It is now official, Meg Whitman will replace Leo Apotheker as Hewlett-Packard?s chief executive. The HP Board of Directors has been called dysfunctional by nearly all of Silicon Valley because this is their seventh CEO choice since 1999.
BSN* gave an overview of recent steps leading to the sacking of Leo Apotheker. Highest on the list of his errors was killing share value, tossing webOS TouchPad over the side after only seven weeks, and saying they will spend $10 billion on a company that sold less than a billion last year.
Shareholders have sold off nearly 50% of HP’s value in the past year.
On Wednesday, shares of Hewlett-Packard soared almost 7 percent following reports, starting with AllThingsD, that the board is considering firing CEO Léo Apotheker. The rise added almost $3 billion to HP’s market valuation.
David B. Smith, chief investment officer of Rockland Trust Investment Management Group, in Rockland, Massachusetts told the International Business Times: "Leo Apotheker failed miserably at HP, his term at the company was marked by bad decision after bad decision." Apotheker 11 months as HP’s CEO it seems as if he is the perfect example of the Peter Principle which says that "in a hierarchy every employee tends to rise to his level of incompetence".
A New York Times article said HP’s Board of Directors had never met face-to-face with Apotheker prior to hiring him last year as CEO. Apotheker came from a seven month tenure as CEO of SAP and two years as a co-CEO. SAP is known as a leader in business management software, solutions, and services for improving your business process. One of the divisions of SAP was found guilty of stealing software from Oracle. Apotheker had no knowledge of this crime.
HP’s Board, in the past 13 months, has spent nearly $50 million on firing CEOs. BSN* looked at Apotheker’s employment contract. We agree with CNBC Senior Stocks Commentator Herb Greenberg that Leo Apotheker will walk away with a nearly $10 million Golden Parachute for less than a year’s work. In August 2010, ex-CEO Mark Hurd got $37 million severance pay from HP’s Board of Directors.
Newly appointed CEO Meg Whitman was last seen running for California?s governorship, which she lost. Whitman was CEO of eBay for ten years and led the expansion from 30 employees and $4 million in annual revenue to more than 15,000 employees and $8 billion in annual revenue.
eBay under Whitman also bought a number of companies. John Donahoe, her successor at eBay, has pretty much disassembled all of her major strategic moves. During Whitman’s tenure as CEO, eBay completed the purchase of Skype for $3.1 billion in cash and stock in September 2005 (which took a $1.4bn write-down in 2007). In 2009, Skype was sold by eBay at a valuation of $1.9 billion.
Jayson Noland, an analyst at Robert W. Baird & Co. in San Francisco, said "She?s on the board and is a logical interim CEO, but not a logical long-term CEO. She doesn?t have enterprise experience."
Hewlett- Packard investor Michael 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.
As the new HP CEO, will Meg Whitman bring back shareholder confidence and market valuation? How will she help with stabilizing the "on again-off again" spin off of the $42 billion Personal Systems Group (PSG) and what is there to do about $1.2 billion purchase of webOS that was just killed? Bloomberg reported a rumor that HP can’t undo the takeover of Britain’s Autonomy unless investors fail to approve it. The article says that outcome is unlikely, given that 42 percent of Autonomy shares had already been tendered in favor of the sale as of September 12.
In a conference call on Thursday, Meg Whitman and Raymond Lane, Executive Chairman of the Board said they were committed to getting HP back on track. Lane admitted that the past two quarters and the August 18th announcement by ex-CEO Leo Apotheker were not well handled.
Meg Whitman said she has already met with HP’s Executive Council (their top internal managers) and they are now going to function as a team. She added the HP "employees are enthusiastic and want to be lead." Whitman said the decision on PSG will be soon, because it is "not like wine that improves with age."
Whitman certainly has a lot of major problems to deal with. We wish HP staff and Whitman the best in getting the $143 billion Palo Alto, California giant back on track to profitability and satisfied customers as well as happy employees.