Communications Snafus At The Heart Of H-P's CEO Woes

by , Sep 23, 2011, 8:26 AM
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The last time Hewlett Packard's board embarked on a search for a CEO, which actually was less than a year ago, "we had a joke," a company executive James B. Stewart tells The New York Times: "The code name for the search was Léo Apotheker. Because no one had heard of him."

This time, the board might well have codenamed its search "Meg Whitman," because it seems to have seriously considered no one else before appointing the high profile former CEO of eBay and present day HP board member -- with grounding as a Procter & Gamble brand manager -- as the next in line for a position that seems to be surrounded by metaphorical landmines.

"Political analysts and those close to Meg Whitman not surprised she's taking reins at HP," reads the headline atop a San Jose Mercury News story this morning.

Ken McLaughlin, who spoke to both political and business analysts Thursday, concludes that the 55-year-old Long Island native and former marketer of Mr. and Mrs. Potato Head when she was in middle management at Hasbro, is not quite ready to quit and clip coupons from the billion-or-so fortune she made at eBay. In fact, she has set her sights way beyond saving California, where she lost a gubernatorial bid to Jerry Brown last year, to encompass all of terra firma (and perhaps the ships at sea, too).

"HP really matters," Whitman told analysts on a call Thursday. "To Silicon Valley. To California, the United States and the entire world."

Be that as it may, its disposed chief seems to have mangled the message of how it will continue to matter to many of its constituencies, from Wall Street, to the chiefs of what Apotheker evidently viewed as siloed fiefdoms within the company, to consumers, suppliers and potential partners.

The board still supports the strategy changes announced last month, Nick Wingfield reports in this morning's The New York Times, but "its members felt that Mr. Apotheker had bungled communicating the plans to H.P. employees and outsiders."

The new direction, new direction includes a possible spinoff of the PC business, shuttering a line of mobile devices and the $11.7 billion acquisition of the software maker Autonomy.

"It's not about the strategy, it's about the guy," one insider tells Wingfield.

M. Eric Johnson, a professor at Dartmouth College's Tuck School of Business, tells Wingfield that the company's announcement last month about its plans for WebOS, for example, "was botched in a big, big way. It came out in dribs and drabs in a very confusing set of announcements."

In the end, the company said it would partner with other companies to keep the well-received software viable.

The directors themselves are under fire from within, from without and from sideways. The gist of Stewart's piece in the Times Thursday is that that it had approved hiring the German-born Apotheker without most of its members having even said "guten morgen" in person. Said one, in self-defense of not meeting the man who had been deputy CEO from SAP for less than a year: "I admit it was highly unusual. But we were just too exhausted from all the infighting."

"It has got to be the worst board in the history of business," former HP director and famed venture capitalist Tom Perkins tells Stewart.

"That the board would be considering a change in CEO less that 10 months after Apotheker took over as CEO is a damning indictment of not just the new CEO, but also the board itself," Carter Lusher, chief analyst at Ovum, tells the Financial Times' Joseph Menn. "Having approved the recent strategy changes, it seems spineless for the board just a month later to be potentially jettisoning that plan and its architect."

When SanfordBernstein analyst Toni Sacconaghi said the move felt "more reactionary than proactive" during a conference call Thursday, HP chairman Ray Lane "stumbled a bit in his response, but said that the board considered many candidates -- internal and external, interim and permanent," David Goldman reports CNN/Money.

Lane also "lashed out at the media" for not reporting that eight new directors have come aboard since Mark Hurd was jettisoned last year as CEO for suspicion of alleged sexual peccadilloes with a freelance hostess and he criticized the Fourth Estate for its "open season" on directors.

"I tell you this right from my heart," says Lane. "That's not this board. They work really well together. Customers and shareholders are well-served by this board."

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