backtop


Print 36 comment(s) - last by nocturne_81.. on Sep 29 at 8:52 AM


Léo Apotheker has been fired from two CEO positions in two years. HP's board eventually caved to shareholder demands and terminated Mr. Apotheker in the wake of his wild plan to transform HP into SAP 2.0.  (Source: n-TV/DPA)

Meg Whitman has been appointed as HP's new CEO. As CEO at eBay she grew the firm from a $4M USD business, to an $8B USD one.  (Source: AP)

Some webOS fans are surely hoping Ms. Whitman's arrival could lead to a webOS revival.  (Source: HP)
Report in The New York Times skewers HP's dysfunctional board

Following Bloomberg's report yesterday that Hewlett-Packard Company (HPQ) was on the verge of firing embattled CEO Léo Apotheker, comes official news [press release] today that the Board has finalized the plan.  Mr. Apotheker is out, accomplished Harvard Business School grad and former eBay, Inc. (EBAY) CEO Meg Whitman is in [press release].

I. Apotheker: a Careless Choice?

HP's odd journey began last August when it was 
rocked by a lawsuit filed by celebrity lawyer Gloria Allred on behalf of former adult actress turned contractor Jodie Fisher, who accused the company's accomplished CEO of sexually harassing her.  HP made the hasty decision to drop their CEO, Mark Hurd, despite his successful track record, and rival business software maker Oracle Corp. (ORCL) hastily scooped Mr. Hurd up, naming him a co-president.  HP agreed to pay Mr. Hurd between $28M and $50M USD in severance benefits, depending on whose numbers you trust.

The Board at HP, the 
world's top personal computer maker, was then left fumbling for a replacement chief.  Former HP Board Chairman Tom Perkins complains in an interview in The New York Times, "It has got to be the worst board in the history of business."

Mr. Perkins wasn't alone in that sentiment.  The NYT report cites other insiders as complaining about "animosities, suspicion, distrust, personal ambitions and jockeying for power" by the Board at the time.

As a result the board picked Mr. Apotheker an 
unlikely candidate for the job.

To begin with Mr. Apotheker was German and had little experience in the American market.  And he had even less experience in selling hardware, having only briefly sold casino electronics at a previous position.  

But the really baffling aspect of the hiring was that HP recruited Mr. Apotheker after an abysmal campaign at top German software maker SAP AG (
ETR:SAP), which saw him terminated only 10 months after becoming CEO.  At SAP he steered SAP into its first loss in seven years, faced backlash for failed price increase attempts during the recession, clashed with unions, and allegedly oversaw the theft of intellectual property from Oracle that cost SAP $1.3B USD in damages.

II. Apotheker Steers HP Into a Downward Spiral

Despite that less that gleaming reference, the Board finally agreed that Mr. Apotheker was the best person for the job, of the four candidates considered.  Except, they apparently never bothered to even interview him, according to The NYT report.  States one executive to The NYT, "I admit it was highly unusual. But we were just too exhausted from all the infighting."

During Mr. Hurd's reign HP saw five years of consecutive gains and a 130 percent rise in stock prices.  By contrast Mr. Apotheker's tenure reminded many of reviled former HP CEO Carly Fiorina; under his leadership HP slashed its sales outlook three times and saw stock prices plunge 47 percent.

But the losses were only part of the picture.  Last month Mr. Apotheker announced HP's decision to pull out of the increasingly lucrative mobile market, 
killing the webOS product line, which HP had paid $1.2B USD to purchase just year before.  The death of HP's TouchPad tablet -- the first modern webOS tablet design from HP -- came just over six weeks after it hit the market.

In an even more bizarre twist, Mr. Apotheker announced that HP would be 
selling or spinning off its core PC business, which most deeply associate with HP's brand image and history.  Instead, HP would spend $10.3B USD to buy UK software maker Autonomy, Corp. Plc. (LON:AU) and would focus solely on the higher margin enterprise servers and software.  Essentially Mr. Apotheker envisioned HP becoming SAP 2.0 and vying with Oracle and International Business Machines, Inc. (IBM).

