Will Oracle make a move to help HP? – Part 2

One thing that hasn’t changed: HP’s stock price, which is within a single penny of its price back when the Post story came out last summer. Maybe what HP really needs here is a big dose of Larry.

There are all sort of delicious elements to the idea of Oracle buying HP.  Larry’s right-hand man and presumed heir-apparent Mark Hurd – the former HP CEO – would no doubt be gleeful to have another whack at fixing what ails HP. I’m not sure HP Chairman Ray Lane, a former Ellison lieutenant, would be that keen on selling the company to Larry, but in the end he may not have a choice.

Would the math work? Oracle’s market cap at $149 billion is about triple that of HP at $47 billion; one way to help finance the deal would be to spin out HPs now combined and streamlined PC and printer business. Oracle has about $30 billion in cash, and presumable could borrow more to complete the deal; or a transaction could take the form of a combination of cash and stock. As I noted last summer, a deal to buy HP would hurt Oracle’s profit margins, which are far higher than HP’s at both the gross margin and operating margin level. There would be antitrust questions, particularly given the two companies strong positions in servers. (Remember that Oracle jumped into the server market when it bought Sun.) The fact remains that these are two companies that simply don’t like each other; whether you could combine Oracle’s sales-driven culture with HP’s engineering-driven roots would remain to be seen.

The two powerful IT giants need to do something bold to maintain their dominant roles in enterprise computing. And one way to do it would be for Oracle to team up with HP, and stake a claim to being the primary challenger to Microsoft, Cisco and IBM in enterprise computing.

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Posted by Usman Khalid on Mar 24 2012. Filed under Business. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.