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HP Paints Target on Its Back; IBM CEO Shoots Arrows

Instead Palmisano says he worries about Oracle, which is now likely to become the biggest threat to IBM

It's not everyday that the buttoned-down CEO of the buttoned-down IBM takes a highly public shot at a rival - however calculated - but Tuesday was a day to watch a master practitioner.

In an hour-long interview at a Wall Street Journal breakfast conference Sam Palmisano told all there that IBM would never in its wildest dreams have paid the $2.35 billion HP is proposing to pay for a joint like 3PAR or the $1.5 billion it's paying for ArcSight - it doesn't have to - but HP does because its ousted CEO Mark Hurd "cut out all the research and development."

"HP used to be a very inventive company," Palmisano tsked, but now he doesn't have to worry about it. It's a reseller. Hurd cut HP's R&D budget from $3.6 billion to $2.8 billion thereby making it weak and ineffectual. (Hurd loyalists say what Hurd actually did was can redundant R&D projects and focus the rest but the urban myth is easier to exploit. IBM spends $6 billion and you can bet that doesn't all come up roses either.)

Instead Palmisano says he worries about Oracle, which is now likely to become the biggest threat to IBM. "Oracle has cash flow and good margins. Oracle invests," he said. Oracle CEO Larry Ellison "has done a very good job."

Palmisano also waded into the discussion about the HP board's competence in handling Hurd's ouster and paying him $35 million in severance only to have him turn up literally days later at Oracle. "That is not good use of shareholder money," Palmisano said.

Palmisano evidently means to be around for IBM's showdown with Oracle. He said he has no intention of retiring next year when he turns 60 in the fashion of his immediate predecessor. "There is no formal policy....I'm not going anywhere." How certain, unlike HP.

IBM made an offensive move last week by offering Oracle and HP users a trade-in for new IBM Power servers, software and services on generous financing terms at a reduced budgetary crisis. The IBM boxes are supposed to be more open and powerful than the Oracle-Sun machines.

Apple can evidently rest easy. iPads aren't IBM's kind of innovation. "Rather than something that lets you watch television in another format, our scientists would rather do things that change the world."

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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