Mr. Perkins, HP's former board chairman, accused HP of 
working to commit "corporate suicide" with the wild plan.  And HP's shareholders filed a class action suit accusing HP of defrauding them by failing to disclose the radical corporate makeover in a timely fashion.

In the end the Board caved.  Mr. Apotheker won't get the chance to see that outlandish plan through to its bitter end as he has found himself dismissed from the CEO spot at a top company for the second time in under a year.  In the world of CEO's the word "fired" is seldom used -- instead euphemisms like "declined to renew contract" or "parted ways" are applied.  But for all intents and purposes the last two years have seen Mr. Apotheker assume CEO positions at two top global firms, and be fired from each in under a year for poor performance.

III. Meg Whitman: HP's Hope for Salvation

Turning to the new CEO Meg Whitman, she has a much better track record, though she is not without her own early detractors.  

Having received an M.B.A. from Harvard Business School, Ms. Whitman went on to work as a manager/executive at The Walt Disney Company (
DIS), DreamWorks, The Procter & Gamble Comp. (PG), and Hasbro, Inc. (HAS), before joining eBay, Inc. (EBAY) in 1998.  In 1998 eBay had revenue of $4M USD and only 30 employees -- in short a promising, but tiny up-and-coming web startup.  By the time she left in 2008, eBay had revenue of $8B USD and 15,000 employees.

Her campaign at eBay was not without criticism.  Some complained about slowing revenue growth towards the end of her CEO run.  And under her leadership eBay reportedly overpaid to acquire video calling firm Skype Technologies SA after getting in a bidding war with Google Inc. (
GOOG) and Yahoo! Inc. (YHOO).  However, eBay did end up turning a profit on the purchase, when Microsoft Corp. (MSFTdecided to pay even more for Skype, boosting the return on eBay's remaining stake.

Some benefits of Ms. Whitman are that she's deeply familiar with the overall American business market and that she has diverse executive experience having worked at a toymaker (Hasbro), a pharmaceutical company (Procter & Gamble), and, of course, an online retailer (eBay).  EBay's market cap is similar to HP's, given the latter's currently depressed stock value.

A potential downside is that she's never worked at a computer-maker before.

Ms. Whitman's campaign at HP, which would eventually culminate in being awarded her new CEO position, began after she lost 
her 2009 bid to become the governor of California.  In January 2011 she joined the HP board, hoping to help reform the struggling firm.

She must now figure out how to right the ship and decide what to do with Mr. Apotheker's controversial plans to kill webOS devices and spin off the PC unit, the Personal Systems Group.  For webOS fans, Ms. Whitman's arrival could lead to a webOS revival, though that may be unlikely 
given recent layoffs.

HP is far from out of the game.  It's still the world's top seller of PCs and has a strong brand name both with home and business users.  That said, if the board is as dysfunctional as The NYT report indicates, HP might see more future struggles, regardless of how Ms. Whitman performs.



Comments     Threshold


This article is over a month old, voting and posting comments is disabled

Board
By CityZen on 9/22/2011 5:01:01 PM , Rating: 3
Sorry, but, who the hell names the people in HP's Board of Directors? I'm assuming it's the top shareholders, right?
Why don't shareholders fire a few (or a lot of) Directors too? That'd be a logical move, wouldn't it?




RE: Board
By phatboye on 9/22/2011 6:03:25 PM , Rating: 5
Why Meg Whitman? She doesn't seem like the right person for the job either.

But more importantly if you are going to fire Leo Apotheker because of his bone-headed decisions why aren't they trying to reverse the decisions he made? Keep HP personal computer business and revive WebOS!

Something tells me it's not just Leo Apotheker but the board who is killing HP. Leo Apotheker wouldn't have been able to spin off a major part of HP's business like that or overspend on that Autonomy purchase without getting the approval of the board so it hardly makes sense to place all the blame on him. So I agree with you these idiots need to go.


RE: Board
By idiot77 on 9/22/2011 6:17:20 PM , Rating: 2
Any brains HP had left with Agilent. It juts takes a long time to destroy a company as large as HP.


