Back in 2012 Oracle lost a court case to HPE. A San Jose jury has now awarded HPE $3 billion for both loss of earnings, prior to the trial ($1.7 billion) and for losses subsequent to the trial ($1.3 billion). Oracle is now looking to appeal both the original decision as well as the sus sequent one. So how did this begin?
What started this spat?
HPE believes that it has a 2010 contract for Oracle to continue supporting the Intel Itanium processor with its database product. In 2011 Oracle unilaterally decided to end support for the product causing concern for HPE and its customers. This is because the majority of HPE’s Itanium sales relied on Oracle software being available.
That Intel was looking to shelve the product was not grounds for Oracle ending support according to the court. In fact HPE had an agreement to keep producing Itanium chips. In 2008 HPE paid Intel $440 million dollars to continue doing so until 2014. It then extended this agreement by paying Intel a further $250 million in 2010. This extended the life of Itanium until 2017 although HPE still had to pay for the chips it bought.
Superior Court Judge James Kleinberg ruled in favour of HPE in the first court case in 2012. This latest ruling is on the damages due from that case. HPE of course are happy with the result. With Oracle continuing to supply the software for HPE, it means that their customers will be happy too. This will extend the life of servers already in place and gives until next year for HPE to consider what it does. This may be one of the reasons for its recent closer alignment with SAP, and SAP HANA.
John Schultz, executive vice president, general counsel and corporate secretary, HPE commented. “HP is gratified by the jury’s verdict, which affirms what HP has always known and the evidence overwhelmingly showed…Oracle’s decision to stop future software development on the Itanium server platform in March of 2011, was a clear breach of contract that caused serious damage to HP and our customers.”
Oracle snaps back
The Oracle response has been swift and typical. It has issued a statement by Dorian Daley, Executive Vice President, General Counsel, and Secretary, Oracle saying: “Five years ago, Oracle made a software development announcement which accurately reflected the future of the Itanium microprocessor. Two trials have now demonstrated clearly that the Itanium chip was nearing end of life, HP knew it, and was actively hiding that fact from its customers.
“Oracle never believed it had a contract to continue to port our software to Itanium indefinitely and we do not believe so today; nevertheless, Oracle has been providing all its latest software for the Itanium systems since the original ruling, while HP and Intel stopped developing systems years ago. Further, it is very clear that any contractual obligations were reciprocal and HP breached its own obligations. Now that both trials have concluded, we intend to appeal both today’s ruling and the prior ruling from Judge Kleinberg.”
So the matter isn’t entirely over yet. Oracle begrudges paying out $3 Billion to add to the HPE profits. The key phrase in Oracles statement is “contractual obligations were reciprocal and HP breached its own obligations”. One suspects this is what their appeal will depend on. We don’t know exactly what those obligations are but a new court case looks to be looming.
Meanwhile business continues, but one cannot help thinking that Oracle needs to spend more time making friends than enemies. As Satya Nadella is showing at Microsoft, this is the age of partnerships. The HPE partnership with SAP HANA will only be rubbing salt into Oracles $3 billion wound.