HP’s Board Is Said to Weigh Ousting Apotheker After Less Than Year as CEO

Hewlett-Packard Co. (HPQ), facing investor frustration over sales-forecast cuts and jarring strategy shifts, is considering replacing Chief Executive Officer Leo Apotheker, two people familiar with the matter said.
The board may appoint Hewlett-Packard director and former EBay Inc. (EBAY) CEO Meg Whitman as Apotheker’s successor, possibly on an interim basis, said one of the people, who asked not to be named because the plans aren’t public. The board also is reconsidering a proposal to spin off the company’s personal- computer unit, another person said.
Hewlett-Packard has lowered its sales forecasts three times since Apotheker became CEO in
November, and he’s presided over strategy swings that left shareholders doubting his credibility. Before today, the company’s stock has plunged 47 percent on his watch, and “investor exasperation” with management is at its highest in more than a decade, according to Toni Sacconaghi, an analyst at Sanford C. Bernstein & Co.
“There’s certainly a lot of investor discontent with them,” said Amit Daryanani, an analyst at RBC Capital Markets in San Francisco, who rates the shares “sector perform” and doesn’t own them. “There’s widespread frustration with the fact that numbers have been cut three times since he’s been there.”
Hewlett-Packard rose $1.51, or 6.7 percent, to $23.98 today on the New York Stock Exchange after Bloomberg reported the possible management change.

Revisiting the Spinoff

Hewlett-Packard’s board, due to meet this week, is open to re-examining the spinoff proposal now because some directors think the idea wasn’t studied as thoroughly as other high- profile spinoffs, such as one by Kraft Foods Inc. (KFT), the person familiar with the matter said. At the same time, the turmoil raises the possibility that some or all of Hewlett-Packard may become a takeover candidate.
Mylene Mangalindan, a spokeswoman for Palo Alto, California-based Hewlett-Packard, declined to comment.
The possible spinoff would take as long as 18 months to complete, Hewlett-Packard said at the time. That elicited criticism that it should have had a buyer lined up or a more concrete plan in place before making the announcement.
Whitman, who joined Hewlett-Packard’s board in January after a failed bid to become California’s governor last year, had a mixed record at EBay. CEO for a decade, she took the company public and pioneered e-commerce for small businesses. Yet in the final years of her tenure, she couldn’t halt a slowdown in sales growth and overpaid for Skype Technologies SA after a bidding war with Google Inc. and Yahoo! Inc.
Not Long-Term?
Her lack of experience in computing for large companies may mean she doesn’t stay in the role for long, said Jayson Noland, an analyst at Robert W. Baird & Co. in San Francisco.
“She’s on the board and is a logical interim CEO, but not a logical long-term CEO,” said Noland, who has a “neutral” rating on the stock. “She doesn’t have enterprise experience.”
Pressure on Apotheker intensified on Aug. 18, when he announced a sweeping overhaul that included a $10.3 billion acquisition of Autonomy Corp. and the possible PC spinoff. He also killed off the company’s WebOS tablets and smartphones, just five months after vowing to put the operating system on a full range of the company’s computers.
The shares plunged 20 percent following the announcement, fueled by concerns that Autonomy was too expensive and the plans showed a lack of deliberation. The stock slumped to the point that other breakup and takeover scenarios are possible, Hewlett- Packard investor Michael Mullaney said at the time.

‘Scoop It Up’

“For the right company, it probably would make sense for someone to come in and scoop it up,” Mullaney, who helps manage $9.5 billion at Fiduciary Trust in Boston, said in August. “Someone could come and at least buy pieces of the firm.”
The server unit would boost Oracle Corp.’s share fivefold and help it become the biggest maker of the hardware. Hewlett- Packard’s printer business, which is 70 percent more profitable than the company as a whole, may also attract private-equity firms, Mullaney said.
While the PC spinoff would help Hewlett-Packard focus on higher-margin products, such as services and software, the way it was conveyed didn’t satisfy shareholders, Sacconaghi said. The Autonomy deal, meanwhile, hasn’t been popular, he said.
“Our conversations with investors continue to point to near universal opposition of the Autonomy acquisition, due to its high price,” he wrote in a Sept. 13 report.

Undoing Autonomy

By paying cash for Autonomy, Hewlett-Packard doesn’t need approval from its own shareholders to complete the deal, Sacconaghi said.
The company can’t undo the takeover unless Autonomy investors fail to approve it, according to a person with knowledge of the terms. That outcome is unlikely, given that 42 percent of Autonomy shares had already been tendered in favor of the sale as of Sept. 12, this person said.
Apotheker, the former CEO of German software maker SAP AG (SAP), has aimed to transform Hewlett-Packard into a provider of more profitable software and services for businesses that are doing more computing on remote servers, via the so-called cloud. Yet, results have been plagued by tepid demand for PCs, as consumers in growing numbers snapped up competing mobile devices and tablets, such as Apple Inc.’s iPad.

Short Stint

His tenure at Hewlett-Packard may barely outlast his 10- month stint as CEO of SAP. He resigned in February 2010 after an attempted price increase during the recession that rankled consumers and a clash with German unions on plans to cut jobs. He presided over the company’s first revenue decline since 2003 as customers delayed software purchases.
Apotheker joined Hewlett-Packard after Mark Hurd departed as CEO amid a scandal over a personal relationship with a company contractor. Hurd now is a co-president at Oracle.
Hewlett-Packard isn’t looking to completely change course, said Baird’s Noland. The company’s board and shareholders are mostly looking for a surer hand, he said.
“The board is directionally behind the plan Apotheker’s put in place,” Noland said. “It’s just the execution of that plan that has investors wound up.”


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