RE: Board
By Master Kenobi (blog) on 9/22/2011 8:52:04 PM , Rating: 3
I would disagree. Hurd did a bang up job during his tenure and the company was regaining much of the glory DELL stole back in the late 90's. Shame that HP gave him the boot so quickly, oh well their loss. Oracle is reaping the benefits now.


RE: Board
By Sivar on 9/22/2011 9:15:12 PM , Rating: 2
A friend of mine that worked for NCR (which Hurd ran at the time) was unimpressed by him. He said Hurd went gung ho with mass layoffs and by the time he was done, the best people in the company were gone. Those that remained had been there either under 2 years or over 10 -- new or just holding on for retirement.
Wall Street does love layoffs.


RE: Board
By astralsolace on 9/23/2011 1:46:35 PM , Rating: 2
Hurd wasn't the genius people are making him out to be. He was extremely unpopular with the company's employees because of repeated layoffs and salary cuts. Then, they engineered the purchase of EDS--a government contractor whose business they didn't really understand--and tried to implement the same policies.

You don't slash a billable employee's salary to "reduce costs to the company." A billable employee's hours are charged to a client (a government agency) and the company is paid. Hurd instituted company-wise budget cuts shortly after acquiring EDS, which he insisted apply to all, including billable, employees.

Guess what that does? REDUCES company revenue AND profit. Hurd, and the Board, didn't understand the business they were acquiring--for fourteen BILLION dollars. Not smart, and not rocket science. And now there's a far-right politician leading HP.


RE: Board
By TSS on 9/22/2011 9:19:27 PM , Rating: 5
IMO any business that gives it's grosely incompetent CEO 25 million severance pay has to be run by idiots.

His annual salary was $1,4 million, meaning he'd have to work nearly 18 years to actually earn as much as he's getting paid for running the company further into the ground.

Our kids are really going to look at us funny when they find out we let crazy shit like this happen, and better yet, considered it "normal".


RE: Board
By unimatrix725 on 9/22/2011 9:40:31 PM , Rating: 2
I Totally agree with you on this. The corporate system seems broken, so fix it!


RE: Board
By Sulik2 on 9/23/2011 10:20:17 AM , Rating: 2
It doesn't seem broken, it is broken, but its not fixable. The government that would have the power to fix it won't because the elected officials are all financed by the the corporations.


RE: Board
By MrBlastman on 9/23/2011 11:31:12 AM , Rating: 2
It will not be fixed anytime soon. The ridiculous mentality of excessive executive compensation runs as deep as the classrooms of our Nation's universities. This pay is idolized there. Once people -do- enter the executive circle (it is a circle, a club actually), everyone there does their best to perpetuate this cycle, patting each other on the back and looking out for their own pockets.

They then look to the pockets of our Congressmen... and fill them. Of course, Congressional intervention would go against the spirit of capitalism and free markets so this is a dangerous sword to swing (that will never swing with the current state of things).

No, it has to start with a complete philosophical reform. One that I fail to see coming anytime soon. The disparity between CEO compensation and line-workers is ridiculous now. These severance packages are atrocious. I'd LOVE to get 18 times my annual pay in severance. I suggest if companies want to excessively comp their execs for being fired, they should give the SAME, EXACT and identical scale (or multiple) to all their other employees. The only exception to the rule would be the founder of the company, as it was -their- company.

It won't happen though. The rest of the employees aren't in the club.


RE: Board
By kaosstar on 9/23/11, Rating: 0
RE: Board
By MrBlastman on 9/23/2011 1:32:04 PM , Rating: 2
Keep dreaming. The multitude of idiots in the executive circle has been increasing, not decreasing. So you are saying that by being an idiot, you earn excessive pay? Somehow, I thought it was supposed to be the other way.

You're hallucinating. The disparity of pay is ridiculous and is not serving any of us, especially the shareholders, well.

There are exceptions that drive major growth in a company like Steve Jobs, Jack Welch and Gozueta, but those are rarities, not commonplace.


HP's been declining for a long time
By LBID on 9/22/2011 4:52:32 PM , Rating: 5
If you've had any exposure to HP at all, you'd realize that the company really reached its peak just before Fiorina took over. Even though on paper looked good during and for a while after her term, she had already sold the company down the river by cutting loose almost all of the R&D that made the company strong.

