May 17, 2011

Hewlett-Packard CEO Not Inspiring Confidence

A leaked memo from Hewlett-Packard (HP) CEO Leo Apotheker warns of "another tough quarter", underscoring concerns about the growth strategy of the company and the challenges facing its fresh leader, reports the Associated Press (AP).

Coming to light on Monday, the May 4 memo sent HP shares tumbling. HP abruptly moved up its earnings report to Tuesday morning. It had originally been scheduled to Wednesday afternoon.

The 72-year old tech giant is struggling to find ways to boost sales without chasing bottom-feeder deals that eat away at profits. It is a difficult path that many analysts believe HP hasn't cracked yet. The company is also just settling down from the abrupt departure of its previous CEO, Mark Hurd and the replacement of a third of the board of directors.

Although Wall Street loved Hurd, HP's market value nearly doubled under Hurd's five-year watch, many HP employees were unhappy under Hurd's leadership because of extensive cost cuts.

Hurd resigned after a sexual harassment scandal. The board found no evidence of harassment, but did conclude that Hurd submitted inaccurate expense reports for outings with his accuser. Hurd now works as co-president of Oracle Corp., a longtime HP partner turned bitter rival.

With its stock fallen nearly 20 percent since the last earnings announcement in February, Apotheker is struggling with the task of holding together the mass of disparate business ventures acquired under Hurd.

HP, long renowned for its printers and personal computers, is now a factor in the computer networking and technical services, which has caused rifts with business allies and created new rivals within the industry.

Apotheker, who took the helm in September, wants to push into new sectors such as cloud computing, helping companies to revamp their data centers. "HP has been known historically for consistency," said Gleacher & Co analyst Brian Marshall. "Now they are known for inconsistency," reports Reuters.

The company is not planning any job cuts but will watch its head count, "We will manage our costs very prudently ..., including our salary costs," Apotheker said. "We want to create enough resources to expand our business."


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