Commentary
10/12/2010
08:28 AM
Bob Evans
Bob Evans
Commentary

Global CIO: In Oracle Trial, HP Might Pay Higher Price Than SAP

While SAP will have to pay archrival Oracle many millions of dollars, HP's paying a steep toll in ongoing distractions tied to its CEO and board.



Three things are certain regarding the Oracle-SAP trial slated to begin in the Bay Area in less than three weeks: SAP will have to pay Oracle a pile of money—and possibly a huge pile; Hewlett-Packard's ongoing quest for normalcy will be postponed by its new CEO being a key witness; and Oracle's witness list will include a range of high-profile executives including Larry Ellison, SAP founder and chairman Hasso Plattner, Oracle president Safra Catz, and others.

And it seems to me that of those three things, the most significant is #2: the ongoing distractions confronting Hewlett-Packard and new CEO Leo Apotheker, a longtime SAP executive who served briefly as its CEO.

The very last thing in the world HP wants or needs right now is exactly what it will be facing when the trial begins Nov. 1 over how much in damages SAP must pay Oracle for the illegal downloading of Oracle software that a former SAP subsidiary engaged in several years ago.

SAP has admitted responsibility for the actions of its former subsidiary, Tomorrow Now, and has said it will provide reasonable compensation to Oracle as reparations.

So the Nov. 1 trial is going to be all about what "reasonable" means: to Oracle, $1 billion might seem fair and square, but SAP will no doubt say that reasonable people would calculate the damages at more like $10 million or $20 million.

But here's why this really matters beyond the glitzy stuff of tens of millions of dollars and superstar executives making rare and compulsory appearances in a courtroom (I've listed some of the executives on the Oracle witness list at the bottom of this column): HP took a huge risk in hiring Apotheker to head the $130 billion company, and did so at a time when it was under enormous scrutiny following its ouster of former CEO Mark Hurd and some moves by the HP board that drew an astonishing level of publicity and criticism.

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I don't think HP helped its case the other day when newly named chairman Ray Lane took to the public airwaves with a defense of Apotheker (in general, that public support was a good move) that included a glaring error about when and why Oracle put Apotheker's name on its witness list for the trial (in particular, that error was a very bad move).

Seeking to defend Apotheker and deflect the CEO's involvement in the Oracle-SAP trial as a meaningless gambit by those crazy folks over at Oracle, Lane sent a letter to the New York Times that included this comment:

"Oracle has been litigating this case for years and has never offered any evidence that Mr. Apotheker was involved," Lane's letter says. "It didn't even deem him relevant enough to the case to include him on a list of witnesses for trial—until, that is, Mr. Apotheker was named CEO of HP and Oracle had other motives to tie him to the case."

In court cases, they say that if you don't have the facts, pound the law; if you don't have the law, pound the facts; and if you don't have either, pound the rostrum. I think Lane was engaging in a bit of that third option because I have a copy of publicly available court document that lists the witnesses Oracle intends to call for the trial, and it includes the names of many employees of Oracle and of SAP and of TomorrowNow and of some joint customers.

And that document with the witness list is clearly dated Aug. 5, 2010, which is almost two months before Apotheker was named CEO of HP.

If you're keeping score at home, stamped across the top of every page is the following, which gives the case number, the document number, and the date of filing: "Case4:07-cv-01658-PJH Document742 Filed08/05/10 Page1 of 12."

Maybe Oracle will decide not to call Apotheker (right—and maybe this is the year I make the NBA as a free agent), or maybe he'll be called but will only have to answer a few breezy questions before he's free to head back to HP and settle into his new job.

No, without question, Oracle's attorneys will hammer at Apotheker, who at the time of the TomorrowNow actions in question was a high-level SAP executive with at least partial responsibility for sales and support. Because this phase of the trial is about financial damages and Oracle wants to try to prove to the court that the downloading was something many people within SAP knew about, rather than just an isolated incident.

