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The feud between Oracle and Hewlett-Packard escalated dramatically yesterday as HP sued its former CEO Mark Hurd for accepting a position at Oracle. HP claims that Hurd is violating the terms of his severance by joining a competitor and jeopardizing HP's trade secrets. Defending Hurd, Oracle CEO Larry Ellison lashed out at HP in a surprising display of corporate brinkmanship:

Oracle has long viewed HP as an important partner. By filing this vindictive lawsuit against Oracle and Mark Hurd, the HP board is acting with utter disregard for that partnership, our joint customers, and their own shareholders and employees. The HP Board is making it virtually impossible for Oracle and HP to continue to cooperate and work together in the IT marketplace.

Ellison's threat to stop doing business with HP, which is no small ultimatum, shows he clearly means business. But does he want to crush HP or weaken its stock value to the point where he can acquire it?

  • A Shrewd Response by Oracle, writes Kit Eaton at Fast Company: "See what Oracle did there? It planted the notion of a failed board in HP shareholder's minds, alleging that if Oracle and HP's relationship suffers--potentially hurting HP's bottom line, and thus shareholder income--it's all their fault. Touché. It also opens the door for Hurd to go on an acquisition spree for Oracle, mopping up players that will make it more competitive against HP."

  • Ellison Wants to Buy HP, suggests Tom Foremski at ZDNet: "That's a very hard response to a civil suit against Mark Hurd. It's not filed against Oracle. It seems clear that Larry Ellison is spoiling for a fight. The hire of Mark Hurd, along with his standard confidentiality contracts, was designed to provoke a reaction. And now his response to the suit, virtually cutting off all business with HP, is very harsh. It will undoubtably affect HP's business, and ultimately, its stock market valuation. A cheaper HP, leaderless, is an acquisition target. Since HP's loss of its CEO, it has continued to slide in value while Oracle's valuation has grown. Will Larry Ellison use Mr. Hurd to mount a bid against HP? It wouldn't surprise me."

  • Ellison Is Trying to Crush HP, counters Om Malik at Gigaom. He lays out an 8-step plan in which Oracle will undermine its competitor:

* Oracle appoints Hurd, HP gets angry and sues Oracle, Hurd.

* The lawsuit forces HP and its senior management's entire attention onto stopping this clear and present danger to their business.

* Oracle continues to work, as Larry is still the king of that castle. Hurd leads the fight against HP. His intimate knowledge of HP allows him to direct pin-pointed legal attacks at his former employer.

* Hurd wants HP to air his so-called dirty laundry, only to prove that HP essentially pushed him out. (Okay this one is maybe a stretch )

* The legal hostilities drag HP's attention away from hiring a CEO.

* All this mud-slinging spooks some of the outside candidates for the top job at HP. I mean if you are considering a gig at that company and you see it going after Hurd with hammer and tongs... you're going to think twice.

* HP ends up picking an internal candidate, which essentially causes fissures in the senior ranks and turns the company into a series of fiefdoms.

* Chaos at HP essentially helps Oracle.

  • Get Ready for a Long Slog, adds Nilay Patel at Engadget: "HP's entire lawsuit hinges on the court agreeing that HP and Oracle are actually direct competitors in the enterprise space, and, as the lawsuit points out, Oracle itself has filed SEC reports saying its hardware and software products 'compete directly' with HP and other companies, so perhaps this is all more sound than fury, but at this point we wouldn't count on a quick settlement putting all this to bed anytime soon."

  • Whatever Happens, Hurd Gets Away Filthy Rich, writes Jay Yarow at Business Insider: "First he was given a fat severance package valued between $35 million and $50 million for leaving. Now, he's getting a massive pay day from his new employer Oracle. Hurd's base salary will be $950,000 at Oracle, and he will be eligible for a $10 million bonus. Further, Hurd will be granted 10 million stock options which will be priced when granted. It doesn't stop there, either. Hurd will be granted 5 million shares annually for the next five years if he sticks around. Compensation expert Frank Glasser tells Bloomberg Hurd's total compensation will come in at $50 million."

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