HP's board of directors reportedly is considering firing CEO Leo Apotheker and replacing him, at least temporarily, with former eBay CEO Meg Whitman.
Hewlett-Packard's
board of directors reportedly is mulling over a move to oust CEO Leo Apotheker
after a tumultuous tenure of less than a year that was replete with
disappointing financial forecasts and significant company strategy shifts.
Bloomberg News and
Forbes, quoting unnamed sources, are both
reporting that directors may fire Apotheker when they meet Sept. 21 and replace
him-at least on an interim basis-with former eBay CEO and current HP board
member Meg Whitman.
The move would
come after one of the rockiest years in HP's history. Under Apotheker's watch,
the technology giant saw its stock price plunge by as much as 47 percent while
he cut revenue forecasts at least three times. In addition, Apotheker
aggressively tried to shift HP's focus software, most significantly with the
announcement last month that it was planning to
spin off its market-leading PC business and end
development of webOS-based devices.
At the same
time, the company announced it was buying infrastructure software maker
Autonomy for $10 billion to boost its enterprise software portfolio.
The moves made
sense to many industry analysts, who said it would enable HP to better compete
with the likes of IBM, Cisco Systems and Dell in the converged infrastructure
and cloud-computing markets. However, it didn't seem to sit well with investors
as the stock price dropped following the announcement, and shareholders became
unsettled at a time they already were feeling uneasy about the direction of the
company.
In particular,
the
decision on the webOS devices came a year after
HP bought mobile-device maker Palm for $1.2 billion, in large part to acquire
the webOS mobile operating system. In March, HP executives reportedly planned
to use
webOS not only in its mobile devices but also in PCs.
The decision also came only six weeks after HP released its TouchPad tablet to
the market. Though it got mixed reviews upon its release,
the TouchPad's popularity shot up after HP
executives announced it was killing the device and put the remaining tablets on
sale for $99.
All of this
contributed to the downward spiral in HP's stock price and fueled speculation
that the company could be an acquisition target itself, with Oracle rumored to
be among the interested buyers.
Despite the
rampant shareholder dissatisfaction with Apotheker and the direction of the
company, HP may be setting itself up for more troubles if it fires him after
less than a year, according to Rob Enderle, principal analyst for The Enderle
Group.
"I think it
would appear to be rash to the market and make it even more difficult for the
firm to hold large customers and top executives let alone attract another top
CEO," Enderle said in an email to
eWEEK.
"Employees and customers of companies like HP expect stability, and a third or
fourth CEO in rapid succession would make HP appear just too risky to
most. It would likely be better, if they are to make a change, to wait and
make one strong one rather than two in quick succession."
He also said
that if the board is considering such a move, the fact that it leaked out to
the media before a decision was made is further indication of the company's
problems at the highest levels.
"If they are
thinking about doing this, their inability to contain this information is
showcasing once again that the lack of security around decisions like this is
doing more harm to them than competitors and the economy combined," Enderle
said.
He also noted
that despite the bump in the company's stock price after the initial reports of
Apotheker's possible removal, HP needs to go a long way to restore its image of
stability.
"Currently,
the market isn't happy with Leo, and it is reacting positively on the rumor;
however, it wants HP to get to a stable state of predictability, and another
interim CEO won't do that," he said. "It would be a tactical move in a company
that desperately needs a strategic one. If it is going to make a change,
this one needs to be handled better and remain in place long enough for HP to
be seen as stable again or the firm is likely to start slipping again very
shortly."
Charles King,
principal analyst with Pund-IT Research, said the move by board members could
be viewed as rash, but noted that they need to take their share of
responsibility for any failures over the past year.
"On one hand,
HP's stock has been hammered since Apotheker came onboard, so it'd be easy to
dismiss him as a sop to the market," King said in an email to
eWEEK. "At the same time, CEOs do not act
without the explicit approval of the board-in other words, there isn't anything
Apotheker has done that the BOD [board of directors] didn't sign off on. If HP
truly believes that it needs to fundamentally reorganize itself, turning their
CEO into a whipping boy won't change that."
Apotheker came
to HP after former CEO Mark Hurd was forced to resign over questions about his
personal and professional conduct. Hurd had been praised for bringing a sense
of stability to the company after the volatile tenure of Carly Fiorina and a
corporate spying scandal that encompassed the board around the same time.
However, he also was criticized for deep budget cuts and hindering HP's history
of innovation through such acts as slashing the company's R&D budget.
Hurd now is
co-president of software maker and HP rival Oracle.
Apotheker came
to HP in 2010 after being fired earlier in the year from his position as CEO of
software giant SAP. Given his record at SAP, his appointment to the HP spot
came with a mix of praise and skepticism. Some analysts questioned his ability
to run a company with a strong hardware business after spending his career in
software. However, others said he had the opportunity to undo some of the
problems Hurd left behind and to improve morale within the company and
enable HP to again become a thought leader in the industry.
With
Apotheker's tenure now in doubt, it's unclear in what direction HP will head.
King said it could mean the board may decide to keep the PC business, though
that might not make the most sense.
"It ...
depends on just how shaken the BOD is," he said. "I understand the controversy
over the move-PCs have defined HP since Carly Fiorina was CEO. But HP isn't the
only company trying to migrate away from lower-margin businesses. And the
concept of reshaping the company as more of a direct competitor to IBM and
Oracle makes good strategic sense."
There's also
the risk of further turmoil should Apotheker be fired, according to King.
"Getting rid
of Apotheker couldn't be done in a vacuum," he said. "There are numerous
executives who came to HP in the past year as the result of Leo becoming
CEO, and my guess is that many of them would leave if he does. So firing him
would create considerable turmoil for a company that has been in turmoil for
over a year (since Mark Hurd was bounced, really, though you could argue that
his drastic cost-cutting and layoffs caused similar distress).
"At the end of
the day, HP's BOD has three critical audiences to address: major shareholders,
the broader market and company employees. No matter what choice it makes, it's
unlikely that the board will be able to please or satisfy them all."
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