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
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
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. (MSFT) decided 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.