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No Brass Ring on HP’s CEO Carousel

Since September 18th I’ve been saying that Hewlett-Packard needed to get rid of Léo Apotheker sooner rather than later. Well, the deed’s been done and Apotheker’s been shown the door. The trouble is, HP’s board doesn’t seem to have learned their lesson. They’re replacing him with former eBay CEO and would be California governor Meg Whitman, who might even be less qualified than Apotheker to run the ailing tech giant. The announcement of the switch came early this evening, pretty much timed to coincide with the closing of the stock market.

Apotheker’s Troubled Tenure

Léo Apotheker

It wasn’t obvious that Léo Apotheker was a good choice to replace Mark Hurd in the catbird seat at HP last September when it happened, and it has never been obvious since. In fact, it’s never even been obvious that Mr. Hurd’s resignation should’ve been forced to begin with, as the cloud over his head, a charge of sexual harassment, was evidently short on substance. HP’s board, evidently after blood, ignored the fact the he’d put the company on a sound financial footing and had charted a reasonable course for the company to follow, a course that left room for expansion into other areas.

None of this mattered, according to James B.Steward writing in The New York Times, for the bigwigs at HP thought the company to big to fail:

“The vote to demand his resignation was unanimous, although the board was sharply divided, especially over how to handle his departure and seek a new C.E.O. But H.P. was so big, so dominant in most of its markets, and so profitable that Mr. Hurd was dispensable, according to people familiar with the board’s reasoning. “We don’t need you,” one board member bluntly told Mr. Hurd, or words to that effect.”

In retrospect Mr. Hurd wasn’t so dispensable after all. Sure HP was big, dominant and profitable – just as Titanic had been “unsinkable.” It turns out that Léo Apotheker, instead of being captain at the helm, was something akin to HP’s iceberg.

At the time of his hire, he was lauded for his experience heading SAP, meaning his experience with business software. It seems that more than a few board members wanted HP to move into software, which wasn’t an unreasonable idea. Indeed, developing a more complete business software stack to run atop HP servers was probably the best next move the company could make, now that the departing Hurd had sorted through the fiasco he’d inherited from former CEO Carly Fiorina, which was the merger with Compaq, to make HP the largest PC vendor on the planet.

Apotheker’s “success” at SAP seems to be a fiction concocted by the PR department at HP – or by Apotheker himself. In fact, he should probably never have been considered for HP’s short list of possible Hurd replacements. Except to HP’s PR folks, his brief tenure at SAP hadn’t been very successful by anyone’s measure. He was only sole CEO for seven months, and left because his contract as a member of the company’s executive board wasn’t renewed. Although a SAP spokesperson tried to put a happy face on the departure, saying it was “by mutual consent,” Tim Ferguson, in an article published on silicon.com, finds evidence to indicate he was forced-out:

“Under Apotheker’s stewardship SAP found it hard to win over new customers with its stuttering development of its on-demand ERP system, Business ByDesign, and unsuccessful attempts to move all customers onto a more expensive Enterprise Support package.

“Apotheker’s departure from SAP prompted little surprise among analysts, who said SAP had alienated some of its customers while Apotheker was at the helm.

“Thomas Otter, VP with Gartner, said: ‘SAP’s performance over the last year hasn’t been particularly good.

“‘Throughout the year, SAP was very much on the defensive. Customer satisfaction has dropped significantly on the back of enterprise support and SAP has been chasing margin as a main strategy and that’s not really been sustainable.

“‘Also Apotheker hasn’t done a great job of articulating a long term vision for SAP that’s compelling,’ he added.”

While at SAP, Apotheker was also linked with the data theft from Oracle that cost the company a $1.3 billion damages award, although he has denied being directly involved.

The problems at SAP may not have been entirely of Apotheker’s makings, but nearly all of HP’s major problems can be laid right in his lap. Even before the announcement on August 18th that HP was dropping mobile devices, webOS and consumer PCs, the company’s stock had fallen considerably under his stewardship. On August 19th, the day after the announcement, HP’s stock fell almost 20 percent, a $16 billion loss for investors in a single day. Even if these moves were seen as being good for the company’s future, announcing them wholesale in this manner gave the impression that the company was in panic mode and rudderless.

