War Erupts in Silicon Valley

Break out the popcorn -- the battle over Mark Hurd is just beginning. Less than a day after the former Hewlett-Packard (NYSE: HPQ  ) executive agreed to a deal to join Oracle (Nasdaq: ORCL  ) as a co-president, HP filed a suit against the executive. While Hurd doesn't have a non-compete clause in his severance agreement with HP, there is a confidentiality agreement that prohibits disclosure of sensitive information.

Oracle was up nearly 6% today on news of Hurd's arrival. Should Oracle investors fear losing an experienced executive through subsequent legal tussles? Are we looking at a new era of rivalry between these Silicon Valley giants?

We asked three of our Foolish tech analysts to weigh in.

Rick Munarriz, Motley Fool Rule Breakers Analyst/Writer: Me-ow! I didn't think HP had this kind of catty and vindictive streak. If anything, I thought Hurd going to Oracle was actually doing HP a favor. He could have popped up as a high-ranking exec at Dell (Nasdaq: DELL  ) or IBM (NYSE: IBM  ) and really been a thorn to HP's future plans. How dangerous can he be to the HP he is leaving behind? Nobody cared much about what HP was doing before Hurd's arrival at the company. The way that HP's Slate tablet has gone through perpetual incarnations, it's safe to say that trade secrets and confidential information have already morphed since Hurd's exit.

Hurd reportedly didn't sign a non-compete clause as part of accepting his severance, so what's HP doing beyond drawing more attention to this summer's ugly episode? I figured the 3Par (NYSE: PAR  ) purchase was just HP's decision to eat its way out of this. It cracked open the lid to the Ben & Jerry's Chunky Monkey, and would spoon its way to the bottom as a way to get over Hurd. Well, apparently it still has an "If I can't have him, nobody else will!" jealous streak that isn't going to play out well, especially because it was quick to push him out in the first place.

At what time does The Real Housewives of Palo Alto go on, again?

Tim BeyersRule Breakers Analyst/Writer: Sometimes, the Oracle haters have a point. This isn't one of those times.

An HP spokesperson told The Wall Street Journal that HP intends to "enforce" agreements designed to protect trade secrets. But that's silly. Sure, HP has trade secrets, but the company also had to know Hurd would have no trouble landing a job and that a competitor would likely make an offer. Despite this, HP made no move to insert a non-compete clause in Hurd's severance agreement, the Journal reports.

Realizing its mistake, HP is now demanding Hurd not do his best to compete with HP after being hired into a job where he'll be competing with HP. (Sigh.)

Don't get me wrong; I've no issue with confidentiality agreements. I've signed plenty of them. And HP does have the right to protect its trade secrets. But unless Hurd came into the Oracle job spilling his guts about major accounts, HP has no claim. This is no more than a tactic -- similar in scope and style to IBM's suing of Apple when it hired chip designer Mark Papermaster to oversee the project that became the A4 chip. As such, I'm not taking this suit seriously, and neither should any other Oracle investor.

Anders Bylund, Fool.com Writer: When HP's board decided to kick Mark Hurd out on the street, it must have known that he would seek employment elsewhere. Moreover, unless there was an actual non-compete clause in his contract you would have to assume that he'd go to one of HP's direct competitors. After all, the IBM wannabe that HP has become under Hurd's watch is in direct competition with every IT shop that matters. Finally, would you really expect a man you fired for essentially a lack of common sense to adopt some sort of honor code with regards to trade secrets?

If HP can actually enforce its confidentially agreement, Hurd is in trouble again. That would give Oracle an excuse for backing out of what I see as a terrible mistake -- Ellison should send HP a thank-you note when it's all over. And if not, then HP made a series of unfortunate mistakes and will suffer the consequences of giving away its trade secrets. Tough luck.

What do you think about this Silicon Valley saga? Share your thoughts in the comments box below.

Tim Beyers owns shares and options of Apple. He also owns shares of both IBM and Oracle. Rick, Anders, and Eric don't own any of the stocks mentioned. Apple is a Motley Fool Stock Advisor recommendation. The Fool owns shares of Oracle. Try any of our Foolish newsletter services free for 30 days. True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Motley Fool has a disclosure policy.


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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 08, 2010, at 5:15 AM, TerenceFL wrote:

    HP didn't file suit on a non-compete agreement with Hurd because they are generally not enforceable in California, something that has been reported many times over the years in high-profile tech exec moves. I'm surprised that more analysts don't know this.

    People talk about some kind of partnership between Oracle and HP, but that started falling apart long ago because of two different acquisitions: Oracle buying Sun and HP buying EDS. Ellison deliberately decided to start competing against HP in hardware, and that chapped many execs inside of HP, including Livermore and Robison. EDS was a huge customer of Sun before HP bought them, and is now dropping Sun systems as rapidly as they can. The only reason that there was any appearance of "partnership" was because of the friendship between Ellison and Hurd. Now that Hurd is gone over to Oracle, the gloves have come off on both sides.

  • Report this Comment On September 08, 2010, at 8:34 AM, zoningfool wrote:

    Silicon Valley would be a far more drab, boring place without the soap opera-reality tv show that is Oracle. From dumpster-diving to hostile takeovers and now hiring the outcast Hurd, we have been provided with much entertainment from Mr. Ellison. The lawsuit indicates that HP is experiencing 'seller's remorse' and there's probably at least some second guessing that decision in the upper echelons of HP. Maybe they should've thought it through a tad more....

    @TerenceFL--so true about the gloves coming off--with Ellison himself calling the lawsuit 'vindictive' and calling into question any future 'partnership' between HP & Oracle:

    "“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."

  • Report this Comment On September 08, 2010, at 9:56 AM, TMFRhino wrote:

    Terence,

    It's not that people don't know about the difficulty of enforcing non-compete clauses, it's that HP didn't even bother with it. To quote the WSJ

    "Mr. Hurd's exit agreement didn't include a noncompete clause, which is hard to enforce in California state courts. "

    Best,

    Eric Bleeker

  • Report this Comment On September 08, 2010, at 10:34 AM, plange01 wrote:

    the idiots on hp's board shot the company in the foot by firing hurd one of the top executives in the world.now oracle stepped in and shot them in the head to finish them off..its amazing that hp stockholders have not fired this entire board and blacklisted them from serving anywhere else.....

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