IBM's Palmisano: HP 'Used to Be Inventive'

Includes: HPQ, IBM
by: Larry Dignan

IBM CEO Sam Palmisano knocked Big Blue’s primary rival—Hewlett-Packard (NYSE:HPQ)—as well as Mark Hurd, who is now taking aim at the company at Oracle (NASDAQ:ORCL).

In a Wall Street Journal interview, Palmisano said:

H-P used to be a very inventive company. Hurd cut out all the research and development.

The R&D remark refers to HP $2.4 billion purchase of 3Par. Palmisano argued that the 3Par (NYSE:PAR) acquisition means HP hasn’t invested in R&D. He also noted that HP botched the Hurd departure. Meanwhile, Palmisano gave Oracle props and said Larry Ellison & Co. will become IBM’s biggest rival.

The Journal story appeared to be a tease to a much longer Palmisano interview to come later. Palmisano doesn’t talk much, but when he does it’s worth a listen.

Now let’s examine the motives here.

  • IBM has been touting its R&D and smarter planet initiative as its trump card against HP. Palmisano is just relaying what Big Blue reps often say—that HP is losing its innovation edge and can’t hang on R&D.
  • Palmisano noting that Oracle is IBM’s biggest threat is interesting. In the war of perception, IBM is minimizing HP to focus on a rival that’s down in the standings. The subliminal message is that HP is cooked.
  • At a time where HP is in flux, it only makes sense for Palmisano and IBM to play a little offense. Palmisano is looking to put some doubt in the minds of HP customers. It’s a playbook that worked nicely when Sun was in the process of being acquired by Sun. To that end, IBM last week announced that it would offer lease terms and credit for used gear if Oracle and HP customers dumped servers for Big Blue’s Power Systems.
  • The more fear, uncertainty and doubt Palmisano can plant about HP the more customers IBM can poach. By the way, Palmisano said he’s not retiring any time soon—another comment designed to make IBM look like the picture of stability as HP hunts for a new leader.

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