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The Surprising Winner in the HP-Oracle Slugfest

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Sometimes the best way to win a fight is to work the sidelines. That doesn't seem to be lost on IBM (NYSE: IBM  ) as Hewlett-Packard (NYSE: HPQ  ) and Oracle (Nasdaq: ORCL  ) go through the computer industry's version of a nasty breakup.

As the Silicon Valley turns
It started when Oracle tied the knot with Sun Microsystems in a January 2010 acquisition. Then HP sent former CEO Mark Hurd packing last August after -- long story short -- a contractor accused him of sexual harassment. Oracle's Larry Ellison rushed to publicly defend Hurd's honor and shortly thereafter offered Hurd a new home as co-president of the software giant. Now HP has sued Oracle, claiming its March 2011 decision to quit supporting Intel's (Nasdaq: INTC  ) high-end Itanium processors is a breach of contract with HP.

To be sure, Oracle wasn't the first software maker to stoke concerns about the future of Itanium -- and thus about HP's high-end systems. Microsoft (Nasdaq: MSFT  ) and Red Hat (Nasdaq: RHT  ) previously pulled support.

Used to play well with others
HP uses Itanium in mission-critical computers that compete with Sun's SPARC-based and IBM's Power-based servers. IT decision makers are understandably risk-averse about these high-end systems, which makes them reluctant to switch vendors. The market accounts for more than one-fifth of server market revenue and carries above-average margins, so vendors fight hard to take market share from one another.

Before Oracle acquired Sun, it partnered with HP to offer optimized hardware and software solutions. That plays-well-with-others strategy helped them compete with IBM, which offers both hardware and software. It ended when Oracle bought Sun and refocused on optimizing its software to run on Sun hardware.

Would you trust those two with your valuables?
The punches between HP and Oracle make IT buyers nervous. Whether or not dishes are being thrown, it's hard to believe the feuding couple is taking good care of their roughly 140,000 shared customers.

Whom can IT buyers turn to in search of a safer home for their fragile valuables? IBM is large and stable and has been gaining share in this market for years. It even has a process called the Power Migration Factory to ease moves onto IBM Power-based systems. It's the IT equivalent of not only finding a great new home, but also having the seller minimize the hassle and risks of moving.

Into the great wide open
Don't be distracted by the diversion Oracle and HP are creating and fail to notice that IBM is successfully courting nervous IT buyers. This is a fight IBM seems destined to win.

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Fool contributor Cindy Johnson owns shares of Microsoft. The Motley Fool owns shares of Microsoft, IBM, Intel, and Oracle and has bought calls on Intel. Motley Fool newsletter services have recommended buying shares of and creating diagonal call positions in Intel and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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  • Report this Comment On July 04, 2011, at 8:01 AM, ricjensen wrote:

    This commercial brought to you by........

    IBM.....IBM lost this market. IBM doesn't "play that way".....ask M$ about that. "It's the IT equivalent of not only finding a great new home, but also having the seller minimize the hassle and risks of moving." This is a commercial, it is not even an opinion....

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