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Ousting Apotheker may add to disruption at HP, say analysts

Company is reportedly considering whether to replace CEO Leo Apotheker with former eBay head Meg Whitman

September 21, 2011 02:49 PM ET

Computerworld - The man Hewlett-Packard hired just one year ago to build its software and cloud computing businesses, as well as take on Apple with a WebOS-powered tablet, may be on the verge of heading out the door.

Analysts are reacting cautiously to a report in Bloomberg that HP's board is reviewing CEO Leo Apotheker's future at the firm, and some see peril for the company if it decides to replace a CEO after such a short time at the helm.

HP isn't commenting on the report, or on another that cites Meg Whitman, an HP director and former eBay CEO, as Apotheker's replacement.

HP is calling these reports speculation, though it's easy to see how it could get wings.

Former SAP CEO Apotheker has angered HP shareholders who have seen share values fall by about half, notably over a plan to either sell or spin off its personal systems group, which makes PCs, tablets and smartphones.

The spinoff plan, announced last month, included the killing of the company's tablet entry, the TouchPad, and the WebOS software that runs it.

Apotheker last month also committed $10 billion to buying Autonomy, an information management software vendor, and has outlined an extensive cloud services strategy along with a number of management changes.

If Apotheker were to leave, a new CEO could step in and revisit the plan to spin off the PC division and possibly whether to close on the Autonomy deal, say analysts.

"What bugs me a little bit about this," said Charles King, an analyst at Pund-IT, "... Apotheker was [not] making these announcements in a vacuum. The board had to be deeply involved."

Apotheker may "become a whipping boy for the board that was just as complicit in most of the decisions," King added.

The changes sought by Apotheker, especially the increased focus on software, are already causing disruption at the company, and King worries that replacing the CEO "could cause a great deal more stress and disarray. What do you gain by getting rid of Apotheker?."

Crawford Del Prete, an analyst at IDC, said HP "is going through an incredibly difficult transition," which "causes a tremendous amount of stress in the organization."

The recent changes, combined with the investor sentiment, may be what's prompting the board to take a step back, said Del Prete. "The shareholders have been very, very frustrated," he said.

Losing Apotheker would "introduce more chaos" at the company, said Del Prete, and the board would have to move swiftly to name an interim CEO to mitigate it.

Rob Enderle, an analyst at the Enderle Group, said the biggest case for change is that much of the board has been changed since Apotheker was hired.

"When you change a board you'll likely change what it thinks the company should have in a CEO," said Enderle.

Indeed, following the resignation of Apotheker's predecessor CEO Mark Hurd, HP added five new board members in what was then seen as an effort to move past the havoc caused by the ouster of Hurd.

Enderle said the company is also being hurt by leaks of private corporate matters, which could be an indication of internal dissent.

"Companies in HP's space are required to be extremely stable and reliable," said Enderle. "Changing the CEO spot destroys the image that you can trust the direction presented by the company or the promises of its executives."

HP may be better served by providing a better "backstop" to Apotheker and addressing the leak problem.

"Unfortunately the leaks are driving premature decisions and may be taking this choice away from HP's board," he said.

Patrick Thibodeau covers SaaS and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld. Follow Patrick on Twitter at Twitter@DCgov, or subscribe to Patrick's RSS feed Thibodeau RSS. His e-mail address is pthibodeau@computerworld.com.

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