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Quattrone blasts Ellison, says Autonomy is right

The Whopper Wars - what's Ellison's game here?

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Comment Investment banker Frank Quattrone has said Autonomy's Mike Lynch is right and Oracle is wrong: Mike Lynch did not shop Autonomy to Oracle - he did.

Oracle, in a decidedly aggressive and blunt press release and website blitzkrieg, had said that Autonomy boss Mike Lynch, accompanied by Frank Quattrone, head of Qatalyst Partners, tried to sell Autonomy to Oracle at a meeting in April. At the confab were Oracle president Mark Hurd and Douglas Kehring, Oracle's M&A head. Oracle has supplied two Qatalyst slide decks to support this stance.

Slide wars

Mike Lynch, who is reportedly gaining $500m from the HP deal to buy Autonomy for $10.2bn – agreed earlier this year by the since-ousted HP CEO Leo Apotheker – denied this.

It was a 30-minute meet-and-greet session to discuss database issues and went nowhere, Lynch said.

Autonomy then released a statement saying that Qatalyst had independently sent the slides to Oracle on 26 January. The Autonomy press release added: "Autonomy did not present these slides in the meeting."

Lynch then said Oracle needed help with its unstructured data, saying in an interview on Tuesday that the Oracle CEO’s “understanding of the problems in the unstructured world is very weak". This is knockabout stuff, rarely seen on the CEO stage.

Now Frank Quattrone has waded in with an admission to the FT that he tried to sell Autonomy independently to Oracle in January, the date on one of the slide decks, and that Autonomy had known nothing about this:

The slides Oracle posted publicly were sent by me to Mark Hurd in January, were prepared by Qatalyst and were for the purpose of our independently pitching Autonomy as an idea to Oracle. These slides were not used in our April meeting with Mark and Doug.

Omissions and obfuscations

We have Frank Quattrone and Mike Lynch both telling Oracle in public, loudly and very clearly, that its strongly asserted view of an April meeting involving Mark Hurd and Doug Kehring is wrong, and implying that Oracle's accusation of Mike Lynch being a liar is itself a lie.

In any other public company this would be followed either by lawsuits, the sacking of the president involved or the board-enforced resignation of the CEO. If Quattrone and Lynch are wrong then Oracle has to prove it, going to court if necessary.

Revolving doors, falling shares

The Oracle war of words with HP looks like a contemptuous series of shots from the hip which appear to have started after Ellison's tennis-playing buddy Mark Hurd resigned from his CEO position over some minor expenses infringements and some disagreement over his involvement with an executive meet-and-greet actress. Since then Hurd has joined Oracle and Ellison has publicly berated HP time and again.

HP hired ex-SAP man Leo Apotheker to be its replacement CEO, and appointed ex-Oracle COO Ray Lane to be its board chairman. Lane was at the helm when Apotheker left 11 months later – this September. This was after Apotheker cast off Palm, abandoned HP's tablet, raised doubt about the future of its PC division, and bought Autonomy for the breathtaking sum of $10.2bn, all while HP's share price declined.

It was $48.99 on 16 February, now it is $23.78, more than 50 per cent lower.

Enough was enough. Apotheker went and Lane's board buddy Meg Whitman, the ex-eBay CEO and failed California gubernatorial candidate, was appointed CEO in his stead.

Thunderbolts from Oracle's battlements

Meanwhile Ellison had Oracle publicly walk away from supporting HP's Itanium-based servers, and has been involved in lawsuits against HP and SAP, as well as hurling PR thunderbolts from the battlements of Oracle castle on Redwood Shores.

Why all this sound and fury from Oracle? Why is Ellison bothering with all this? Is something else going on here? Does Ellison want to buy HP?

HP shares are currently trading at $23.78, and the company's market capitalisation is $47.25bn. Oracle shares are worth $29.65 and its market capitalisation is $149.57bn, three times that of HP. Does Ellison want to publicly humiliate HP's board and executives by acquiring the keys to HP's kingdom?

HP might fear so. It recently hired Goldman Sachs to defend itself against potential bidders and aggrieved investors. We can expect poison pill stock arrangements shortly.

Whitman worries

All this sound and fury will boost Oracle OpenWorld's attendance and Oracle's general PR exposure. It may also shake the confidence of HP's customers and investors and – importantly in our view - that of HP employees who may start leaving. The appointment of Meg Whitman, who has no experience running a global hardware-manufacturing, software-producing and services business of this scale, may also be making investors concerned.

It almost beggars belief that a person with just eight months' board experience of HP and some dramatic success running an internet auction company – success moderated by an apparent over-payment for Skype – could be considered as a CEO candidate for HP, let alone get the job. There is widespread apprehension among the Wall Street community that things could go from bad to worse at HP, despite the breadth and depth of its experienced executives and staff, and the strength of its products and services.

El Reg's estimation? Oracle could be kicking HP around the head because it enhances Oracle's business prospects: Or it could have a deeper intention, an acquisitive intention ... a desire to have HP for lunch. ®

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