purchase 10 million Oracle common shares after the first board meeting following his hire date, and can purchase 5 million shares a year for the next five years. But will it be a good investment for Hurd?
"Ellison sees a problem with Sun, which is a huge lack of predictability. He sees Hurd as fix for that. But Oracle needs someone that's charismatic and can rally the troops and bring in more talented workers to Sun," Enderle said. "It looks like the disease Oracle is treating is pneumonia and they are bringing in a cancer expert. Hurd is well qualified to fix certain kinds of problems but the problems Oracle has are the not the kind he's qualified to fix."