Oracle’s bombshell: We might buy HP

And if the HP situation couldn’t get any weirder, Forbes speculates that Larry Ellison and Mark Hurd might attempt a takeover of HP if its share price drops far enough. HP and Oracle once were close partners, but now they hate each other.

I think it might be a little more complicated.

Right now HP is worth about $50 billion. Oracle has about $29 billion in cash. HP would have to shed its PC business–worth perhaps $10-$12 billion–and fall in price a bit more for Oracle to be able to afford the deal. And they’d have to borrow more money than they want, since HP wouldn’t go down without a fight. They’d have to pay a premium to convince the shareholders to agree to the deal. And there’s a lot of redundant business between HP and Oracle. They both make servers and they both make Unix variants. Getting the deal past government regulators will be a pain.

Larry Ellison isn’t stupid. He knows this.

I think Ellison would do the deal if he had the opportunity. I’m not sure he wants the opportunity. But he sure wants HP to think he wants the opportunity.

I think this is about PCs.

One way for HP to make sure Oracle can’t afford a takeover is to stay in the PC business it desperately wants to shed. Because if there’s one company that wants to be in the PC business less than HP, it’s Oracle. And if Larry Ellison and deposed HP CEO Mark Hurd are standing over in the corner with their sleeves rolled up and cracking their knuckles with a menacing look on their face, that PC business is big enough to take cover behind. It’s about the only thing.

And I think that’s what Larry Ellison wants. Whatever HP wants, Ellison wants the opposite. And with HP’s shares in a free fall, Ellison is in position to tell the company he hates what it can and can’t do.

He probably gets just as much thrill from that as he would get from being able to tell Leo Apotheker he’s fired. And it’s a lot cheaper.

The bonus? If HP keeps the PC division, they look wishy-washy, uncommitted, and weak. That perception could easily drop them to #3 in PC volume, behind Dell and Acer. I think Larry Ellison would really like that too.

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