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4-Traders Homepage  >  Equities  >  Nyse  >  Oracle Corporation    ORCL

Delayed Quote. Delayed  - 05/31 05:53:15 pm
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Trial Set to Open in Legal Battle Pitting H-P, Oracle

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05/31/2016 | 02:36am CEST

Jurors are set to convene on Tuesday to hear opening arguments in a five-year legal battle that centers on Oracle Corp.'s alleged role in the decline of one of the former Hewlett-Packard Co.'s most lucrative products. The lawsuit seeks $3 billion in damages from the database kingpin.

The trial, in a state court in San Jose, Calif., is one of several recent skirmishes between Silicon Valley titans. It follows closely on the heels of a jury verdict last week that found that Google Inc.'s use of Oracle's Java software didn't violate copyright law, a ruling Oracle vowed to appeal.

H-P's action against Oracle illustrates how business partnerships can fray when corporate strategies shift. The trial is expected to last four to five weeks and could include witnesses such as Oracle Co-chief Executive Safra Catz and Ann Livermore, a director of H-P spinoff Hewlett Packard Enterprise Co., which inherited the litigation.

The case began in 2011, in response to an Oracle news release that cast doubt on the future of H-P's flagship computers, which are now sold by HP Enterprise.

The dispute is linked to other bad blood between the companies, including friction over Oracle's move several years ago to start selling hardware that competes with H-P's.

H-P, like other makers of server systems, relies mainly on chips from Intel Corp. to drive its hardware.

But some of the Palo Alto, Calif., company's priciest machines use an entirely different chip family, dubbed Itanium, than the variety used in most computers.

In 1994, Intel and H-P developed Itanium in hopes of producing a broadly used calculating engine to succeed Intel's widely used x86 family. Itanium-based machines proved popular for some jobs where reliability is paramount, like running stock exchanges. But most other server makers and their customers found x86 chips more attractive.

Itanium's lack of traction prompted rivals to come up with the unflattering moniker "Itanic." International Data Corp. estimated that annual sales of Itanium-powered systems plunged to $876 million in 2015 from $3.1 billion in 2011.

Matt Eastwood, an analyst at the research firm, said customers who moved away from Itanium in many cases shifted to H-P x86-based machines. But those systems don't carry the same generous profit margins as Itanium-based systems, or the same lucrative contracts for technical support, he said.

H-P alleged that Oracle, for years an important partner, helped drive the sales collapse because of its January 2010 purchase of Sun Microsystems Inc., a deal that turned Oracle into an H-P competitor.

Oracle denies that allegation, saying that the Itanium-based products declined for other reasons.

Another conflict between Oracle and H-P emerged in September of the same year, after Oracle gave a job as co-president to Mark Hurd, a former chief executive of H-P, whose board had asked him to resign the month before.

H-P filed suit, arguing that Mr. Hurd possessed trade secrets that would allow Oracle to compete unfairly with his former employer. The companies reached a settlement several weeks later.

In March 2011, Oracle said it would stop creating new versions of its database and other software for Itanium-based systems.

The company's news release said private conversations with senior Intel managers made clear that Itanium was nearing the end of its life. Oracle noted that other software makers had stopped making new programs targeting the chip technology.

In its response, Intel said it remained committed to Itanium. So did H-P, many of whose customers used Oracle software to run their operations. The computer maker sued Oracle in June 2011, saying that Oracle was obligated by the settlement of the dispute over Mr. Hurd to keep supporting Itanium as it had been.

"Immediately after issuing its announcement, Oracle exhorted its salesforce to strike at HP's base of Itanium customers to try to switch them to Oracle's Sun platform," an H-P trial brief alleges.

In August 2012, a judge sided with H-P, ruling that the 2010 agreement obligated Oracle to keep developing Itanium versions of its products free of charge as long as H-P sold such systems.

The new trial, delayed by an Oracle appeal and other factors, is expected to focus on whether either company violated the agreement and any damages that might be owed as a result.An Intel spokesman declined to comment. Intel's last Itanium model was released in 2012. Intel hasn't given a timetable for releasing a successor version.

Oracle resumed releases of software for Itanium following the 2012 ruling. It contends that, as a result, H-P wasn't harmed and deserves nothing like the $3 billion in damages it is seeking.

The software company filed a separate claim that H-P illegally misled customers about the chip technology, which it paid Intel to keep developing. "H-P desperately sought to hide the demise of Itanium from its customers and the market in general," Oracle alleged in a document summarizing its legal position.

Write to Don Clark at don.clark@wsj.com

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