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Analysis: Is Meg Whitman HP's Next Big Mistake?

By Erik Sherman, CBS Interactive Business Network

PALO ALTO (CBS) -- Hewlett-Packard has become the poster child for ensuring that failure only has consequences for subordinates, never for higher-ups. CEO Léo Apotheker learned this lesson on Thursday when HP's board of directors ousted him. Apotheker became the third CEO in a row to get the heave-ho from the board. But then, what do you expect from directors who apparently hired Apotheker without having even met him?

>> Related Story: HP Fires CEO Apotheker, Hires Whitman As Replacement

At least HP should have found it easy to meet with their next CEO — former eBay CEO and current HP director Meg Whitman. Pros: the company won't have relocation costs from Germany. Cons: quite a few. In fact, Whitman could turn out to be yet another blockbuster of a blunder by the HP board.

KCBS' Tim Ryan Reports:

Resume looks good
Not that Whitman is a lightweight. Her experience at Disney, DreamWorks, Proctor & Gamble, and Hasbro eventually landed her at eBay, two years after the company was founded.

That's where she built her image of serious tech management credibility. Between 1997 and 2008, she oversaw the company as it grew from $5.7 million to $8 billion in revenue and 30 employees to 15,000.

It's nothing to sneeze at, but it's also not Google or Amazon, which started around the same time. It's also a fraction of the size of HP, which in 2010 had 324,600 employees and $126 billion in revenue.

So why are people nervous?
Management credibility is one thing. Actual reputation is another. Whitman benefited from the dot-com frenzy, which helped fuel eBay's growth.

Her decision to buy PayPal was perhaps the smartest thing she did during her stay, as it's become eBay's main engine of growth. Acquiring Skype, on the other hand, was a waste of time, as eBay would only sell it off for about what it paid in the first place. More importantly, Whitman missed shifts in the market that saw Amazon take over business with fixed prices. By the time she left, eBay's stock had slumped to about $10 from its high of $58 in 2004. It was a long hard slide down.

Whitman has zero experience in the enterprise software, hardware, and service markets that are HP's core business. That would be a bigger adjustment than Apotheker, who came from SAP, had to make.

Morale? Who needs stinkin' morale?
Given the current state of HP, even more important is that Whitman doesn't have the best personal reputation in the industry. After losing an expensive bid to become governor of California, fellow Republicans called her arrogant and someone willing to say anything to anyone to get elected. That's quite a statement coming from professional political operatives who are used to outsized personalities (and egos).

She failed to connect with the very people she wanted to vote her into office. Unfortunately, success at HP will depend heavily on making personal connections with executives and employees.

HP had a heavy morale problem that grew under former CEO Mark Hurd. Under Apotheker, discontent continued. A new CEO at HP would have to connect with everyone.

This is starting to sound like history repeating itself, with the board trying to find a new CEO when it has created an atmosphere that scares off the best candidates. To paraphrase Woody Allen, why would HP want to hire any CEO who'd be willing to take the job?

(Copyright 2011 By CBS Interactive. All rights reserved.)

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