HP Selects Former SAP Chief as Its New President, CEO

HP Selects Former SAP Chief as Its New President, CEO

Hewlett-Packard elected to go the road less traveled to find its new chief executive officer.

After a nearly two-month search, the world's largest IT company on Sept. 30 named former SAP chief executive Leo Apotheker, 57, as its new president and CEO, replacing Mark Hurd.

It was a move few industry people saw coming.

In choosing Apotheker, HP bypassed several highly placed insiders, including Todd Bradley, executive vice president of HP's $40 billion Personal Systems Group; Ann Livermore, EVP of HP's $54 billion Enterprise Business unit and a 30-year HP veteran; David Donatelli, EVP and GM for Servers, Storage and Networking; and Marc Andreessen, entrepreneur, HP board member since 2009 and creator of Moziac, the first graphical Web browser.

The HP board also named former Oracle President Ray Lane to its membership. Lane currently serves as managing partner at the celebrated venture capital firm of Kleiner Perkins Caufield & Byers in Menlo Park, Calif. Lane was designated non-executive chairman of the company.

Naturally, Apotheker will join HP's board of directors. Both appointments are effective Nov. 1, 2010, the company said.

HP's stock price closed at $42.07 but was down about 3 percent to $40.82 in after-hours trading.

Apotheker, a native of Aachen, Germany, served at SAP for 20 years but lasted less than two years as CEO of the Germany-based database company, from April 2008 to February 2010.

Apotheker resigned his position under pressure at SAP on Feb. 7, 2010, when the company failed to deliver on its cloud and mobile market strategy, losing key market share to Oracle-ironically the new employer of his predecessor, Hurd.

Hurd was named co-president of Oracle on Sept. 6, one month after leaving HP in a forced resignation following charges of sexual harassment by a former HP employee. Hurd has since settled the complaint out of court.

New CEO had rough sailing at SAP

Apotheker's resignation last February came as SAP was locked in a fierce global market share battle with Oracle over the enterprise business applications that both companies develop and sell. These applications include accounting, financial management, general ledger, human resources and others that are the operational bedrock of all large enterprises.

His resignation also came a little more than a week after SAP announced a 12 percent decrease in operating income for the full year 2009.

In May 2010, only a few months after Apotheker left SAP, the company decided to acquire Sybase to help fill out those market needs.

Reaction Immediately Starts Coming In

Apotheker, fluent in five languages (English, French, German, Dutch and Hebrew), currently is a board member of AXA and Schneider Electric SA. He is a graduate in international relations and economics from the Hebrew University in Jerusalem.

Interestingly, Apotheker's appointment to lead SAP in 2008 was the first time that a large German company was run by a Jewish executive whose parents escaped the Holocaust.

When the Nazis invaded Poland, Apotheker's parents fled to the Russo-Chinese border. After the war, they settled in Aachen, near Belgium. Apotheker was born there in 1953 and later moved to Antwerp.

"If SAP had a pre-war history, I would never have joined the company," he told The Economist in an interview.

Naturally, HP published its board members' official takes on the selection of Apotheker.

"Leo is a strategic thinker with a passion for technology, wide-reaching global experience and proven operational discipline-exactly what we were looking for in a CEO," said Robert Ryan, lead independent director of the board. "After more than two decades in the industry, he has a strong track record of driving technological innovation, building customer relationships and developing world-class teams.

"Leo has been a leader in anticipating the transformation taking place in our industry, and we believe he is uniquely positioned to help accelerate HP's strategy. He has demonstrated success in the U.S. market and also has vast international experience-which will be a major asset as HP continues to expand globally, particularly in high-growth emerging markets. HP has the right assets and market positions, and now we have the best team to realize the company's enormous potential," Ryan said in a prepared statement.

Lane said he has "known and admired Leo for almost 20 years. He is ideally suited to build on HP's strong foundation, leverage its many assets and keep the company at the forefront of innovation."

Analysts have their say

Analysts, of course, had their immediate reactions.

Ezra Gottheil, IT hardware analyst with Technology Business Research, told eWEEK that Apotheker's major attribute is that "he's an ex-software CEO. HP's kind of got its ducks in a row now with hardware: They're driving market share in PCs and servers, they've put acquisitions in place for networking and storage, and in mobile devices with Palm.

"They've got a services business that they've successfully integrated, so what's the final frontier? Software has been a kind of stepchild at HP for a very long time. How do you protect software margins, which they haven't succeeded at doing, ever? You put a software CEO at the top of the organization."

Stuart Williams, a software industry analyst with TBR, wrote in a flash report that
the appointment of Apotheker "fills a gap in HP's expertise. HP is now a three-way player: HP is confident that hardware and services are on positive trajectories, and is once again filling out its portfolio by strengthening the third leg of the IT stool: hardware, software and services."

The experience Apotheker brings in running and selling an enterprise software company is directly beneficial to HP, Williams wrote.

"Given the strong margin contribution of enterprise software, TBR believes Mr. Apotheker will reinvigorate the software portfolio under the HP Software and the Enterprise Server, Storage and Networking (ESS&N) divisions as a highly profitable lever that can help to quickly lift overall HP profitability. The appointment reinforces the perceived importance of outside experience in running the software business following the hiring of ex-Microsoft executive Bill Veghte as the head of the HP Software and Services division," Williams wrote.

Veghte is a 19-year Microsoft veteran who recently ran the Windows franchise.

New man an unknown quality for many U.S. IT people

Apotheker, who has been described as flamboyant by some European IT people, is a relatively unknown personality for many U.S. industry people.

"In short, we don't know much about him-but he ran a really big software company," Steve Duplessie, principal at Enterprise Strategy Group, told eWEEK. "That's what I find most interesting-he didn't run any traditional product businesses, HP's bread and butter, but did run a major enterprise software company.

"With Hurd going to Oracle, maybe the HP board is ready to take on the software giant next? It's pure speculation, of course, but if you wanted to find a new area of business where you don't really play that generates many billions annually, why not that space?  Maybe HP buys SAP next ..."

Editor's note: This story has been updated to add more detail on Apotheker's background and comments from analysts. It has also been updated to correct the amount of revenue generated by HP's Enterprise Business unit and the Personal Systems Group. eWEEK West Coast Managing Editor John Pallatto also contributed to this story.