In part I of my post on Oracle and HP, I detailed some pretty compelling reasons why an HP/Oracle takeover could be more likely than you’d suspect. But now, I’ve a confession to make - it seems doubtful...
I have to agree with those that say this could be a bridge too far and can’t see it happening for now, for a few key reasons:
- The Oracle war chest is not sufficient at present - even with the PC and Printer business out, the price point would be high
- Although the HP Enterprise Services/"EDS" arm is performing well Oracle has avoided this revenue stream in the past
- Although Oracle integration execution has been exemplary to date, it still hasn’t satisfied analysts that the Sun acquisition has been a success, the markets would therefore be nervous
- There would be serious effort required for such a deal to be approved for the same monopolistic reasons that would attract Oracle in the first place
- Oracle has been through a lot of change and could be getting fatigued even without such a huge integration burden
I believe that Oracle knows that its clients are already concerned about its behaviours and their loss of leverage. Being pushed this far into absolute dependency on them would drive many into the open arms of IBM.
It’s regarded as a long shot but clients close to us are already increasing their vendor dependency modelling activity and risk analysis on Oracle, and even the wildest speculation on the HP takeover is pushing them further to step back and take stock of vendor strategies.
Having said all this, with Apotheker’s recent departure and Whitman looking like caretaker CEO, we have to wonder what is running through HP Chairman Ray Lane’s mind, and there is no doubt that HP is now at a pivotal moment in its history. However, HP seems committed to a number of Apotheker’s key (but much maligned) decisions as CEO and there is no clear vision of any other direction. Could this vacuum be filled with direction from Oracle?
Larry certainly doesn’t seem to be letting up in his war on words with HP, in fact he’s been widening the conflict with a recent and very public spat with Mike Lynch, the CEO of recent HP purchase, Autonomy. The latest development of which is an almost unprecedented area on Oracle’s own website setting out their ‘evidence’. Certainly Larry would enjoy the purchase, and this could be enough to push the decision that way.
With HP stock having dropped off a cliff, halving in value since issuing Q2 2011 guidance back in February, their market capitalisation currently stands at $47 billion and could well descend closer to Oracle’s war chest figure of $32 billion in cash and marketable securities.
It would be a hostile action to say the least, so we’ll all have plenty of time to consider the implications but it’s a useful reminder at present of just how truly dependent we all are on IT giants that we have so little control over.