Company Gains $3 Billion on Paper

 
 
By Chris Preimesberger  |  Posted 2011-09-22
 
 
 

HP Axes CEO Apotheker, Meg Whitman Takes Over


PALO ALTO, Calif. -- Hewlett-Packard on Sept. 22 fired CEO Leo Apotheker, the man it had selected to lead the company into the 21st century, after 11 months on the job.

HP's embattled board of directors immediately installed one of its newest members, former eBay CEO Meg Whitman, 55, to replace Apotheker on a permanent basis. It had been widely speculated that whoever replaced Apotheker would do so in an interim role.

HP, the world's largest IT company by sales volume, whose rock-solid administrative reputation for 60 years has turned simply rocky in the last decade, is shifting away from the personal computing sector to focus on the more profitable enterprise software and services markets. Apotheker, 58, who came to HP from German enterprise software maker SAP with great fanfare in September 2010, turned out not to be the person to lead the way.

Apotheker was fired because of "his poor execution and a lack of leadership," a source told The Wall Street Journal.

Former Oracle President and current venture capitalist Ray Lane has moved from non-executive chairman to executive chairman of HP's board of directors, and the board intends to appoint a lead independent director promptly, HP said. With the exit of Apotheker, the HP board now has 13 members.

Whitman (left) joined the board in January 2011 with four other new directors after losing the previous November to former Gov. Jerry Brown as the Republican candidate for governor of California. She becomes the second female CEO of the company. Carly Fiorina, who ran unsuccessfully on the Republican ticket for the U.S. Senate seat held by incumbent California Democrat Barbara Boxer, served as HP's CEO from 1999 to 2005.

The news came two days after HP announced that is starting layoffs of as many as 500 workers in its webOS division, after stating a month ago that it was shutting down that operation. However, a source at the company told eWEEK that the pink slips are now being withheld until "further notice."

The HP board also is reconsidering its Aug. 18 announcement that it will spin off or shutter the company's market-leading PC business, sources with knowledge of the company told eWEEK.  

Great Ups, Downs in Short Tenure

Apotheker (pronounced Appo-tecker) had seen great ups and downs during his brief time at HP. On his watch in February 2011, HP launched its first tablet PC (the TouchPad) and two smartphones (the Pre3 and Veer), all of which run on the webOS system HP inherited when it acquired Palm Computing for $1.2 billion in 2010.

At that time, Apotheker (right) announced that HP had decided to propagate the webOS to every computer it makes-laptops, desktops, servers, storage arrays and printers-and that the webOS would run "alongside" Windows, Linux and other operating systems. But it was never made clear exactly what that potential OS handshake would do to improve the devices.

After the TouchPads and phones came into the marketplace in July 2011 and didn't sell well, Apotheker replaced Jon Rubinstein, head of the webOS group, on July 11 and announced it would pull all the webOS computers and phones from the market. HP then decided to lower the price of the TouchPads to $99, and they promptly became the best-selling such device on the market until they sold out.

Meanwhile, the stock price continued to tank. Later, on Aug. 18, Apotheker announced at the company's quarterly earnings conference call that HP had decided to do away with the webOS division entirely, as well as the long-established and highly successful Personal Systems Group, which recorded $41 billion in sales in 2010.

Largely as a result of all this uncertainty, HP saw its stock price plunge by as much as 47 percent while it cut revenue forecasts at least three times. At the same time, Apotheker proactively tried to shift HP's focus to software, announcing that it was going to buy infrastructure software maker Autonomy for $10 billion to boost its enterprise software portfolio in search, content management and several other areas.

Although the Autonomy transaction has not yet closed, it likely will be consummated despite the change in leadership.

Company Gains $3 Billion on Paper


Company Gains $3 Billion on Paper in One Day

HP shares jumped 7 percent on Sept. 21 to a shade under $24 on the initial report by Bloomberg News that Apotheker might be replaced. Wall Street analysts estimated that the one-day surge added $3 billion to the value of the company.

