HP Blames Oracle For Falling Server Sales

Almost lost in the announcement by Hewlett-Packard that it would spin off the PC business and axe webOS-based devices, was the negative impact of Oracle’s decision to no longer support Intel’s Itanium platform on HP’s high-end server sales.

According to HP officials, its Business Critical Systems unit saw a 9 percent year-over-year revenue drop during the fiscal third quarter, to $459 million (£279m).

It represented a 16 percent drop from the company’s second fiscal quarter. The BSC unit includes HP’s high-end Integrity and NonStop servers, which are powered by Intel’s Itanium processors.

Oracle Blamed

During a conference call with analysts and reporters to discuss the quarterly financial results, both CEO Leo Apotheker and Cathie Lesjak, executive vice president and CFO, put much the blame on the poor BSC unit numbers on Oracle, which in March announced it would no longer develop software for the Itanium platform.

Oracle officials said they made the decision after talking with Intel engineers and determining that the giant chip maker planned to start shutting it down in the near future to focus its high-end server chip efforts on Xeon. The statement drew a sharp rebuke from Intel officials, who said they have roadmaps for Itanium going out through the rest of the decade.

HP officials accused Oracle making the move to force customers to choose between HP and Oracle’s SPARC hardware, which it inherited when it bought Sun Microsystems. HP and Oracle share about 140,000 customers, with most running Oracle software on HP systems. HP sued Oracle in June, accusing the software vendor of violating an agreement between the companies to support products used by joint customers.

Apotheker and Lesjak again hammered away at Oracle for its Itanium decision, accusing Oracle of risking the businesses of customers in a blatant push to hurt HP’s server business and prop up its own.

“We firmly believe that [HP’s] Itanium-based server platform is by far the best in the industry, and we have fully committed to its future,” Apotheker said. “In fact, it is the strength of this platform that is likely behind Oracle’s approach to drive customers away from HP technology.”

Legal Action

Lesjak said HP will continue to press the lawsuit against Oracle.

“We are doing everything we can, including pursuing legal actions, to protect our customers and our business against Oracle’s anti-customer behaviour,” she said.

The Itanium dispute is a key part of the growing dissolution of the relationship between HP and Oracle, who until the last couple of years had been strong partners. Oracle’s acquisition of Sun last year gave Oracle a high-end server business, which put it into competition with HP. Tensions grew more later in 2010, when then-HP CEO Mark Hurd was forced to resign amid questions over his personal conduct. Oracle CEO Larry Ellison lambasted the HP board of directors for forcing out Hurd, and later hired Hurd as president of Oracle. A lawsuit by HP eventually was settled.

In making their decision on Itanium, Oracle officials noted that they following two other major software vendors – Microsoft and Red Hat – both of whom had said they would no longer support Itanium. Unlike the Xeon chips, Itanium is not based on the x86 architecture, and competes with Oracle’s SPARC and IBM’s Power platforms. HP is by far the top consumer of Itanium chips.