HP Gives Up; Oracle Wins

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All's well that ends well, right? Hewlett-Packard (NYSE: HPQ  ) and Oracle (Nasdaq: ORCL  ) have settled their differences over former HP CEO Mark Hurd, and now want to make jolly sure that everybody knows the companies are committed to their storied partnership.

The lawsuit HP brought against Oracle has been dropped in exchange for Hurd giving back a hefty pile of stock options given to him as severance payment from HP. Hurd also promises on his dear grandmother's grave not to use any confidential info from his HP days in his new role as co-president of Oracle.

I'm pretty sure that this is not exactly what HP wanted. How do you trust someone like Hurd with a vow to play it straight and narrow, especially after the somewhat shady circumstances of his HP departure? Moreover, how do you enforce it? In California, agreements like Hurd's confidentiality agreement don't appear to hold much water even if written in Sharpie on sheets of plastic.

I'm certain that Hurd could never have walked off to join other HP rivals like IBM (NYSE: IBM  ) in New York state, EMC (NYSE: EMC  ) in Massachusetts, or Dell (Nasdaq: DELL  ) down in Texas; local contract laws would have made his arrival more difficult. But California is different, to the point where HP took note of this condition when drafting the farewell letter to Hurd:

"I will not provide services in any role or position (as an employee, consultant, or otherwise) that would involve Conflicting Business Activities (but while I remain a resident of California and subject to the laws of California, the restriction in this clause will apply only to Conflicting Business Activities that result in unauthorized use of HP's Confidential Information);"

This also explains how Google (Nasdaq: GOOG  ) managed to steal so much talent from Yahoo! (Nasdaq: YHOO  ) and other Valley neighbors many years ago -- or why Google is now losing so many top names to Californian upstarts Facebook and Twitter. What goes around comes around.

So now Oracle can either play strictly by the book and keep Hurd out of meetings where he'd know too much, or reap the benefits of having deep information about a head-to-head rival with little risk of penalties of any kind.

Knowing Larry Ellison (and Hurd), what do you expect to happen? Sorry HP, you got nothing worthwhile out of this legal hassle.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. Google is a Motley Fool Inside Value recommendation. Google is a Motley Fool Rule Breakers pick. The Fool owns shares of Google, International Business Machines, and 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. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.

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  • Report this Comment On September 22, 2010, at 9:31 AM, floridafool3 wrote:

    You have it backwards. Oracle blinked first. Larry made the call to HP realizing that Oracle would be punished by large Wall Street firms after he tried unsucessfully to force Sun on them. Wall Street firms wanted a choice on hardware and Oracle would have been drubbed if they didn't make peace with HP. Bravo to HP for burying the hatchet and not holding a grudge.

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