IBM CEO lays into HP over strategy but praises Oracle


IBM CEO lays into HP over strategy but praises Oracle

Microscope contributor

IBM CEO Sam Palmisano has criticised HP's pricey acquisition strategy which he says it is pursuing to compensate for massive cuts in R&D and revealed that it is Oracle he is monitoring more closely.

During a rare public flogging of a rival, IBM's big cheese also criticised HP's handling of CEO Mark Hurd's exit last month when it paid the disgraced executive a severance package worth $35m, claiming it was a poor use of shareholder funds.

Palmisano told the WSJ: "HP used to be a very inventive company."

This was a nod to the $2.8bn HP shelled out on R&D in fiscal 2009 compared to $3.5bn it invested in 2005 when Hurd joined the business, compared to 6% of revenues or $5.8bn from IBM last year.

Palo Alto-based HP recently forked out $2.4bn for 3PAR after a closely fought price war with Dell, paying more than three times the closing stock price for the storage firm before initial advances were made by Dell.

It then followed that up earlier this week with a $1.5bn acquisition of ArcSight.

During Hurd's five-year tenure, HP also splashed out $13.9bn on EDS, $2.7bn on 3Com and $1.2bn on Palm.

Palmisano also crowed about IBM's decision to quit the PC market in 2005 before it descended further into a commoditised market, the opposite direction taken by HP which acquired Compaq in 2001 and is today the world's largest vendor.

"We wanted to get out before it was obvious to everyone," said Palmisano, "I couldn't give it away today."

However, praise was reserved for Oracle - with whom IBM battled it out for the signature of Sun Microsystems and has of late fallen out with HP - which he suspects will be its major rival in the long run.

"Oracle invests," he said.

Indeed it does, 12% of revenues or $3.2bn in fiscal 2010. Perhaps Palmisano has reason to look over his shoulder at the software giant, especially when the former Sun channel gets fully up to speed.

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