September 22, 2011
Is HP’s Apotheker’s Job In Jeopardy?
With sales-forecast cuts, investor frustrations and a shift in strategies, Hewlett-Packard Co. is debating on ousting its beleaguered CEO Leo Apotheker and putting a stop to a critical move to spin off its personal computer business, according to people familiar with the matter.
If Apotheker does go, HP could appoint former eBay Inc. CEO Meg Whitman, who is currently an HP director, to serve as an interim leader, the source, who asked not to be named because the plans were not made public, told Reuters.
HP directors met yesterday and will reconvene today as a full board, according to the source. Directors are concerned about the stock price and the lack of improvement under Apotheker´s reign. Some top HP executives also opposed the acquisition of Autonomy Corp., a deal pushed by Apotheker, said the source.
Stock in HP jumped $1.51 -- 6.7 percent -- to $23.98 yesterday on the NYSE after Bloomberg reported the possible management shift. HP´s stock is still down 44 percent since Apotheker took control of the company on November 1, 2011.
Another CEO change would make it HP´s seventh leader change since 1999, when Carly Fiorina took over from Lewis Platt. It would be the third CEO in a row that has been forced out by the board.
The computer giant is fighting to restore its credibility as a powerhouse. During Apotheker´s 11-month tenure, he slashed sales forecasts repeatedly, backtracked on promises to integrate Palm´s WebOS software into devices, and struggled to reverse the stock plunge.
According to analysts, the odds have been stacked against Apotheker right from the beginning. Venture capitalist Ray Lane has argued that previous management underinvested in areas including software and services.
Whitman has seemingly been approved by investors as a possible interim leader. She joined the company last year after a failed attempt to become California´s governor.
Whitman spent 10 years at the helm of eBay and established a career at consumer-related companies. Her time at eBay was filled with ups and downs. She took the company public and pioneered ecommerce for small businesses. Yet in the final years of her tenure, she couldn´t stop a slowdown in sales growth and overpaid for Skype Technologies after a bidding war with Google and Yahoo.
But any successor to Apotheker will need to do a better job communicating the company´s vision to shareholders, said Tony Ursillo, an analyst with Loomis Sayles & Co. in Boston, which owns shares in HP. “Leo´s tenure as CEO has been disastrous.”
HP is dealing with scornful criticism from Wall Street -- along with a barrage of shareholder lawsuits -- over its recent strategic decisions and the disorganized way in which they have been communicated.
HP perplexed investors in August when it killed off a highly-touted line of mobile devices including the Touchpad and declaring it may spin off its massive PC division. And Apotheker´s takeover of Autonomy was considered a costly mistake. The $12 billion price tag on the cloud-computing software firm struck a nerve with investors, as there were no clear-cut clarifications of how the business would have fit into or help drive HP.
“If (HP) fires Apotheker, cancels Autonomy deal, and keeps PC division, it'll be great for the stock -- and every director should be arrested,” outspoken hedge fund manager Eric Jackson said on Twitter in reaction to the news.
The ouster of Apotheker has been expected by some for a while now. Lane had been taking a more visible role in past weeks and has accompanied Apotheker to visit investors to try to clarify HP´s strategy. He also replaced Apotheker last week at an industry conference to defend HP´s strategy shifts and clear the confusion that followed in the market.
The Autonomy deal may prove to be too difficult to walk away from, even if HP wanted to, according to the anonymous source. He said he believed the deal was not an issue at the time, however.
The board will, however, be debating over the fate of HP´s PC division. HP has said a decision on the division´s fate is expected by the end of the year.
“It's unclear if they wish to change this current strategy, or just change the messenger,” said Collins Stewart analyst Louis Miscioscia.
“It´s not going to be easy,” said Michael Mullaney, who helps manage $9.5 billion, including Hewlett-Packard shares, at Fiduciary Trust in Boston. “They have to go back and redefine what they want to be as a company, go back to the drawing board.”
The company needs a leader who can challenge the biggest providers of technology for corporations, such as IBM, Oracle and Cisco, said Shaw Wu, an analyst at Sterne Agee& Leach Inc. in San Francisco.
“They basically need a turnaround specialist,” Wu said. “It´s not going to be an easy role, whoever it is. Autonomy and the PC business -- they´ve got to figure out what to do there because not everyone thinks those are necessarily the right moves.”
Besides Whitman, other possible candidates that would make sense include Gary Moore, chief operating officer of Cisco Systems Inc., or Steve Mills, who runs the software unit at International Business Machines Corp., said Shaw Wu, an analyst at Sterne Agee& Leach Inc. in San Francisco.
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