CEO Changes in Hewlett-Packard Reflect Industry-Wide Turmoil

Less than a year after firing Mark Hurd and eventually replacing him with Leo Apotheker, the Hewlett-Packard board has now let Apotheker go and hired former eBay chief Meg Whitman as CEO. Analysts had mixed reactions to Whitman, who joined the HP board earlier this year, because eBay is a consumer-focused company while HP is primarily a business-to-business enterprise.


The management shake-up reflects the rapid changes in the computer hardware space, where the PC has become commoditised even as PC makers struggle to respond to the rise of tablet computers and smart phones. Apotheker had announced a new strategy for HP that involved focusing on enterprise software and services and a possible share of the PC business. However, he failed to stem the fall in the company's stock price.


The HP board said the company requires "additional attributes" in its CEO, traits that the directors believe Whitman possesses.


“We are fortunate to have someone of Meg Whitman’s caliber and experience step up to lead HP,” Ray Lane said in a statement. Lane has now changed positions, from non-executive chairman of HP's board to executive chairman.


Apotheker was the former CEO of business software vendor SAP. He joined HP at a turbulent time following the departure of the well-regarded Hurd, who left the company at the board's behest after a scandal involving an alleged romatic relationship with an HP contractor. Hurd is now president of Oracle, an enterprise software and services company that HP, under Apotheker, looked to emulate.


The market did not react well to a number of announcements and other moves Apotheker made, including the planned purchase of infrastructure software vendor Autonomy and talk of spinning off HP's PC division, which sparked a major downturn in HP's stock price. HP also missed its financial targets in three recent quarters.


"There was probably an underestimation on the company's part and on Leo's part ... about how difficult this transformation would be," IDC analyst Crawford Del Prete said. "They haven't been able to effectively communicate their strategy and vision."


"Investor confidence is a very difficult thing," he added. "When it starts to get eroded, it's very difficult for that person to get confidence back."


HP’s services business has struggled for years with flat to single-digit quarterly revenue growth, the result of a drawn-out and arduous integration of its EDS acquisition, and a strategy that has failed to meet market and customer expectations.


"Even as HP endures another leadership change with the appointment of industry veteran Meg Whitman as its new CEO, the company insists that services, particularly its outsourcing and global delivery capabilities, will play a critical part in HP’s future," wrote Ovum analysts Jens Butler and John Madden in a report.


The analysts said Whitman lacks experience running a global enterprise IT vendor, but she does have experience as an enterprise IT customer (as CEO of eBay), and understands the value of consulting services (having started her career at Bain Consulting.).


"After years of starts and stops, will Whitman be the leader that can bring a fully realized HP services strategy to market and spark greater revenue growth?" they asked. People inside and outside HP are waiting for the answer.




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