During the Hurd years, margins were improved essentially by chopping off fingers and toes and eating them. In the past year, they amputated the left arm and started snacking on it. Pretty soon there won't be anything left to cannibalize, and the company will just be another crater on the history of the industry.




RE: HP's been declining for a long time
By TheRequiem on 9/22/2011 5:02:17 PM , Rating: 3
This whole CEO thing and Whitman deal is a joke... come on. Can we actually get a CEO that is capable?


RE: HP's been declining for a long time
By drycrust3 on 9/22/2011 8:34:09 PM , Rating: 1
quote:
Can we actually get a CEO that is capable?

Yeah, someone with obvious experience in resuscitating a dying company, bringing it back into profit, and then making it into a world leader ... like Steven Jobs.


By retrospooty on 9/23/2011 8:28:53 AM , Rating: 3
For a company that just basically announced "We are getting rid of our CEO for his bad decisions, but keeping his decisions" what more can you really expect. LOL

I see a Monty Python skit in here somewhere.


RE: HP's been declining for a long time
By Bad-Karma on 9/23/2011 8:31:27 AM , Rating: 2
quote:
experience in resuscitating a dying company ......like Steven Jobs.


Jobs health is failing... So what would be your plan to keep him resuscitated?


RE: HP's been declining for a long time
By nuarbnellaffej on 9/23/2011 11:07:35 AM , Rating: 2
Hmmm he said someone *like Steve jobs, it's in his quote in your own post..


By tastyratz on 9/23/2011 12:50:14 PM , Rating: 2
There is no jobs like the real jobs
So why not just go all futurama and pickle jar the remaining serviceable pieces? We can use a REALLY BIG pickle jar with a brushed aluminum lid, no fuss cables or loud fans. From there we can wrap the jar with a pliable lcd display backlit by Steve's mesmerizing aura. This of course may turn the screen yellow but that won't be a problem. As long as you don't use it on a sunny day... rainy day... on a boat... or with a goat you wont have overheating problems.

God help you if you hold the jar wrong though...


By Gondor on 9/24/2011 12:26:53 PM , Rating: 2
Magic !


By kitonne on 9/22/2011 5:10:55 PM , Rating: 2
It is a very slow death, as the founders did a great job building the company in the first place, and it still has many very talented engineers. It may take Meg + a couple more CEOs to kill it, but I am afraid LBID is right about where things are going.

It kind of makes sense - the founders were engineers trying to build something, while the current CEOs are only looking to maximize their take home payola. Their charter is to maximize "shareholder value", not to worry about employees, long term survival or growth of the company. As ElReg is saying: "ETHICS?! We've heard of them!"(TM)


By The0ne on 9/22/2011 5:48:16 PM , Rating: 2
Yep, Florina was bad. I can still remember the layoffs across the country lol.


Stock is back down....
By kitonne on 9/22/2011 4:52:04 PM , Rating: 3
after Meg stated HP will go forward with the plans put in place by the last (and unlamented) CEO.

"Reuters added that one of its sources said Whitman's elevation would not result in a reversal of Apotheker's key strategic moves, including the proposed spinning off of its PC division, and the eyewateringly expensive acquisition of British software vendor Autonomy."

http://www.theregister.co.uk/2011/09/22/whitman_hp...




RE: Stock is back down....
By snakeInTheGrass on 9/22/2011 7:03:44 PM , Rating: 2
Clearly Apotheker wouldn't have been brought in had the board not been OK with what he would have had to outline as his vision for where to take HP when talking to the board in the first place. Apotheker is apparently insane, but the board is no better - and if 'Meg stated HP will go forward with the plans' - the board knew that, too. Hell, she was ON the board, so they know that. And the board still sucks.

Anyway, I'm tired of the business I'm in too, I just need to let my wife know (run it past the board) that I'm going to quit and switch to being a enterprise software business. Higher margins, you know. Never mind current success, it's never too soon to trash your success and do crazy sh1t instead!


RE: Stock is back down....
By Makaveli on 9/22/2011 7:44:09 PM , Rating: 2
Is she is going to continue with leo's apeshit plans if you have any HP stock left SELL SELL SELL!!!!!


