Apotheker out, Whitman in as new HP CEO

Changes at HP: Leo Apotheker, former CEO, and Meg Whitman, the company's new CEO / CBS/Getty Images

HP named former eBay chief Meg Whitman its eighth CEO since 1999 and second one in the last year. Whitman has to take on a massive to-do list, stop HP's slide, and either continue the company's current strategy or invent a new one.

In a statement, HP executive chairman Ray Lane said:

We are at a critical moment and we need renewed leadership to successfully implement our strategy and take advantage of the market opportunities ahead. Meg is a technology visionary with a proven track record of execution. She is a strong communicator who is customer focused with deep leadership capabilities. Furthermore, as a member of HP's board of directors for the past eight months, Meg has a solid understanding of our products and markets.

For her part, Whitman said:

I am honored and excited to lead HP. I believe HP matters - it matters to Silicon Valley, California, the country and the world.

The move, which began to leak on Wednesday, ended the tenure of Leo Apotheker, who took over as CEO Nov. 1. Since Apotheker took over, HP has missed earnings three times and appears to be in a financial tailspin. Apotheker also orchestrated the pricey $10 billion purchase of Autonomy in an effort to bolster HP's software standing and plotted a spin-off of the PC unit.

(In her first public event since HP named her as its new CEO, Whitman said on a conference call that plans for a PC spin-off remained intact. On the same call, HP chairman Ray Lane defended the board against its critics.)

Clearly, Whitman has her work cut out. HP may be easier to fix than California--Whitman ran to be governor--but it can be just as dysfunctional as its home state at times. For Whitman to succeed, she will have to address the following to-do list:

HP board of directors on Dipity.

Meanwhile, Whitman doesn't have a lot of time to act. HP customers are weary from the non-stop turmoil--killing the TouchPad, a potential spin-off of the PC unit and executive turnover--and the company is vulnerable to a bevy of rivals ranging from Dell to Cisco to IBM to Oracle. (Also see: Meg Whitman's ledger: Is she up to running HP?)

Early reaction

The initial reaction to HP's move to name Whitman CEO was decidedly mixed. The consensus view is that Whitman has a lot to fix and not a lot of time.

Collins Stewart analyst Louis Miscioscia said in a research note:

Whitman has not run a company the size of HP, nor one focused on the enterprise, both of which are concerns that are made more important by the fact that HP is in need of a turnaround in many lines of business, not just a new strategic direction.

Sterne Agee analyst Shaw Wu noted:

While we believe she has proven to be a very capable manager helping grow eBay from a start-up into one of the largest internet companies, we think an ideal candidate for HPQ should have extensive experience in the enterprise market. In addition, we believe expertise in supply chain management would be helpful as well.

Forrester's Frank Gillett said:

HP's strong customer brand is being damaged by the uncertainty of the Board and repeated CEO turmoil. The company is in a difficult strategic position. It might undo the planned PC spinout, but only if they value the supply chain synergies - the option to expand in mobility is gone. The Autonomy acquisition was a good strategic buy, but they may have overpaid. HP has strong enterprise data center technologies and infrastructure software, but undifferentiated enterprise services. The company has a long shot possibility to become a leader in enterprise cloud as an anchor of a larger ecosystem of products and services.

Barclays analyst Ben Reitzes said:

We continue to believe the disruption at HP could prove positive for other PC competitors such as Dell and Apple given potential for disruptions that include shelf space reductions and a lack of focus. We also note that IBM and Dell could potentially benefit from any disruptions at HP in terms of server sales (HP has #1 unit share worldwide) and NetApp and EMC could benefit in storage (HP is #4 in external storage revenue share worldwide). In terms of services, IBM may see some outsourcing wins vs. HP over time if dislocation persists.

Among the Enterprise Irregulars mailing list, HP watchers openly questioned the initial hiring of Apotheker. Since Apotheker only knew software, some quipped that HP hired a CEO that knew only 4 percent of the company's business. As noted by Jeff Nolan at Venture Chronicles, you could argue that Whitman knows zero percent of HP's business.

Wall Street seems to be thinking the same thing. HP shares on Wednesday spiked on word Apotheker was gone. On Thursday, shares almost gave back all of those gains. HP continues to bounce along a bottom. Here's the last year for HP shareholders.

