Why Wall St. went gaga for Hurd

As a testament to the value of one man, it doesn’t get any better than this: On a day the market is back to its bad old ways — the Dow was down about 90 points, or almost 1%, at midday — Oracle’s (ORCL) shares surged more than 5% Tuesday on news that former HP (HPQ) chief Mark Hard had joined as co-president. Oracle’s shares are trading near their 52-week high; HP’s are off more than 25%.

I offered some reasons earlier why Hurd is such a good fit for Oracle. But his complementary qualities to Larry Ellison and his general operational acumen only partly explain Wall Street’s enthusiasm. After all, in Safra Catz Oracle already had a president whose skills fill in Ellison’s blanks. Also, Catz is a master at squeezing profitability out of Oracle’s acquisitions. It’s not like Hurd will teach her anything about profit optimization she didn’t already know.

What Hurd means to Oracle’s acquisition of Sun partly explains the reaction by investors. Pat Walravens, an analyst with JMP Securities, wrote to clients Tuesday morning that he’d been hearing that demand for some of Oracle’s hardware products were outstripping supply. Hurd would be just the executive to fix problems in Oracle’s supply chain, if they exist.  More broadly, in Hurd, Oracle gets an executive who has now been competing at the highest level with Oracle’s most important adversaries. “There is no better executive who understands the competitive landscape than Mark Hurd,” wrote Walravens. “Oracle’s software/hardware vision competes primarily with IBM and HP. We believe Oracle now has a ‘general’ who has the exact blueprint of the enemies’ battle plans. In the end, the HP board may rue the day Mr. Hurd left HP.”

Actually, HP already does rue the day Hurd left. It filed suit against him Tuesday morning, arguing that his very presence at Oracle will make it impossible for him not to reveal HP’s secrets. HP wants to keep Oracle from hiring Hurd. The supporting evidence is amusing. HP says its board, including Hurd, was presented with a detailed internal analysis of Oracle on March 18 of this year. It also details how and why Oracle is an HP competitor, with the former’s Exadata server competing with the latter’s Proliant server. The hastily written suit whines that Hurd neglected in his public comments to credit HP as a competitor. HP, on the other hand, neglects to mention in its suit that Oracle is a partner as well, which presumably is why HP enterprise chief Ann Livermore is appearing later this month at Oracle Open World.

HP, at best, will be able to delay Hurd’s joining Oracle. But it’d be a mistake to think Oracle wants Hurd either for his vision or his knowledge of HP’s game plan, which HP has been telegraphing for anyone who’s listening. (Exhibit A: HP’s pricey acquisition of 3Par.) Oracle already had vision. Larry Ellison has more vision than any five other Silicon Valley executives. Sometimes he may even have too much vision for his own good.

No, the real reason for the stock pop is precisely what Hurd’s hiring means for Oracle when the day comes that Ellison isn’t around. Investors always have fretted that there is no true successor to Ellison at Oracle and hasn’t been since Ray Lane left a decade ago. Assuming Hurd can adjust to being a second banana — and to sharing power with Catz — Oracle now has a plug-and-play heir to Ellison should one be needed.

What’s the value of peace of mind? Oh, a bit more than $6 billion. That’s the amount of value added to Oracle’s capitalization on Tuesday morning.

A postscript. I noted earlier that Oracle had yet to scrub Charles Phillips’s name from the public agenda for Oracle Open World, which begins Sept. 19. That problem has been taken care of. Interestingly, Hurd has not yet been added to the schedule.

See also:

* The Larry, Mark and Safra show at Oracle
* Why Mark Hurd’s consigliere had to turn against him