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HP Ousts CEO Apotheker, Names Meg Whitman Successor

Hewlett-Packard Co. on Thursday fired president and CEO Leo Apotheker and tapped former eBay chief Meg Whitman to replace him.

The decision to cut Apotheker comes less than 11 months after he arrived at HP to replace Mark Hurd. Hurd was fired for irregularities on expense reports; according to the company, he covered up an inappropriate relationship with a contract employee. Reports that HP was considering parting ways with Apotheker surfaced Wednesday.

Apotheker's firing comes amid a barrage of controversy circling HP over the years, and most recently over the past month following the company's hasty disclosure that it is considering the sale or spinoff of its PC business and withdrawing from the tablet and mobile phone market. HP simultaneously announced the $10.3 billion acquisition of enterprise search vendor Autonomy, a move that many critics are questioning because of the deal's high price tag.

Dooming Apotheker was a falloff in revenues over the last three quarters and a market valuation that has fallen by nearly half since he took over last November.

Ray Lane, who was HP's non-executive chairman, is now executive chairman. Speaking to investors on a call that was webcast, Lane explained there were several reasons HP had to oust Apotheker. Among them was a lack of confidence in Apotheker's leadership because he and members of his executive team weren't in sync. "We didn't see an executive team that was working on the same page or working together," Lane said.

An inability to communicate well to employees, investors, partners and customers also plagued Apotheker, as witnessed by his handling of the Aug. 18 announcements of HP's plan to evaluate divesting its PC business, the discontinuation of its webOS-based device business and the Autonomy deal. However, perhaps his biggest failing, according to Lane, was operating and financial execution.

"We're fortunate to have someone of Meg's caliber and experience to step up and lead HP," Lane said. Whitman, who last year ran unsuccessfully for governor of California, joined HP's board back in January.

Indeed, the criticism of Apotheker appeared to come more from his inability to communicate HP's strategy than the strategy itself. On the investor call, Whitman said while she will review the strategy, she is on board with it.

"I will step back and take a hard look at this but from what I know now, I think the strategy is right, the initiatives that we undertook on Aug. 18 are right, and I'll dive in and have a more informed point of view for you, probably at our next earnings call," Whitman said.

It remains to be seen whether she is up to the task of turning HP around. Whitman's background is primarily consumer-based, having worked at such companies as Walt Disney Co., FTD and Stride Rite. She has no enterprise background or experience running a hardware business.

Furthermore, though Whitman saw eBay through 10 years of huge growth, the company is still dwarfed in size and scale by HP. She also made some questionable moves, including eBay's $2.5 billion purchase of Skype, which the company years later wrote off.

Whitman insisted she was up to the task. "The way we have to rebuild the confidence of investors, the confidence of employees, is we have to execute," she said. "We have to say what we're going to do, we have to mean it, and we have to deliver the results. In the end, the only thing that will rebuild confidence in this company is delivering the results, and that's what I intend to do."

Analysts questioned why the board didn't conduct an exhaustive search both inside and outside of HP. Lane said he believed Whitman was the best candidate.

"I knew from the beginning of the process that she is the strongest candidate to do this," he said. "I've seen Meg lead. She is decisive, she is a people person. I predict that the HP employees are going to get on her side because she is going to get on their side really, really quickly."

About the Author

Jeffrey Schwartz is editor of Redmond magazine and also covers cloud computing for Virtualization Review's Cloud Report. In addition, he writes the Channeling the Cloud column for Redmond Channel Partner. Follow him on Twitter @JeffreySchwartz.

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