WebOS and the Palm brand were inherited by Apotheker, as HP had purchased Palm about five months before his hiring. However, Apotheker gave every indication that he was firmly behind the deal. In an interview with Bloomberg Businessweek in March, he made his now infamous claim about the Linux based mobile OS being incorporated into HPs entire line of PCs:

“Apotheker says he also wants to make better use of WebOS, the computer-operating system acquired last year when Hewlett-Packard purchased smartphone maker Palm Inc. for $1.2 billion. Starting next year, every one of the PCs shipped by HP will include the ability to run WebOS in addition to Microsoft Corp.’s Windows, Apotheker said.

“The move is aimed at enticing software developers to create a wider range of applications that would differentiate HP PCs, printers, tablets and phones from those sold by rivals.

“‘You create a massive platform,’ Apotheker said.

Developers evidently didn’t rush to supply the platform. One of the biggest complaints about the TouchPad was the dearth of apps available, even though HP’s official TouchPad page still promises: “Apps like nothing else. Thousands now. Bazillions on the way.”

Another issue with the TouchPad, according to many reviewers, was that it was slow and sluggish under certain usage conditions. The device might have still found customer support, however, if not for the price, which was high, the same as Apple was asking for an iPad. By the time HP caught on and tried lowering the price, it was a case of too little, too late.

Or maybe failure was the planned result. HP has been in the electronics business a long time and they know how to design and build products that work. This botched introduction, the ballyhooed premiere of HP’s implementation of webOS, would almost seem to have been sabotage. Indeed, it freed Apotheker from the chains of an operating system he inherited and didn’t want anything to do with.

Meg Whitman

He probably could’ve survived the webOS/TouchPad failure, but the way he announced HP’s planned exit from the PC business was unforgivable. The company had spent the better part of the last decade working to position themselves as the world’s largest PC maker. Billions had gone into the merger with Compaq and employees had worked countless overtime hours positioning the company as a consumer PC giant that not even Dell could conquer. Now those efforts were going to disappear as if they had never meant anything.

It was the “HP is getting out of the PC biz” announcement that put the nail in Apotheker’s coffin and ended his tenure. With his leaving, all bets are off. WebOS, Palm, the HP PC brand – all may survive, or not. Time, and Meg Whitman, will tell. The only sure bet is that the former CEO leaves HP a much richer man than he was when he took the job less than a year ago according to a report today on CNN Money:

“On the job as chief executive for not even 11 months, Leo Apotheker will leave HP a wealthy man: He has already taken home most of his $1.2 million annual salary, a $4 million signing bonus, and an additional $4.6 million awarded for relocation assistance and to offset payments that he forfeited from his previous employer, SAP.

“Apotheker was ousted on Thursday, but he’ll collect more money on his way out the door. The former CEO will take home $7.2 million in cash as severance, plus $18 million more in stock.”

Meg Whitman to the Rescue?

Hardly anyone outside the boardroom at HP seems to think Meg Whitman capable of guiding the company back on the road to prosperity. Her only real claim to fame is that she successfully transformed eBay from a relatively small, but already successful, Internet start-up to a billion dollar giant. Other than that, her career has been not-so-successful and is dotted with notable failures.

Today, the Associated Press called her “an imperfect fit,” and commented that her success at eBay in no way qualifies her to run a troubled giant such as HP:

“‘She built up a one-trick pony, an online auction site, and she oversaw the growth of the company, but we are talking about a situation where someone needs to come in who has a technological background, an engineering and scientific background,’ said Steve Diamond, an associate professor at Santa Clara University School of Law. ‘And that is way outside of her skill set.’”

A deeper look at her history reveals aspects that are probably not going to compel investors to buy tons of HP stock, most notably her unsuccessful tenure in the 1990s as CEO of FTD:

“Whitman has rarely spoken about her time at FTD. It’s an imperfect comparison to HP, but Whitman was brought in to the company in 1995 by her former colleagues at investment firm Bain & Co. to spearhead a major transformation. She was supposed to stay five years, but ended up quitting after two, citing investors’ unrealistic goals.

“‘This company is not fixable, at least not by me,’ Whitman wrote in her book, The Power of Many. She calls her tenure there ‘probably the most frustrating and, ultimately, least successful executive experience of my career.’”

