Larry Ellison, CEO of OracleFew observers were surprised when tech giant Hewlett-Packard (HPQ) announced plans to sue Oracle (ORCL) for hiring Mark Hurd -- HP's former CEO -- as co-president. After all, Hurd is no doubt in possession of HP's crown-jewel corporate secrets. Moreover, HP, which competes directly with Oracle in a number of critical enterprise software and hardware markets, probably had no choice, if for no other reason than to save face.

But Oracle CEO Larry Ellison is a man who inevitably gets exactly what he wants -- and in this case, what he wants may be HP itself, in order to better to compete with IBM (IBM). But buying HP, a $90 billion Goliath? That's crazy, right?

"Larry Ellison is borderline bat-shit crazy on a good day," says veteran Silicon Valley analyst Rob Enderle, principal analyst at the Enderle Group. "I think his bet is that he can damage HP enough that it drops in value and he can wander in with an offer."

Top-Notch Cost-Cutter

"Ellison believes he can do anything, and he wants to go after IBM," Enderle adds. "If he can figure out a way to get HP, then I believe he would like to do that. Because he would really like to bring IBM out, and he needs [a company] of the stature of HP to do it."

Oracle's market capitalization is about $120 billion so, at least in theory, some kind of stock-based transaction is possible.

And what better person to integrate HP into Oracle than its highly successful -- Hurd was loved on Wall Street, though loathed inside HP -- former CEO? At least Ellison has traded up from Charles Phillips, a once-powerful but now crippled co-president at Oracle who had spent much of his recent year in a very public and very ugly spat over adultery allegations that included a honest-to-goodness billboard campaign against the former investment banker.

Indeed, Hurd has shown he can do top-notch cost-cutting of the sort that Larry likes and needs in order to integrate his myriad acquisitions. Further, Hurd and Ellison share a "buy-it, don't-build" mindset that should make for an easy working relationship.

"Oracle wants to rebuild Sun, and Hurd is a turnaround packager who never really sold the package at HP," says Enderle. "He's left a mess, stripped to the bone, but with good financials."

A Near-Complete Software Stack

Ellison is a man with ambitions as big as his MIG-29 fighter jet is fast, and he's got a history of stating that the info-tech industry will further consolidate in the same way the auto industry consolidated into the Big Three in the U.S.

With his purchase of Sun Microsystems, Ellison showed an appetite for enterprise hardware that he could use to vertically integrate sales of what is now a near-complete enterprise software stack, which includes databases, application server/middleware, customer-relationship management tools, financial applications, product-lifecycle management and enterprise resource planning tools.

HP's strong position in the hardware and server market would instantly give Oracle a reason to touch millions of customers at myriad places in their business, from storage, to networking, to servers. That's a position IBM has also valued, considering its continued investments in its hardware lines like server and storage (even as it cast off its less profitable PC lines to Lenovo).

True, lots of orphans would be left over in an Oracle-HP deal. HP's core printer and imaging unit doesn't clearly fit into Oracle's fold, nor does its big consumer and PC products or its foray into smartphones via the recent acquisition of Palm.

Enderle theorizes that Ellison would spin out HP's printing and imaging business. "But this all hinges on whether Hurd can execute," Enderle says. "If I'm right, Larry wants to walk away with a [combined] company that would go head-to-head with IBM virtually anywhere. The deal would be very difficult and somewhat convoluted, but we're talking about a guy [Ellison] who lives and breathes war."

A Powerful Force

When your end goal is global dominance, difficulty is a mere distraction. And this would likely be a three-year to five-year plan. HP's lawsuit will likely tie up Hurd and Oracle for quite some time, but Ellison is a powerful force, and his wishes rarely go unrealized.

HP claims Hurd can't perform his new job of co-president without disclosing HP secrets in violation of his confidentiality agreement. But Enderle points out that in California, noncompete and other employment contract clauses are "generally unenforceable."

"HP can go after Hurd's [$40 million] severance package," says Enderle, "but they can't keep him out of Oracle." And what could be sweeter revenge for Hurd than winding up running HP again -- as a part of Oracle?

With reporting by Alex Salkever

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No matter who buys out who today, you can bet on it, there's going to be more American jobs lost in the end. It's whats happening everywhere throughout Silicon Valley today, More Americans loosing their jobs in favor of these imported H1B Visa workers. Number 2 is age discrimination. These corporations, once you hit you're late 40's may as well start packing.

September 10 2010 at 2:09 PM Report abuse +1 rate up rate down Reply

I worked for HP for many years. It was a fantastic company to work for, that is, until its founding fathers faded out of the picture. HP became nothing more than just another greedy corporation. They abandoned all the principles that made it the great company it was. It became just another bottom-line company with no fidelity to it's employees.

September 10 2010 at 1:22 PM Report abuse +1 rate up rate down Reply

Good way to double prices and rip off the consumer.

September 10 2010 at 12:45 PM Report abuse +1 rate up rate down Reply

Wonder if HP paid Hurd off on condition he didn't work in direct competition, as many company's do

September 10 2010 at 12:31 PM Report abuse +1 rate up rate down Reply

Did you see the other AOL headline, Testosterone hurts CEO's? Of course, because they can't keep it in their pants just like Hurd.

September 10 2010 at 10:23 AM Report abuse +2 rate up rate down Reply

I doubt that the gov would allow the deal, but with this admin who in the heck knows. Larry, please if you decide to go after HP give Mark the ability to make the offer, and front the deal because if you do it yourself you will surely fail just because of who you are. I would be more than happy to help (at no charge) to assist in a merger. but once again it ain't gonna happen if you get involved.

September 10 2010 at 9:57 AM Report abuse -5 rate up rate down Reply