And to HP, this is gravely important because after forcing out Hurd for some pranks with expense reports, it then chose Apotheker because of his vast software experience and because of his personal integrity. That's why new HP chairman Lane lashed out at Hurd in his public letter, saying Hurd "violated the trust of the board by repeatedly lying to them in the course of an investigation into his conduct" and that Hurd "violated numerous elements of HP's Standards of Business Conduct" and "demonstrated a serious lack of integrity and judgment."

It's entirely possible that Leo Apotheker knew nothing about the TomorrowNow actions, and that he will quickly and easily answer all questions posed to him by Oracle attorneys.

But it's entirely certain that Apotheker's entanglement as a hostile witness in what is sure to be a high-profile trial will be a distraction to Hewlett-Packard, a distraction that the company surely doesn't need after the ugly departure of Hurd, the seven weeks of speculation about who the new CEO would be, the selection of Apotheker with his poor track record as a CEO, and the blistering attacks on him by Larry Ellison.

At a time when HP needs focused and consistent leadership, it is getting boatloads of drama. Surely the HP board knew that within two months of joining HP, Apotheker would become a central figure in this trial—they had to know that, right?

Or did they believe, as chairman Ray Lane would have the readers of the New York Times believe, that Apotheker wasn't on Oracle's witness list until after he was made CEO of HP, an assertion that is not only incorrect but also simply baffling?

HP and its CEO need peace and quiet so they can start creating the company's future. But for at least a while, peace and quiet is the last thing that HP and Leo Apotheker are going to get.

Some names on Oracle's witness list:

  • From Oracle: Lawrence Ellison, Safra Catz, Charles Phillips, Juergen Rottler, Edward Screven

  • From SAP: Leo Apotheker, Shai Agassi, Werner Brandt, Peter Graf, Henning Kagermann, Hasso Plattner

  • From TomorrowNow: about 40 (former) employees

  • Oracle/TomorrowNow customers: Lexmark, NBC Universal, Pepsi Americas, Travel Centers of America, Waste Management

    RECOMMENDED READING:

    Global CIO: Are HP And SAP Perfect Match Or Train Wreck?

    Global CIO: An Open Letter To HP CEO Leo Apotheker

    Global CIO: SAP's Sweeping Turnaround: Exclusive Co-CEO Interview

    Global CIO: HP's $130-Billion Gamble

    Global CIO: Larry Ellison Puts HP In Crosshairs Via Slap At New CEO

    Global CIO: HP CEO Apotheker Has Deep Expertise But Checkered History

    Global CIO: An Open Letter To SAP Chairman Hasso Plattner

    Global CIO: SAP's Last Chance: It's The Customers, Stupid!

    Global CIO: IBM Turns Guns On Cisco With Acquisition Of Blade Network

    Global CIO: Oracle's Success Breeds Fear And Loathing At The New York Times

    Global CIO: SAP Promises Business Value Over Products: Can It Deliver?

    Global CIO: An Open Letter To HP CEO Leo Apotheker

    Global CIO: SAP Stunner: ERP Deal Boosts Customer Profit $100M Per Year

    Global CIO: Tibco Surges And CEO Flips Off IBM, Oracle, And SAP

    Global CIO: The Awesome Transformative Power Of The Apple iPad

    Global CIO: As HP And Oracle Brawl, IBM And SAP Snatch Customers

    Global CIO: SAP Confronts The Real-Time Culture Wars

    Global CIO: The CEO Of The Year Is SAP's Bill McDermott

    Global CIO: Who Is The Tech Sector's #1 Acquisition Target?

    Global CIO: Oracle Hammered By SAP For Stifling Customer Choice

    Global CIO: How SAP Is Leading The Mobile-Enterprise Revolution

    GlobalCIO Bob Evans is senior VP and director of InformationWeek's Global CIO unit.

    To find out more about Bob Evans, please visit his page.

    For more Global CIO perspectives, check out Global CIO,
    or write to Bob at [email protected].

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