Although she seems to be a strange choice for this job, who knows? Maybe she’ll excel at it. The first task in front of her is to cool investor’s fears that the company has completely derailed, and to make clear the future of HP’s PC division and the future of WebOS.

If I was awarded the opportunity to give her just a little advice, I would tell her that if Hewlett-Packard wants to be a company like IBM, now might be the time to start acting like IBM.

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Christine Hall has been a journalist since 1971. In 2001, she began writing a weekly consumer computer column and started covering Linux and FOSS in 2002 after making the switch to GNU/Linux.

11 comments to No Brass Ring on HP’s CEO Carousel

  • Chrusse

    She should keep Compaq as a affiliate company for the pc division accept fore the prime models that the would keep the name HP name on. And for the webOS either there is a hardware manufacturer that would get on the train now, or they are forced to continue making the hardware. Until someone what’s in on the Os.1.2billion ain’t small change even for HP. Thanks for a nicely written leading article.

  • Thanks for the kind words, @Chrusse. And you’re right. No company, no matter how big, can afford to flush billions of dollars down the toilet.

  • djsmyth

    Hurd was not the savior he’s made out to be – hack and slash put HP into a position where anyone coming in after him would have major issues

    can L.A REALLY destroy a company that quickly? no. it boggles the mind.

    HP board’s more at fault the Leo – if they wanted an IBM, give him the chance to become IBM.

    L.A was wrong for the job and poorly executed or communicated his strategy.

    Whitman will be gone as well. question is who on the board is plotting her demise? we’ll see in 8 months…

    So sad.

  • You get no argument from me @djsmyth that Hurd spent his time in slash and burn mode. We also get a glimpse into what kind of guy he is by looking where he ended up, holding court with Larry Ellison over at Oracle. That being said, he’s a much more capable executive than Apotheker, who should never have been hired to begin with.

  • James E. LaBarre

    Meg Whitman?????? Really???? The same arrogant moron who turned feeBay into the customer-hostile disaster it is now? Yeah, HP is the WALKING DEAD now. She’ll try to turn the company by increasing prices ten-fold, and then tell customers to stuff any and all complaints. Couldn’t have picked a worse CEO if you picked Kenneth Lay to run HP.

  • Kenneth Lloyd

    “Things are they way they are because they got that way” — G. Weinberg

    The same could be said of a cancer patient’s disease and HP’s predicament. @LeBarre called HP the WALKING DEAD. Probably correct on that one point. It may be viable as a generic business, but certainly not as a serious contender in computing – unless you call generic server farms computing. IOW, I thing too much focus was placed on the business, and not enough on the products. You cannot replace technical competence with clueless marketing and expect to survive in the long term. Time will tell.

  • @Lloyd I think you hit the nail squarely on the head, and not just with HP. Too many companies no longer work to rise above the crowd by creating better products, but rely on marketing techniques instead. This is particularly worrisome when it comes from a company like HP, which had a long history of setting the bar for others to follow with their products. They seemed to have lost sight of that a long time ago, however, and have been getting by on their traditional reputation. Now that’s running out. There are very few of us left who remember when HP stood for quality designed and made products. Now they’re just another commodity computer company.

  • I can say that I believe also with the line “Things are they way they are because they got that way” — G. Weinberg. It really inspires me a lot and aside from this, she should keep Compaq as a affiliate company for the pc division accept fore the prime models that the would keep the name HP name on. Great share!

  • Christine,

    HP has been coasting “on their traditional reputation” like Wile E. Coyote about 50′ after he goes off the cliff. Now something’s about to make them look down and realize that the nice solid ground they were coasting on is a LONG way down.

    Meg Whitman? Point down and wave bye-bye, Wile E. Ten meters per second acceleration per second… and HP has been falling for a LONG time.

    Granted, this may have been the default prediction since the world became fully aware of Fiorina’s technical knowledge and leadership skills, but going from bad to worse to terrible to inexcusable in direct sequence does not speak highly of the competence or attention to fiduciary responsibility of the Board. They’re the real villains here, and always have been.

  • @Jeff No kidding! I’m still trying to figure out what drugs the HP board is using, because that’s about the only excuse they have for the way they’ve been acting for the last decade or so. No less than Walter Hewlett, son of HP’s cofounder, tried to shake some sense into the company back during the Compaq fiasco. Oh well…