HP’s Never Ending Drama: Blame the Board

I don’t pretend to know what is going to happen next at Hewlett-Packard, but both Bloomberg and All Things Digital report that the board is meeting to consider ousting CEO Léo Apotheker and perhaps replace him with former eBay CEO (and current HP director) Meg Whitman.

The HP board has long had a well-earned reputation as one of the worst around, going back at least to the clumsy dumping of CEO Carly Fiorina and the ensuing scandal over spying on reporters to determine the source of boardroom leaks. But its performance in the last year puts it in a class by itself. A board shouldn’t have much involvement in the day-to-day running of a company, but it is responsible for oversight and strategic direction. The HP board has provided neither.

HP stock price chart

HP common stock price (from MarketWatch)

The big problems started a little over a year ago when then-CEO Mark Hurd got caught up in accusations of sexual harassment and an improper relationship with a contractor. The board decided Hurd hadn’t violated any policies on harassment or relationships, but fired him anyway for falsified expense reports. Hurd was widely disliked within HP for his slash-and-burn approach to improving earnings through stringent cost reduction, but he was a first rate operations executive who did make the trains run on time.

The choice of Apotheker seemed to signal a major strategic move by the board. For some time, HP had been a three-headed beast, comprising PCs and associated consumer electronics; enterprise servers, services, and software; and printing and imaging. from desktop inkjets to commercial Indigo digital presses. Apotheker, who had spent most of his career at German software giant SAP,  seemed to be chosen to focus on the enterprise business, especially since the board chose him over Personal Systems Group chief Todd Bradley and Imaging & Printing Group chief Vyomesh Joshi.

Apotheker made his big move this August when he announced that HP was killing the phone and tablet business acquired  (under Hurd) from Palm, was considering selling or spinning out the rest of Personal Systems, and was acquiring Autonomy, British business analytics software maker, for $10 billion. The Autonomy purchase was unanimously approved by the HP board according to the announcement; the other moves certainly must have had board approval as well.

But HP has been in a tailspin since the announcements. The stock price, which had been sinking since spring, cratered (though it rose 10% in intraday trading today on rumors of Apotheker’s departure.) Competitors such as Dell moved to poach corporate customers unnerved by the uncertain future of the PC division.  A fire sale of  the inventory of TouchPad tablets added to the ridicule. And the board, it would appear, panicked again.

In the circumstances, the choice of Whitman, would be an odd one. She has a solid record of accomplishment and has been cooling her heels at the venture capital firm of Kleiner Perkins Caulfield & Byers since losing a bid to become governor of California in 2010. But her business background is largely in consumer services and she would be taking over an HP that Apotheker has remade into an enterprise company.

Might such a move signal the board’s intention to reverse the enterprise direction? Possibly, though that would only lead to even more turmoil. The Autonomy purchase has been approved by both boards, though not yet by shareholders, and would probably be both very messy and very expensive to undo; such agreements typically carry heavy termination fees if the deal fails to close. Nothing irrevocable has been done yet to sell the Personal Systems Group, but the former palm operation is well and truly dead–the Apotheker rumors broke the day after HO began wholesale firing of webOS Global Business Unit employees.

However this turns out, we can expect more drama, and probably more missteps by the HP board. Somewhere in tech heaven, Bill Hewlett and Dave Packard are crying.


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Steve Wildstrom

Steve Wildstrom is veteran technology reporter, writer, and analyst based in the Washington, D.C. area. He created and wrote BusinessWeek’s Technology & You column for 15 years. Since leaving BusinessWeek in the fall of 2009, he has written his own blog, Wildstrom on Tech and has contributed to corporate blogs, including those of Cisco and AMD and also consults for major technology companies.

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