EDJ is in the midst of creating a research report analyzing the HP acquisition of Autonomy (look for further details on that next week). There is a lot of negative market reaction to the premium that HP is paying (over 10x Autonomy’s revenues), but not a lot of attention being paid to the real issues. The latest example is the escalating war of words between Oracle and Autonomy. Oracle claims that Autonomy was shopped to them and they turned down the offer due to the high price; Autonomy denies the claim. Oracle then releases the Powerpoint presentation slides used in the Autonomy meeting as proof of the claim. While the industry can’t divert its eyes from this tabloid-like news, the real issues at the heart of the acquisition get ignored.
There is certainly something fascinating about reading the back-and-forth claims between Oracle and Autonomy. It reads like a political debate with assertions and denials and very careful choices of words. Did Mike Lynch, CEO of Autonomy, attend a meeting with Oracle’s President Mark Hurd in which Autonomy was shopped to Oracle? The better question is whether that actually matters. Oracle didn’t want to pay the price for Autonomy. HP does (or did, depending on who you believe). So why is this battle playing out so publicly? The first reason has to be ego. Mike Lynch likely doesn’t like Larry Ellison publicly claiming that Oracle passed on the chance to buy Autonomy due to an “absurdly high price.” Meanwhile, the only reason for Oracle to create a page on its site titled, “please buy Autonomy” is to rile up Lynch in the hopes of getting the market to believe he is untrustworthy.
While these two scuffle like school kids (and let’s face it, that’s exactly what is going on here – two big kids not wanting to back down), customers, prospects, and investors are distracted from the fact that the HP/Autonomy entity presents some real competition for Oracle (in spite of whatever premium HP may be paying for Autonomy). Not only does Autonomy offer the only major competition to Oracle’s Outside In document filtering technology, but also Autonomy can eventually pressure Oracle in the “big data” arena.
Big data is about more than what exists in structured databases – it’s about all information. Oracle and competitors like IBM and SAP have spent a lot of time building up business intelligence (BI) capabilities. For Oracle, most of those efforts are directed at structured data. Oracle has nothing on its list of products that looks to be related to content analysis (though both Larry Ellison and Mark Hurd talk about the meeting of structured data and unstructured content in the most recent Oracle earnings call, there is no product detail behind the statements.). Such functionality will be critical going forward considering that 90% of all information is unstructured content. Content analysis is not only something Autonomy does now, but something that Autonomy does well if you can afford the investment (we’ve talked to customers that use it). In my mind, that means that HP/Autonomy will present a real challenge to Oracle in this area. For Oracle to win in big data will require better content analysis functionality.
It’s possible that Oracle is making a big deal out this in an effort to embarrass Autonomy and diffuse potential competition. It’s also possible that this is just a display of playground machismo. In either case, both organizations need to rise above it. If Mike Lynch shopped Autonomy to Oracle, he should simply admit it, say that Oracle passed, and let future performance become the story. By denying it, he makes the incident a distraction. Let’s hope we get back to what matters over the next several weeks. As an analyst, I’m excited to watch the companies compete…but more interested in the products they put forward than any name-calling between the executives.