In a shocking development on Aug. 6, Hewlett Packard announced that its CEO, Mark Hurd, had left HP over investigative findings that he had violated HP’s standards of business conduct. The investigation was launched after claims of sexual harassment were made by a former HP contractor. Hurd was quick to point out that the investigation made it clear to him that he would have difficulty being “an effective leader at HP.” The company made its chief financial officer, Cathie Lesjak, interim CEO.
Hurd’s departure from HP could spell trouble for the venerable company. Although it is enjoying success, much of that is due to Hurd’s leadership. And with its Palm plans still in their infancy, it’s not unreasonable to question whether the company’s next leader will have the same vision as Hurd. Simply put, there are some major question marks at HP, and the longer they remain unresolved, the more it will hurt the tech company.
Here, eWEEK takes a look at how Hurd’s departure will hurt HP.
1. It’s an investment game
Make no mistake: The goal of any major tech company is to maximize shareholder value. The only way to do that is to reduce expenses, increase revenues and ultimately see profits soar. When a CEO who has done as good a job as Hurd leaves, shareholders tend to get worried. And when that happens, they usually start selling off shares for fear of the next CEO ruining things. Everything might be fine in the beginning, but the longer it takes HP to overcome the hurdle of Hurd’s departure, the harder it will be to attract shareholders.
2. Hurd turned things around
Let’s not forget that Mark Hurd was integral to the success of HP over the last five years. When Hurd took over from Carly Fiorina, HP was a shadow of its former self. Just about everything was going poorly for the company. Hurd worked hard to give the company a new vision. He also revamped its computing division to give it a better focus. He made HP an unbridled success: the world’s top PC manufacturer, as well as a major player in the enterprise. Now that he’s gone, stakeholders need to start hoping that someone else can maintain that same level of success.
3. What will become of Palm?
When HP acquired Palm earlier in 2010 for $1.2 billion, there was speculation as to how it would help the company. With Hurd at the helm, most folks believed that he would capitalize on Palm’s past success and generally improve HP’s software portfolio through the use of WebOS. But now Hurd is gone, and the key decision maker that decided Palm’s fate isn’t there to lead it into the next decade. Will the new leader utilize WebOS and revamp the Palm product line? Will HP lose its way in the mobile market? Without Hurd, the latter possibility seems more likely than ever.
4. Acer’s opportunity
As Acer continues its trek to become the world’s top PC maker, maybe Hurd’s departure is exactly what the company needed to finally take that crown. For a while now, HP has been able to keep Acer at bay, mainly through its ability to attract corporate customers. But with Hurd out and HP in confusion, Acer can take advantage of the situation. With the right strategies and a focus on value, Acer might not have much trouble taking over the PC business.
5. Tech strategists are needed
When HP announced that its CFO was taking over the company until a suitable replacement for Hurd could be found, some who follow the tech world cringed. Lesjak might be a financial wizard, but Hurd’s value to HP was his ability to see the tech space for what it is and capitalize. As a CFO, it’s unlikely that Lesjak has that ability. The longer HP takes to find a replacement who has the kind of understanding of the industry that Hurd had, the worse it will be for the PC maker. CFOs are great, but they aren’t ideal in the CEO’s chair-especially in the tech industry.
Its Tough to Find a Winner
6. It gives Microsoft the upper hand
If nothing else, Hurd’s departure gives Microsoft more power. Since Hurd has been at HP, he has been tough on Microsoft. When the software giant released Windows Vista and Hurd found that it wasn’t selling as well as he would have liked, he offered customers downgrade rights to Windows XP. He also took Microsoft on in the corporate arena. He has been a thorn in Steve Ballmer’s side all the years he has been at HP. Now that he’s gone, Microsoft has the upper hand. And when a new CEO joins the company, the last thing he or she will be worrying about in the first days is HP’s relationship with Microsoft. Microsoft can capitalize on that.
7. It’s tough to find a winner
When Hurd joined HP, the company didn’t know for sure what it was getting. It didn’t know if it was getting a CEO who would lead the way Fiorina did, or if it would get someone who would do an extremely fine job. Luckily for HP, it got the latter. But getting lucky twice in five years isn’t easy. In fact, it’s nearly impossible. Realizing that, HP will have a hard time finding a CEO who can run the company the way Hurd did. In fact, that search could take years. And the longer it takes, the worse it will be for HP.
8. The future was looking bright; now what?
The future looked great for HP. The company was well on its way to greater revenue and success. And although HP says the future still looks good for its business, what will happen once the year is over and it needs to get working on innovative new strategies to keep its competition at bay? When Hurd was at HP, he had a vision of what the company would look like in a few years, and he knew what he had to do in order to make that vision a reality. With a new CEO coming in, that vision could be different, and depending upon the new CEO’s expertise, HP’s chances of being successful in the increasingly competitive tech marketplace could be significantly hurt. It should be interesting to see what HP’s future looks like.
9. New leadership brings new challenges
Whenever a new leader takes over a company, there is a transitional period. New CEOs need to find reliable support staff to help achieve their goals, they need to find out about how the company operates and, most importantly, they need to determine what programs to keep and which they should end. For a company competing in the tech space, like HP, going through that transitional period often is not a good thing. It typically sends a company into turmoil for a while, and allows the competition to gain on them.
10. Corporate culture dictates success
Part of the role of the CEO at any major company is to create a corporate culture. That corporate culture helps set the tone for how the company should operate, and what will guide its strategies in the future. Hurd built a corporate culture that his employees bought into. Now, the onus is on the next CEO of HP to either keep that corporate culture going or create a new one that employees can get behind. That might be difficult, given how successful Hurd’s culture has been over the past five years.