News Analysis

Can Mark Hurd make a success of Oracle?

Having resigned from HP as CEO, Mark Hurd is now heading to Oracle. The move could boost Oracle's position as a hardware supplier. How will Hurd change Oracle?

With Mark Hurd's fall from grace over his affair with a contractor and the subsequent investigations into expenses fiddling, HP's former CEO seems an unlikely choice for Oracle chairman, Larry Ellison.

But, he has a proven record of boosting shareholder value, integrating major acquisitions and a strong nose for the hardware business. It was under Hurd's leadership that HP acquired EDS to make it IBM's biggest rival in the services market. Hurd is also credited in overseeing the integration of HP and Compaq.

In a posting on the SeekingAlpha financial blog site, Joel West, a professor of Innovation & Entrepreneurship in the College of Business at San José State University, says: "Hurd is still as talented as he was a year ago, and the 134% increase in share price at HP during his reign is unmatched by big tech CEOs not named Steve."

Hurd was CEO at NEC, which later spun out its data warehouse hardware business, Teradata. The firm is considered by many a strong rival to Oracle. Teradata has a strong presence in the retail sector, providing data-crunching hardware and software to enable some of the world's largest retailers, such as Walmart and Tesco, to manage customer data.

Clive Longbottom, founder of analyst Quocirca says: "Even with everything that Mark Hurd has done, he is an excellent commercial leader. It's quite a coup for Oracle. Hurd really is a great asset for Oracle, and has a broader set of skills than most people at Oracle."

But this strong track record may prove a sticking point at Oracle. While he has skills in databases, Longbottom says Hurd should steer away from interfering with Oracle's successful retail and database divisions.

Instead, Longbottom expects Hurd to focus on the Sun acquisition and bolstering Oracle's ailing services arm.

Culture clash

But hiring Hurd has also meant Oracle's former president, Charles Phillips, has resigned. "The departure of Charles Phillips is a bit of a blow," says Neil Ward-Dutton, research director, MWD Advisors. "Phillips demonstrated leadership on Oracle's Fusion strategy."

Oracle is also struggling with integrating Sun's "Californian" culture, which could worsen with Hurd's appointment. Ward-Dutton believes the Sun integration would be the logical place for Hurd to focus on. "His strengths are in attention to detail, track record at integrating hardware and service businesses." But the management of Sun was previous quite relaxed.

The challenge for Oracle is that the acquisition of Sun was a very big bet. Oracle was betting that integrated systems and integrated appliances, rather than open platforms, would be the way forward for IT investments. According to Ward-Dutton, the turnkey value proposition based on an integrated hardware and software stack requires an integrated business model. Which is counter to how Oracle has run its business with external partners.

Services are key

Any move into services would be delayed. Pulling off the acquisition of Sun is hard enough. A service acquisition at the same time would be incredibly difficult to pull off.

Ken Chin, lead analyst for Oracle at Gartner, believes Hurd will have a role to play in building the Oracle services business, given his experiences with EDS.

"Well over 50% of IBM's revenue stream comes from Global Services. Major players are bundling services with their hardware. Oracle will need a services business if it intends to compete with IBM and HP in the future."

Chin says that oracle can only grow its services business through acquisition. "I would be surprised if Oracle did not buy a major services company."

He believes Oracle would look to acquire a company with a worldwide footprint and capabilities to provide outsourcing, which is what IBM and HP are able to offer.

Oracle certainly has the cash to fund a major acquisition and has just raised a further $5 billion. Experts believe it could be making a major services acquisition by mid 2011.

While industry experts speculate as to if and when Oracle enters the services market, one thing is clear. Hurd has immense expertise in hardware and data warehouses. Oracle's Exadata system, a rival to Teradata, will certainly benefit from Hurd's leadership, as will the Sun hardware business, which needs to be revitalised in order to compete effectively against IBM and HP.


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