HP Considers Ousting Apotheker as CEO: Reports

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."