RE: Stock is back down....
By retrospooty on 9/23/2011 8:25:32 AM , Rating: 2
Ya, this really confounds me... They got rid of Apotheker due to his poor decision making, then announce his replacement and the fact that they are keeping with decisions he made. This is even more confusing because its not like its too late. All they did was announce it, its not like they closed shop altogether.

If they are OK with the decisions made, why dump Apotheker. The board is what is really screwed up here. Or at least equally as screwed as Apotheker.


RE: Stock is back down....
By sviola on 9/23/2011 8:42:48 AM , Rating: 2
All I can guess is this:

1 - Fire the CEO that took the decisions the market thinks are terrible;
2 - See stocks go up;
3 - Sell stocks;
4 - Profit


I can't take full credit for this, but...
By Taft12 on 9/22/2011 5:07:50 PM , Rating: 5
HIGHLY RECOMENDED A+++++ CEO WUD HIRE AGAIN!!!!!!




By retrospooty on 9/22/2011 5:35:36 PM , Rating: 2
ROFL !!!!

Give this man a 6+


Carly II
By pityme on 9/22/2011 9:06:53 PM , Rating: 1
Well I guess it was a "Politically Correct" choice but unless HP gets into home shopping or something similar, she will be out in less than a year also. I am sure her highest technical achievement is starting her computer in the morning (no small task for an HP computer) and able to get a clean boot to Windows.

After Carly II fails, HP need to clear out the entire Board of Directors. What a bunch of stupid idiots. All of them are one hit wonders who have not done anything lately to earn any support or respect. The main question is, by Puts for short term gains or margin short the stock. Decisions decisions.




RE: Carly II
By nocturne_81 on 9/29/2011 8:52:08 AM , Rating: 2
There are indeed plenty of competent female executives out there.. these arguments are boiling down to gender alone all too quickly..

But Whitman?!?!?! She's exactly the last person I would choose to head HP. Well... besides Mad Tony..


My nomination for HP's new CEO
By choadenstein on 9/23/2011 2:49:47 AM , Rating: 2
My nomination for HP's new CEO

http://www.youtube.com/watch?v=XI_9Yxr0blo




Kill the messenger...
By ZorkZork on 9/23/2011 6:36:44 AM , Rating: 2
I have no way of evaluating Mr. Apoteker... he might be really bad.

But it seems to me that there must be more to this story. How the hell could he have that impact on a ongoing business. Most of the decisions that determined the performance of the company during his reign were made before he assumed his position. Could it be that Mr. Hurd was inflating revenues or something similar?

That said, some of his decisions were wierd. Thought I'm pretty sure that killing WebOS was right.




By Arsynic on 9/23/2011 9:52:14 AM , Rating: 2
HP would do better to try and hire someone who doesn't have a vendetta to destroy their former employer. It's obvious that Apotheker was way out of his league and the consumer market was too complex for him to understand, so he tried to turn HP into a company that he thought he knew how to run. What an idiot.

HP is so damn bi-polar these days. That board needs to be cleaned the fuck up.




Wow, another woman in charge...
By klstay on 9/23/2011 11:48:00 AM , Rating: 2
...guess they will be learning that lesson a 2nd time, eh?

Seriously, though, HP is a dead company; they just do not know it yet and they are too big to simply waft away on the breeze overnight. They ONLY thing they currently have in common with that amazing original company is the name.




Re: severence package
By wallijonn on 9/26/2011 11:47:31 AM , Rating: 2
quote:
HP agreed to pay Mr. Hurd between $28M and $50M USD in severance benefits


Which probably means that $28MM to $50MM dollars worth of employees will be fired, which translates roughly to about 1000 employees worth. That may represent a large chunk of WebOS employees, though. Then add another $10MM for their severance packages and another $5MM for extended medical benefits.





"If you can find a PS3 anywhere in North America that's been on shelves for more than five minutes, I'll give you 1,200 bucks for it." -- SCEA President Jack Tretton














botimage
Copyright 2014 DailyTech LLC. - RSS Feed | Advertise | About Us | Ethics | FAQ | Terms, Conditions & Privacy Information | Kristopher Kubicki