Apotheker, a former chief executive of German software manufacturer SAP, was announced on Sept. 30, 2010 to replace another ousted HP CEO, Mark Hurd, who had become enmeshed in an internal administrative snafu and a sexual-harassment lawsuit brought by a female contractor.

A month to the day after his ouster, Hurd moved to HP competitor Oracle on Sept. 6, 2010, where he became co-president of the company under longtime friend and ally Larry Ellison.

Apotheker had a 20-plus-year career with SAP in several positions before being named sole CEO in May 2009 after serving as co-CEO with Henning Kagermann for one year.  He resigned under pressure in February 2010 after SAP earnings reports slumped on his watch during the macroeconomic crisis of that time.

The HP board, which has often absorbed flak from shareholders, analysts and former board members ever since it broke ties with the Hewlett and Packard families 10 years ago during the Compaq acquisition, is getting close scrutiny again as a result of a solid 12 months of problems.

There's more intrigue. A report in The New York Times late Sept. 21 detailed the recruitment of Apotheker and contended that most of the board members never even met Apotheker before he was hired-as unbelievable as that sounds.

"The board has to have some level of culpability here," longtime IT industry analyst Steve Duplessie of Enterprise Strategy Group told eWEEK. "They picked him. They let him publicly say he was getting rid of the PC business-which effectively gives HP buying power across their entire spectrum of offerings-then backpedal all over the place.

"An interim CEO ... will do nothing other than calm things down and slow things down, and then after a much-thought-out search, we'll have a new chief. That interim CEO ought to publicly declare that the PC business is absolutely not for sale [even if it is], stem the tide of customer defections and shore up market sentiment," Duplessie said. "In short, the next CEO will have to be a much better public relations person than Leo. His strategy may prove to be correct, but his communications skills will not. On a positive note, it seems startups and smaller companies can sleep better knowing even the big dogs are all screwed up, too, sometimes."

Whitmans Qualifications and Whats Shes Been Doing Lately


What Whitman Has Been Doing Lately

Since her election loss in November 2010 for the California governorship-a campaign in which she spent a well-chronicled $150 million of her own money-Margaret Cushing Whitman has consulted for legendary Sand Hill Road VC firm Kleiner Perkins and serves on the boards of directors of several other organizations.

Whitman, a native of Long Island, N.Y., and now a resident of Atherton, Calif., is a graduate of Princeton University and Harvard Business School. She worked at The Walt Disney Company as vice president of strategic planning in the 1980s. She also has served as an executive for DreamWorks, Procter & Gamble, and Hasbro.

Whitman was president and CEO of eBay from 1998 to 2008. During her tenure, the company grew from 30 employees and $4 million in annual revenue to more than 15,000 employees and $8 billion in revenue. Although she has experienced success in business throughout her career, Whitman has worked exclusively in the consumer sector and has never worked at or run an enterprise-focused company.

Although HP has extensive global consumer IT businesses involving PCs, printers and other devices, its shift away from the consumer sector to a sharper focus on enterprise hardware, software and services does not align with her background.  

HP Employees' Takes on Apotheker

According to nearly 3,000 HP employee reviews and ratings on Glassdoor, a jobs and career community, HP employees gave Apotheker a cumulative 58 percent approval rating (42 percent disapproval).

Apotheker's approval rating had been on a steep decline over the past few months; this past month he held a 25 percent approval rating (75 percent disapproval). When Hurd was fired, he held a cumulative 34 percent approval rating (66 percent disapproval) among HP employees, and interim CEO Cathy Lesjak held a 55 percent approval rating (45 percent disapproval) during her brief term as the top executive in 2010. The average approval rating for CEOs on Glassdoor is 62 percent.

Some HP employees also shed some light on what it's been like to work under Apotheker during the past year. For example, one HP marketing director recently commented: "Fire Leo. The man is flat-out incompetent. We've gone from one fiasco to the next under his reign."

Overall, HP employees gave the company a 2.5 (O.K.) rating (based on a 5-point scale).  

eWEEK East Coast Managing Editor Jeff Burt contributed to this story.

Editor's Note: This story was updated to state that former HP CEO Carly Fiorina ran unsuccessfuly for the U.S. Senate in 2010.

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