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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.

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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 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.

"I modded down, down, down, and the flames went higher." -- Sven Olsen

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