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Did Ellison buy HP information?

Some are saying that Larry Ellison is putting his money where his mouth is. He loudly defended Mark Hurd after his firing by HP, and now he’s hired the guy. Here’s the WSJ story.

Maybe there’s more to this. HP and Oracle are competing over database products, and are making acquisitions in similar areas, such as the competition for 3PAR. Oracle might want to know exactly what HP’s plans are.

The WSJ notes:

One sticking point in Mr. Hurd’s move could be the terms of his severance package from H-P. That package, which could be worth more than $35 million depending on H-P’s stock price, doesn’t contain a noncompete clause as those are typically difficult to enforce in California. However, Mr. Hurd did agree to a 24-month confidentiality agreement, which prevents him from disclosing sensitive information related to H-P.

“Going to work in the same industry or for a competitor would violate” that provision, said Mark Reilly, a partner at 3C Compensation Consulting Consortium in Chicago. H-P probably will ask a court to “stop him from going to work there,” Mr. Reilly speculated. Mr. Hurd’s former employer would argue, “We already have paid you for the confidentiality agreement and we assume you are going to violate that,” the pay consultant said. H-P also “could sue him for a lot more than they paid him” for leaving, Mr. Reilly said.

It’s not so clear that HP will be able to effectively construct a non-compete out of a confidentiality agreement. After all, a big reason for non-competes is to protect trade secrets. Ron Gilson argues that the whole point of California’s anti-non-compete policy is to develop its high-tech industry by encouraging information flows.

If Hurd and Ellison can pull this off, it could be a coup for Oracle. One wonders if Ellison had all this in mind when he spoke out after Hurd’s firing. In other words, maybe Ellison put his mouth where his money was.

Filed under: corporate governance, fiduciary duties

Full post as published by Truth on the Market on September 07, 2010 (boomark / email).