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HP news mortal, legal, financial this month

Hewlett-Packard may be picking itself up off the mat this quarter, but the immediate news from this supplier of an HP 3000 alternative hasn't been good, just one week into this month.

Dunn06Most immediately, interim HP chairwoman Patty Dunn has died of ovarian cancer, which she first contracted in 2004. The 58-year-old Dunn served as chairman of HP board during 2005, while the company was searching for a successor to Carly Fiorina, who the board had ousted earlier that year. According to the Wall Street Journal, a 4-page memo of "concerns" written by Dunn was instrumental in getting Fiorina sacked by the board. Dunn's time in the chairman's post ended her career at HP. After Congressional hearings where she had to testify in 2006 (above) Dunn was told to resign from the board over her role in the company's "pretexting" actions of '05: News emerged in 2006 about HP's hired and internal investigators trying to locate boardroom leaks to the media, using shams and misidentifying themselves to obtain phone records of directors and reporters. The pretexting sank down to family members of reporters, at its lowest point. (In a smack of irony, Dunn graduated with a journalism degree from U Cal Berkeley.)

HP paid a $14.5 million fine and Dunn faced criminal charges in the case that established a record of HP identity theft. The charges were later dismissed after Dunn refused to accept a plea bargain. With Dunn's resignation, Dick Hackborn was the only director left on HP's board from the pre-Compaq days. An excellent book on the sordid affair is The Big Lie: Spying, Scandal, and Ethical Collapse at Hewlett Packard, by Anthony Bianco, in which the "Dunn and Dusted" chapter is most informative. HP stated that "Pattie Dunn worked tirelessly for the good of HP. We are saddened by the news of her passing, and our thoughts go out to her family on their loss."

Not much further back in this month's timeline, HP felt it had to respond on Dec. 2 to a new counter-suit in its legal battle with Oracle. The maker of the databases which are used in more HP Unix systems than any other is now charging HP with "seven counts, including charges of fraud, defamation, intentional interference with contractual relations, intentional interference with prospective economic advantage, as well as violation of the Lanham Act and two violations of the California Business and Professional Code," according to an article on the website The Register. There's no peaceful settlement in sight between the two tech titans, which is probably why HP has started to recommend DBEnterprise as an Oracle replacement for its HP-UX customers, and Mimer for the OpenVMS sites.

HP has responded to the claim that Hewlett-Packard deceived Oracle and hid a program to pay Intel to prop up Itanium. "Today’s filing is another example of Oracle attempting to distract from the undeniable fact that it has breached its contractual commitment to HP and ignored its repeated promises of support to our shared customers," HP said in a press release, one where it laid out its version of the facts in the relationship. Partners of HP and Oracle have been slow to comment on the battle, not wanting to anger either of the combatants.

The Register says that HP wanted clauses in an agreement that permitted Oracle to hire the ousted HP CEO Mark Hurd, conditions that would have given HP extended access to Java developments, "its ability to sell Solaris on x86 platforms, and ongoing support from Oracle for its software stack on HP-UX."

In the end, HP had to settle for the language below, a legal clause that Hewlett-Packard now says commits Oracle to support Itanium systems.

Oracle and HP reaffirm their commitment to their longstanding strategic relationship and their mutual desire to continue to support their mutual customers. Oracle will continue to offer its product suite on HP platforms and HP will continue to support Oracle products (including Oracle Enterprise Linux and Oracle VM) on its hardware in a manner consistent with that partnership.

Perhaps as a result of that Oracle conflict that's crushing HP's HP-UX sales, along with the $10.2 billion HP acquisition of Autonomy, HP's credit rating has been reduced by Standard & Poors. (It's instructive to remember that S&P ratings were one of the chief elements that created the 2008 financial meltdown, as the company over-rated corporation after corporation to pump up the financial balloon to bursting.)

But the S&P bond reports remain a belwether to finance planning and debt. HP got downgraded corporate credit and senior unsecured ratings to 'BBB' from 'A,' which increases HP's borrowing costs. HP just reports that it increased its long-term debt by almost 50 percent year over year during its M&A spree of the last year, and its cash on hand is down to a level that's brand-new to the company's 21st Century fiscal history. The company's P/E valuation has climbed to 8.2x since the darkest days right after CEO Leo Apotheker was fired. Traders seemed to shrug off the S&P downgrade; HP shares are still trading around $28.

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