IBM announces two acquisitions, while spat between Oracle and H-P continues.
Hewlett-Packard Co.’s aggressive push into the high-end corporate tech market has been called a smart move, but the company’s bold dream faces two big would-be spoilers: International Business Machines Corp. and Oracle Corp.
This was underscored by developments this week.
On Tuesday, Oracle, the software giant that morphed from H-P’s close partner into its bitter competitor, escalated its legal war with the Palo Alto, Calif., company by filing a cross-complaint in their dispute over the Itanium platform.
Then IBM, which many see as the corporate behemoth H-P is trying to emulate, announced two acquisitions in a row this week.
Both companies IBM has agreed to buy–Cambridge, U.K.-based i2 and Toronto-based Algorithmics–are focused on data analytics, business software geared to helping companies analyze and make useful the enormous amounts of data they collect.
“Analytics is definitely one of the big applications that’s emerging for enterprises,” Sterne Agee analyst Shaw Wu said in an interview.”Companies have lots of information and they need a way to manipulate it and monetize it, to help them make better decisions. It’s very software intensive.”
Two weeks ago, H-P made its own big move into analytics when it said it was buying British software maker Autonomy Corp. for $10 billion.
The acquisition is seen as a step toward H-P’s grand ambition: to build up enough software muscle to attract big corporate customers and win lucrative IT contracts in which the game is not just about helping corporate customers cut costs, but also grow their businesses.
“Most of [H-P's] services work is about integration and outsourcing and keeping stuff running,” said Gartner analyst Martin Reynolds.”It’s not about transforming the way you do business–which is the way IBM would go.”
H-P has sent a strong signal that that is where it wants to go.
In fact, it unveiled the Autonomy deal the day it also stunned Wall Street by saying that it is considering spinning off its personal-computer business, effectively getting out of the consumer market.
Autonomy is particularly strong in the area of processing unstructured data, which Gartner’s Reynolds describes as covering a range of mostly random information from “every e-mail to every lunch order” that companies collect and hope to monetize.
“It looks like a very brave move to get into that market,” he said.
An H-P spokeswoman said in an email that the company is “inventing the next-generation information platform to empower enterprises to leverage all information through a natural, search-based interface.”
Pushing deeper into enterprise software also plays into the strengths of H-P Chief Executive Leo Apotheker, former CEO of SAP AG. “As an executive who has spent most of my career primarily in software, this is a world I know well,” Apotheker told analysts.
But it is also a world in which IBM and Oracle have established pretty formidable beachheads.
Both have been buying up players in enterprise software. Together with this week’s acquisitions, for example, IBM has spent $14 billion to gobble up about two dozen firms in data analytics alone over roughly the past five years, according to the company.
“What we see H-P doing today, IBM has been doing for many years,” said IBM business development director Gordon Burnes.
An IBM spokesman also noted in an email that despite a number of acquisitions since Apotheker took over, H-P “has yet to use software as a strategic growth play for the company.”
Wu of Sterne Agee said H-P “doesn’t have the brand yet” in analytics. Oracle is also “trying to get some traction” in data analytics, he added, but the Redwood City, Calif., company has one advantage,”the most widely-deployed” database product.
At war with Oracle
Oracle had been H-P’s major database partner, but that partnership is effectively dead. In fact, the two companies are now at war.
This was underscored by the escalation this week of the legal dispute that erupted when H-P accused Oracle of breach of contract for dropping its support for Intel Corp.’s Itanium chip platform, which is critical for H-P’s high-end server products.
Oracle fired back, accusing H-P of duping it into signing an agreement related to a dispute over the software company’s hiring of former H-P CEO Mark Hurd, who is now Oracle’s co-president. As part of the settlement, the two companies reaffirmed their partnership, which H-P argues means Oracle had no right to drop Itanium.
In a strongly worded cross-complaint filed in a California state court, Oracle said H-P “concealed” that it was about to hire Ray Lane as its new chairman, and Apotheker as its new CEO, two executives that “H-P knew Oracle distrusted so completely–and justifiably–that ‘partnership’ would be impossible.”
Oracle has been a bitter rival of SAP, while Lane was a former Oracle president who left the company after reported clashes with CEO Larry Ellison.
In a statement earlier this week, H-P said Oracle “is relying on invented excuses to cover up its blatant disregard for its legal obligations.”
Given the confusion over H-P’s new direction, the disputes could only make it harder for the company to establish a bigger presence in higher-end corporate IT markets.
Gary Beach, publisher emeritus of CIO Magazine, which is geared to chief information officers, portrayed H-P as facing a dilemma.
“CIOs currently doing business with H-P will remain loyal to H-P in the coming 12 to 18 months, though CIOs will have more leverage on pricing until H-P rights the ship,” he said.”CIOs considering to begin a business relationship with H-P might delay that decision.”
In fact, a Wall Street Journal report on Friday said some of H-P’s corporate customers are getting nervous.
ISI Group analyst Abhey Lamba said the legal showdown could serve as an “overhang” on H-P’s high-margin business critical server products. In fact, in its last earnings call, H-P said the dispute with Oracle hurt sales for that business segment.
Beyond the court battle, however, H-P also has to worry about Oracle’s own effort to strengthen its hardware portfolio, underscored by its purchase of server maker Sun Microsystems.
“Oracle is working on an integrated stack of hardware and software,” Lamba said.”That would be a tough one for H-P to replicate. If that were to take off, H-P will have to worry about a new competitive dimension.”
The current competitive landscape, dominated by established rivals such as IBM and Oracle, is worrisome enough for H-P.
“I think Oracle has got a war room going,” Beach of CIO Magazine quipped.
“Hurd knows where all the bodies are buried,” he added, referring to the ex-H-P chief who is now one of Ellison’s top lieutenants. “IBM would be a bit more diplomatic, but they, too, know where things are.”
Source:http://www.totaltele.com/view.aspx?ID=467439&G=5&C=4&Page=0
