Print 13 comment(s) - last by T2k.. on Sep 18 at 8:03 PM

Shareholders are outraged that the HP board is encouraging Léo Apotheker to chop the company up and retry the bid to compete with IBM/Oracle, which he previously failed at with SAP AG and was subsequently fired for.  (Source: Bloomberg News)

The investors are suing HP, trying recoup their losses based on the subsequent beating the stock took.  (Source: AFP)
Outrage is growing at new CEO's wild restructuring plans

Hewlett-Packard Company's (HPQ) CEO Léo Apotheker has quite the troubled past.  As the leader of SAP AG (ETR:SAP) he was fired for failing to help the company keep pace with American business software rivals International Business Machines, Inc. (IBM) and Oracle Corp. (ORCL).  To make matters worse, on his watch SAP engineers copied Oracle source code in an infringement case that ended up costing SAP $1.3B USD.

To the shock of many, HP's board hired on Mr. Apotheker to replace the departing Mark Hurd and allowed him to drastically transform the company, killing its webOS mobile devices
 and working to spin off the company's personal computer unit, which is currently leading in global and U.S. sales.  

Many shareholders were appalled at the board's decision
 to allow Mr. Apotheker to chop up the company and retry the enterprise software bid he already failed once at.  Plummeting share prices in the wake of these decisions equally appalled them.  They've now taken up legal arms and are suing the company for damages.

The suit, reported
 by Reuters, was filed by high-power San Diego, Calif. law firm Robbins Geller Rudman & Down.  Robbins Geller Rudman & Down cites its specialty as "Focusing on the representation of defrauded investors."

Indeed, the firm claims exactly that in the HP case.  It says that HP and its CEO planned well in advance to cut loose the profitable PC business and to bury the webOS device lineup.  They accuse HP of hiding these plans from investors, which allowed stock prices to be artificially inflated.

When the company abruptly announced the plans during its quarterly earnings report, the stock dropped 20 percent in a single day, the largest drop since the Black Monday stock market collapse of 1987.

The suit seeks class action status for anyone who bought HP stock between November 22, 2010, and Aug 18 of this year.  The suit's first named plaintiff is Richard Gamel, a major shareholder who lost a great deal of money after HP's wild change of course plunged the company's stock.

Some view HP's plans with cautious optimism.  After all, despite Mr. Apotheker's questionable track record, HP's enterprise software business is its most profitable asset and IBM went through a similar divestment of its own personal computer lineup.

However, critics are quick to attack that theory.  When IBM sold its personal computer line to the Lenovo Group, Ltd. (
HKG:0992) it was currently in fifth place in the market and the unit was a much smaller part of the company's total revenues, so it was much less of a culture shock.  Furthermore, critics point out that IBM and Oracle typically practice a shrewd acquisition strategy most acquiring "bargains".  By contrast, the critics say, HP is thought to be grossly overpaying with its $12B bid for UK enterprise software powerhouse Autonomy, Corp. Plc. (LON:AU).

Comments     Threshold

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

My goodness...
By room200 on 9/16/2011 12:39:11 PM , Rating: -1
All these frivolous lawsuits.

RE: My goodness...
By drycrust3 on 9/16/2011 1:54:54 PM , Rating: 5
I guess it would seem frivolous to those who have no regard for HP. Here is one of the most respected and top selling computer companies in America deciding to get rid of its main sources of income and the reason it is held in such high regard.
Maybe you would understand it better if the motor car equivalent was that Ford gave up making cars, vans, and SUVs, but decided to keep making trucks and wanted to buy a women's magazine publisher. They would be selling not just a profitable side of the business, but also they would be buying into a business which they have little experience running.
It is estimated that within the next 4 years more than half the people that regularly access the internet will start to do so via a mobile device (as in "while being mobile", and not "just transportable"), that means hundreds of millions of people will need one or more of a notebook, a tablet, or a smartphone. HP had products in each of these lines, and they had an Operating System that had avoided patent litigations as well.
And what does the HP Board of Directors do? Bins tablets and smartphones, flogs off the notebook division to the lowest bidder, and shelves the operating system ... oh, and buys a software company that has no relevance to any of this.
For the same amount of money they could have produced several really outstanding tablets and smartphones and still had money to play with.

RE: My goodness...
By ancient46 on 9/16/2011 2:29:39 PM , Rating: 2
Maybe if you worked for HP and were getting close to retiring and the stock was a major portion of your retirement package. you would feel much differently. Seeing a major part of your retirement funds take a major hit from the questionable programs of a failed CEO, might make you more likely to think the suit is needed.

RE: My goodness...
By room200 on 9/16/2011 7:15:29 PM , Rating: 2
I was being sarcastic.

"We can't expect users to use common sense. That would eliminate the need for all sorts of legislation, committees, oversight and lawyers." -- Christopher Jennings

Copyright 2016 DailyTech LLC. - RSS Feed | Advertise | About Us | Ethics | FAQ | Terms, Conditions & Privacy Information | Kristopher Kubicki