Dunn Out at HP; Hurd Put on Hot Seat

CEO takes over as chairman, confirms role in misinformation campaign

Hewlett-Packard Co. moved deeper into damage-control mode over its probe of leaks to the media last week, announcing late Friday that embattled Chairman Patricia Dunn had resigned from its board and confirming that CEO Mark Hurd had approved a misinformation campaign designed to help HP identify the source of the boardroom leaks.

HP, which previously had said that Dunn would step down as chairman in January but remain on its board, named Hurd to replace her as chairman, as planned.

In his first public comments about the boardroom scandal, Hurd said in a prepared statement at a press briefing that it was “proper and appropriate” for HP to investigate the media leaks. But in a second phase of the probe, he said, “processes broke down, and no one in the management chain, including me, caught it.”

'Processes broke down' at HP, says CEO Mark Hurd

"Processes broke down" at HP, says CEO Mark HurdHurd vowed that he would “take full accountability to get this right” and enable HP’s management team to “get back to the job of running a business.”

But Hurd, who didn’t take any questions from reporters, likely will face a grilling at a congressional hearing this Thursday in Washington. HP said an offer by Hurd to appear at the hearing had been accepted.

HP, and Hurd, also still face an investigation by California attorney general Bill Lockyer. At this point, Lockyer doesn’t have any evidence indicating that Hurd should be charged with a crime, a spokesman for the attorney general said Friday. But, he added, that doesn’t mean Hurd is in the clear yet.

“The key words are ‘at this point,’” Lockyer’s spokesman said. “We’re not ruling anyone out in terms of criminal culpability. We have much more work to do, many more documents to review, more people to interview.”

Hurd said that he attended “a brief portion” of a meeting in July 2005 where the leak issue was discussed and that the matter came up again in January and then in February. At the latter meeting, he said, he was told by HP’s investigation team that they planned to send an e-mail containing false information to a reporter in an effort to identify the source of the leaks.

“I was asked to and did approve the naming convention that was used in the content of the e-mail,” Hurd said, adding that he didn’t recall being informed about or approving the planned use of tracer technology that could show HP who the e-mail was forwarded to.

Mike Holston, a lawyer at Morgan, Lewis & Bockius LLP, a San Francisco law firm hired by Hurd to investigate the leak probe, said at the press briefing that he has yet to find any evidence that Hurd was asked to approve the use of the e-mail tracer. But Hurd did approve “the concept of sending misinformation to the reporter, and the content of the misinformation,” Holston said.

Earlier last week, Hurd barely mentioned the widening boardroom scandal when he appeared before thousands of users at HP Technology Forum 2006 in Houston. Hurd obliquely alluded to the scandal when he told attendees that Jack Novia, managing director of HP’s Americas region, would be throwing out the first pitch at the Houston Astros baseball game on Tuesday. Hurd said he hoped that Novia wouldn’t “embarrass the company, with all the press that we have had over the past week.”

Beyond that, Hurd focused his remarks on HP’s overall technology strategy.

But some HP officials did devote time during conference sessions to brief discussions of the boardroom problems, according to attendees.

Mark Yturralde, a systems engineer at a major health care provider that he asked not be identified, went to two technical sessions on the first day of the conference. At each one, he said, the speakers spent a few minutes talking about the leak probe, seeking to assure attendees that the scandal isn’t a big problem and that it won’t affect HP’s technology.

Yturralde added that he’s really not interested in hearing about HP’s boardroom troubles. “I’m more hoping that they just concentrate on technology and the company and don’t make an overly big deal over the whole scandal,” he said. “I don’t really think it affects us, the IT guys.”

Other users interviewed at the conference also said they were mostly interested in hearing about the technology-related issues that have long dogged HP, such as the future of its HP-UX operating system.

“I’m a techie, and I just want to know if there’s a long-term future for Unix or HP-UX, or is everything going to be migrated to the hegemony of Microsoft,” said Rob Roy Hathaway, a systems consultant at Advanced Technology Solutions Inc. in Dallas.

Dan Berry, a senior systems engineer at Lockheed Martin Corp. in Bethesda, Md., called the boardroom scandal “a big distraction” but said, “I don’t want to hear anything more about telephone records.”

Berry said his chief concern involves HP’s decision to move away from its PA-RISC processors. He added that migrating to HP’s Integrity servers, based on Intel Corp.’s Itanium2 chip, will cost Lockheed Martin millions of dollars.

Copyright © 2006 IDG Communications, Inc.

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