IBM CEO trash talks HP

Samuel Palmisano

Here’s something you don’t see every day. In this morning’s Wall Street Journal, IBM CEO Samuel Palmisano took shots at rival Hewlett-Packard Co. Among his comments were these:

  • HP fell behind the technology curve and bungled the removal of former CEO Mark Hurd.
  • Hurd’s severance package, which could amount to $35 million, was not a good use of shareholder money.
  • He doesn’t worry about HP because it has slashed investments in core technologies and is keeping pace mainly through expensive acquisitions.
  • It has lost its ability to innovate because Hurd cut out all research and development. (HP’s R&D budget fell to $2.8 billion under Hurd, or 2.5 percent of revenue ($2.8 billion). IBM’s R&D budget is about 6 percent of revenue ($5.8 billion).
  • It overpaid to acquire data-storage provider 3PAR Inc. but had no choice because Hurd cut out all research and development.

These are strong words from a CEO. Corporate protocol dictates that normally, you don’t badmouth competitors. Instead, you talk up your own strengths.

HP and IBM’s markets are starting to overlap in such areas as enterprise software, storage technology and information-technology services. So, is Palmisano really so dismissive of his rival, or is he trying to gain an edge on a competitor who is making strides in his company’s core businesses? This will be interesting to watch.

Meantime, Hurd has joined software giant Oracle, whose CEO, Larry Ellison, also criticized HP for its handling of the Hurd matter. (HP is suing over that arrangement, saying it violates the non-compete clause in Hurd’s severance agreement.) Palmisano admitted in the interview that he worries about Oracle and thinks it will become the biggest threat to IBM over the long term. Compared with his remarks about HP, Palmisano’s comment about Oracle was highly complimentary. “Oracle invests,” he said. Could Palmisano be trying to imply that Hurd will also slash the R&D budget at Oracle?

We’ll see how smart Palmisano’s decision to call out HP turns out to be. Whatever the case, don’t you think it’s refreshing to see a CEO take the gloves off once in a while?

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