Oracle Loses HP Itanium Court Battle

For the last six weeks, Oracle and HP have been publicly airing their dirty laundry in a court case that resulted from Oracle's 2011 unilateral decision to drop support for HP's Itanium-based servers. On August 1, Judge James Kleinberg issued his decision and order in the case, which amounted to yet another in a string of losses in court for Oracle.

In his decision, the judge strongly backed HP's claims that its September 20, 2010, contract with Oracle explicitly said that mutual product support must continue as it had in the past.

In deciding a remedy, the judge had two options. The first was to award HP a cash settlement with no requirement that Oracle support HP's Itanium servers. The second option--the one that Judge Kleinberg chose--was to require Oracle to continue support, and for Oracle to pay for damages HP has already incurred.

The amount will be determined by a jury, but will be far less than the $4 billion HP was seeking--a figure that assumed an end to the Oracle-HP partnership, and that considered business revenue projected out through the end of the decade. Both parties have 15 days to file objections; Oracle has said it will appeal.

The Remedy

On the face of it, the judge's order makes sense, essentially saying to Oracle that there's a binding contract to perform, so ... perform. The court order goes further, insisting the releases be complete, fully tested, tuned, supported, and on parity with other platform releases (meaning Oracle can't release software for SunOS, Windows, and AIX, and then six months later release it for HP-UX/Itanium). Oracle is also barred from charging HP for porting and support.

Taken in that light, the ruling provides some comfort for those who were going to have a tough time jumping off Itanium. But the damage has been done both to past and future income streams and whatever HP gets, it probably won't fully compensate for the business lost because of Oracle's actions. HP's quarterly statements show double-digit decline in Itanium business coincident with Oracle's announcement, so it's clear that material damage has been done.

This ruling probably won't slow that trend much. Oracle is now racking up a string of high-profile court losses that should indicate to HP/Oracle customers that the company has no problem violating its agreements if it feels there's an advantage. What if Oracle doesn't do a good job on a HP-UX port or doesn't provide adequate support? The two companies would end up back in front of Judge Kleinberg while customers suffer with bad products. Smart IT planners will continue their migration to something--anything other than HP's Itanium.

On the other hand, if the judge had opted to provide cash as part of the settlement, he and jury would have had the unpleasant task of attempting to determine how much Itanium business HP lost because of Oracle, and how much it had lost due to other factors, like the bad economy, a shrinking market and the mess that has been HP's corporate management over the past two years.

The Contract

That a contract for mutual product support exists at all between the two companies is fairly uncommon. Most software and hardware companies enter into cooperative agreements without the need for a contract and, in fact, HP and Oracle had mutually supported Oracle products running on HP's PA-RISC and Alpha processor systems without contracts for decades until those systems were retired. It wasn't until Oracle purchased Sun Microsystems, and HP fired Mark Hurd (now Oracle's President) that the two companies felt it necessary to put their obligations in writing.

During the trial Oracle had said that the contract did not pertain to any products in particular and was meant only to be a public "hug" between the companies intended to show mutual good will.

The judge was direct in his assessment, saying that while the agreement wasn't specific about exact products, the contract states: "Oracle will continue to offer its product suite on HP Platforms in a manner consistent with [the HP-Oracle] partnership." Judge Kleinberg said that a reasonable person would objectively find that Oracle had intended to support HP's products based on that statement and therefore there was no reason to explore subjective intent of either party. The "plain words" in that statement described the contract sufficiently. The judge ruled that the product suite mentioned in contract meant all Oracle products that run on the Itanium platform at the time the contract was written.

In his decision, the judge also cited a joint press release from the companies that was intended to dissuade the concerns of mutual customers. The September 20, 2010, release included a quote attributed to Larry Ellison saying "Oracle and HP will continue to build and expand a partnership that has already lasted for over 25 years," indicating that customers should expect business as usual.

Oracle's sudden announcement of discontinued support, done without notice to HP, and made on March 22, 2011, the eve of HP's shareholder meeting was clearly not business as usual.