Hewlett-Packard CEO Leo Apotheker

/ Getty Images

For Apotheker, the HP news equates to the second CEO disaster in his career. At SAP, Apotheker lasted less than a year. History repeated itself at HP.

It's unclear whether Apotheker was given much of a chance to carry out HP's strategy. He had to grow a software business, bolster services and shed low margin businesses. On the surface, that strategy makes sense.

However, Apotheker was clumsy with Wall Street and sometimes combative. He managed to consolidate power only to watch it be taken away. During HP's last conference call, Apotheker carried out a post mortem of the TouchPad and illustrated why HP was killing the tablet. In a nutshell, HP couldn't keep up. He said:

The tablet effect is real and sales of the TouchPad are not meeting our expectations...The velocity of change in the personal device marketplace continues to increase as the competitive landscape is growing increasingly more complex especially around the personal computing arena. There's a clear secular movement in the consumer PC space. The impact of the economy has impacted consumer sales and the tablet effect is real and our TouchPads has not been gaining enough traction in the marketplace.

On HP's bread-and-butter businesses such as servers, Apotheker also said that Oracle was hurting business because it wasn't supporting the Itanium chip. Add it up and there were multiple holes for HP and Apotheker to plug and not enough time.

In addition, HP's board reportedly didn't get along with Apotheker following a trio of mixed quarters. Of course, it would have been nice if the board would have actually met him before HP brought him on board. Based on his employment agreement, Apotheker will get a nice consolation prize that will fluctuate based on whether he was officially terminated with or without cause.

Like Apotheker, Whitman may have a grace period, but chances are it won't last too long.

[fwd23515]

Contempt is not a word I use easily, but in this case I admit to feeling genuine contempt for HP's board, and for people they've hired.

They hired Carly Fiorina, who alienated employees, changed the company's name to a meaningless two letters, initiated a senseless purchase of Compaq, and helped drive down the value of the company to half its former value. To reward this performance, the board then gave her a final parting gift of $20 million of the company's money.

They hired Mark Hurd, paid him more than $30 million a year while he cut employees' pay, and then gave him a $50 million parting gift when he lied on his expense reports and was accused of sexual harassment.

They hired Leo Apotheker without even meeting him. There's no point in commenting any further on that action.

Now they have installed Meg Whitman, one of the board's own members, as CEO. The same Meg Whitman who ran a vision-less losing campaign for governor, the same Meg Whitman who lost almost $1.5 billion of eBay's money on the Skype fiasco, the same Meg Whitman who thinks so little of her city, state, and country that she didn't vote in a single political election for 28 years, the same Meg Whitman who abused her illegal-alien housekeeper, the same Meg Whitman who made millions of dollars in insider stock deals with Goldman Sachs, and the same Meg Whitman who has such dignity and self-control that she physically assaulted an eBay employee.

Like I said, contempt.

[stuwerb]

The solution to HP's problems are obvious -- start spinning off all the companies that it has bought over the past decade.

[jimbom121]

Abyone care to defend Apothaker getting 25m for being fired? Last I checked, I don't get anywhere near that if I get fired.

[stuwerb]

Tell ya what. Send me your name and address, and I will write you a check for $25 if you should be fired. Promise.

[formrusmcsgt]

HP seems determined to go out of business, apparently.

It was damn lucky to survive Fiarina and now Whitman?

This board's nuts.

Sheesh.

[woozybarnes]

Great: Another empty suit from finance running an engineering company. Prepare for more workforce reductions so the stock price increases. That's the only thing they know. It's about engineering, products, quality and innovation, Stupid!

[fargo2413]

Amen to that! I'm so angry at just how completely removed from reality CEO's and board members seeem to be. They can only seem to see as far ahead as the next quarter, no long term vision whatsoever. One thing HP needs to invest in is customer service which has gone downhill for so many years. It's probably some of the worst customer service in the business. HP expects to build a customer base with crappy, low quality products and even worse customer service? Just how hard is it to understand that this is not a winning formula?!!

[rightbehind]

Bottom of the ninth for HP. 2 strikes and Whitman's up. People are alread existing the stands.

[abbykravis]

any woman who receives the brooks brothers catalog without irony deserves a shot at the helm of hp.
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