Tickers in this Article: ORCL, HPQ, IBM, MSFT, CSCO, DELL, SAP
"I wish I knew how to quit you." - Brokeback Mountain

Like a creepy stalker, software titan Oracle (Nasdaq:ORCL) just cannot seem to let go of Hewlett-Packard (NYSE:HPQ), even though Oracle has come to far exceed it in enterprise value. It's admittedly an American tradition to celebrate a success - we invented the spike, the Icky Shuffle, and the Carl Edwards victory backflip, after all - but at this point Oracle is just rubbing it in. It's worth wondering, then, just why Oracle is apparently so interested in a company that is no real threat to it anymore.

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While software-oriented Oracle and hardware-oriented HP had gotten along well enough for quite a few years and were partners in certain businesses, that all seemed to start changing around the time Oracle bought Sun Microsystems. At that point, Oracle not only became a competitor in high-end servers, but acquired one of the technology options that was giving HP's Itanium line fits. Hewlett-Packard had their chance here but they blew it - they certainly could have stepped in and bought Sun, kept the hardware it wanted, and sold, spun-off, or kept the software side of Sun (like Java).

Later, when Oracle decided it was no longer in its interests to support Itanium servers, HP filed suit. Among the allegations HP has made is that Oracle refuses to fix bugs in its software for HP servers, while Oracle continues to try to drive customers to Oracle hardware and work with IBM (NYSE:IBM) to make sure that Oracle software and IBM servers work well together.

From Hurd To Apotheker
It certainly seems as though decisions made in HP's boardroom have also inflamed the relationship with Oracle. In relatively short order in 2010, Hewlett-Packard tapped Ray Lane (a noted critic of Oracle founder Larry Ellison) as chairman of the board, Mark Hurd unexpectedly stepped down (whom Ellison respected enough to soon hire as an Oracle executive), and then hired Leo Apotheker - a man who not only ran SAP (NYSE:SAP) (a major adversary of Oracle), but did not, in my opinion, even run it particularly well.

The Squabble Over Autonomy
The latest example that there is something really stuck in Oracle's craw regarding HP is the recent spat over whether or not British software company Autonomy, which HP intends to acquire, shopped itself to Oracle first. Autonomy management claims that they only made what amounted to a social call on Oracle, but Oracle then responded with further allegations and the embarrassing release of some of the PowerPoint slides that Autonomy management allegedly presented at a meeting - slides that don't necessarily offer definitive proof of Oracle's position but are nevertheless material. (for more, check out Why do companies merge with or acquire other companies?)

Here's the thing - from what I've seen companies are looking at potential M&A activities all the time; for every deal that's done, there are probably two deal rumors, and five potential deals that are discussed but never go any further. Why would any company break the "code" and trying to potentially put another's management in the hot seat? Perhaps this will make life just a bit more difficult for Hewlett-Packard.

Should Oracle Investors Care?
Oracle investors might rightly wonder why their most senior management is so interested in a struggling hardware company that really cannot hurt them much (if at all) anymore. True, Larry Ellison has never been a shrinking violet and if something, or someone, annoys him, he is not always going to let bygones be bygones. Moreover, history suggests he can hold grudges and still conduct business quite well.

On the other hand, there are some potential downsides here. First, no management team needs distractions. Bill Gates has commented previously that the antitrust investigations around Microsoft (Nasdaq:MSFT) distracted management and took away their focus on many potential growth projects. Moreover, look at the struggles of other tech companies like Cisco (Nasdaq:CSCO) and Dell (Nasdaq:DELL) and it is easy to see how it can be dangerous for management to take their eye off the ball.

Second, does this move risk making Oracle a less appealing partner? Will companies be leery of shopping themselves to Oracle? Will other potential hardware partners see the soured HP relationship as an area of potential concern against Oracle?

The Bottom Line
To Oracle's credit, this company takes calculated risks when it comes to competition. Moreover, Oracle is big enough and powerful enough now that a company refusing to deal with Oracle will likely hurt itself more than it will hurt Oracle. Last and not least, investors may not want to discount the possibility that Oracle may be tactically manuvering the pieces it has to play to make its competitors respond.

Likely as not, Oracle realizes that the days of a sharp hardware/software dichotomy are over. That, then, could mean that it's time for deals. While the acquisition of a company like EMC (NYSE:EMC) could make just as much (if not more) sense as a deal for HP, HP's ongoing struggles could make it a target and Oracle clearly seems to have HP squarely on its mind.

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