HP's New CEO Has Software Bent

Apotheker's SAP experience may help HP boost its emerging software business and its standing against growing nemesis Oracle.

While analysts are split over whether former SAP CEO Leo Apotheker has the experience to run a $120 billion company, most agree that his appointment as appointment as Hewlett-Packard Co.'s CEO late last month was a way to tell the world that HP's future is software.

"One of the fastest-growing and [most] profitable parts of HP has been its software business," said Frank Gillett, an analyst at Forrester Research Inc. "Software is where the magic and differentiation get created."

Analysts also pointed out that the hiring of a longtime software company executive is also a message to emerging nemesis Oracle Corp., which acquired HP rival Sun Microsystems Inc. early this year and then hired former HP CEO Mark Hurd within days of his resignation.

HP added to the rivalry by coupling the announcement of Apotheker's hiring with news that it has appointed former Oracle Corp. President and Chief Operating Officer Ray Lane, now managing partner at venture capital firm Kleiner Perkins Caufield & Byers, to serve as nonexecutive chairman of its board.

Apotheker's huge compensation package -- the same $1.2 million annual salary paid to Hurd, annual bonuses of 200% to 500% of his annual pay, generous stock awards and options, a $4 million signing bonus and $4.6 million to cover the cost of moving from his home in France to one closer to HP's Palo Alto, Calif., headquarters -- shows that HP is confident that Apotheker can bring a more international focus and a more software-centric vision to the business, said China Martens, an analyst at The 451 Group.

Nonetheless, she added that the new CEO must move quickly to prove to users and investors that he can "helm a much larger company than SAP with a very wide product portfolio."

HP officials highlighted Apotheker's record in driving software growth at SAP, as well as his support for research and development projects, an area that some analysts believe was de-emphasized during Hurd's tenure.

Apotheker resigned from SAP in February after some 20 years at the ERP vendor, whose sales totaled nearly $4 billion in the quarter that ended June 30.

Ray Wang, an analyst at Altimeter Group, said that after Hurd's abrupt resignation in August, HP likely had few strong CEO choices. "HP needed a tech leader, someone who has run a billion-dollar business, someone who has a global perspective and a software perspective to help the company get more into the software business. There aren't too many people like that walking the street," he noted.

If HP's chief executive selection had been a horse race, the initial odds would have heavily favored internal candidates such as Ann Livermore, who runs the company's enterprise business, and Todd Bradley, who heads its PC division.

But HP has surprised analysts before. Carly Fiorina, who preceded Hurd, was also an outsider. And Hurd wasn't on the short list of CEO candidates either, having come from NCR Corp., whose revenues were only a fraction of HP's.

Gohring is a reporter with the IDG News Service. James Niccolai and Marc Ferrante of the IDG News Service contributed to this story.

Copyright © 2010 IDG Communications, Inc.

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