HP, Oracle hurl claims of damage via Hurd
September 8, 2010
Former HP CEO Mark Hurd was scheduled to collect $12.2 million of his HP exit payout on Sept. 5. The very next day Oracle announced he was going to work for HP's rival in enterprise servers. The new job was announced one day after Hurd's payout was reported in SEC documents. Oracle plans to pay Hurd $950,000 in salary and a signing bonus not to exceed $10 million.
The costs to HP may go beyond a loss of face or the pillage of the company's R&D budget under Hurd. (The chart shows how HP's R&D budget fell at the same time company profits rose during Hurd's tenure starting in '05 -- and in Carly Fiorina's before him. It's easier to increase profits while you decrease R&D expenditures.) The day after Oracle announced its Hurd hiring, HP filed lawsuit 110-cv-181699 in California Superior Court to try to block the move -- sparking Oracle's Larry Ellison to issue a statement that paints the end of cooperation between the two longtime partners. Ellison said he cannot see how the companies can continue to work together in the face of HP's suit.
Oracle has long viewed HP as an important partner. 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.
HP's sold tens of thousands of Unix servers with Oracle's help and software on the deal. Now HP asserts it's being threatened by Hurd's move to lead Oracle's sales and marketing force as a co-president.
The complaint says that "HP is threatened with losing customers, technology, its competitive advantage, its trade secrets and goodwill in amounts which may be impossible to determine." The suit accuses Hurd of breach of contract but doesn’t name Oracle as a defendant.
Despite the fact that HP's board insisted Hurd was not leading initiatives while CEO, and was just one of 300,000 employees, its suit says the man they ousted on Aug. 6 knows key HP trade secrets. HP wants the courts to assign a Special Master to review Hurd's employment tasks, monthly.
Hurd “was privy to the most sensitive of HP trade secret and confidential information,” HP said in its complaint. Legal experts contacted for an article in BusinessWeek labeled HP's suit a long-shot to succeed under California labor laws, which permit employee moves freely. HP weathered a similar suit by EMC last year when it hired the head of its enterprise business David Donatelli away from EMC. Donatelli stayed at HP, but the companies settled by isolating the lured-away exec from some of HP's enterprise storage business strategy.
HP's suit states that Hurd signed agreements in 2008, 2009 and 2010 that prevent him from soliciting HP customers or suppliers. Oracle has named Hurd as its president of sales and marketing. He has received more than $100 million in compensation over the years he signed those HP agreements.