April 4, 2013 9:45 pm

Autonomy deal debacle takes toll at HP

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Ray Lane©Bloomberg

Hewlett-Packard’s chairman and its longest-serving directors resigned from their positions on Thursday in a delayed reaction to last year’s disastrous $8.8bn writedown relating to the company’s $11bn acquisition of Autonomy.

Ray Lane will be succeeded as chairman temporarily by Ralph Whitworth until a permanent replacement is identified. Mr Whitworth, an activist investor who joined the board as an independent director in 2011, is HP’s fifth chairman in a decade.

Mr Lane resigned just over two weeks after he narrowly avoided being voted off the board of the Silicon Valley company.

He received only a 59 per cent vote in favour of his re-election at HP’s annual meeting in March, compared with 96 per cent a year earlier. He will remain a director.

“After reflecting on the stockholder vote last month, I’ve decided to step down as executive chairman to reduce any distraction from HP’s ongoing turnround,” said Mr Lane in a statement.

John Hammergren and Ken Thompson received only 54 and 55 per cent support respectively at the meeting, at which more than 50 per cent support was needed for re-election. HP said on Thursday they had now decided to leave the board, after eight and seven years’ service as directors.

Anne Simpson, head of corporate governance for Calpers, the pension fund, welcomed the move, but said shareholders had made their intentions clear and that further change was necessary: “It’s not quite leaving them in a room with a brandy and a revolver, but we expect them to do the right thing.”

Calpers, which in addition to its direct holding of HP stock has $1bn invested with Mr Whitworth’s Relational Investors investment fund, has been in active discussions with HP. Ms Simpson said that “all those who presided over the disaster should step aside”, including Ernst & Young, auditor to HP for 14 years.

Institutional Shareholder Services, an influential proxy advisory firm, had urged HP’s stockholders to vote against the re-election of Mr Lane and the two directors over their handling of the company’s controversial acquisition of Autonomy, a UK software company. ISS said shareholders should be concerned by failures of oversight of the due diligence process.

Mr Hammergren, chief executive of the drug wholesaler McKesson, was chairman of HP’s finance and investment committee. Mr Thompson, former chief executive of the Wachovia bank, was chairman of the audit committee.

Mr Lane had been executive chairman since September 2011, after being appointed in a non-executive role in November 2010. He is a former president of software company Oracle.

HP had alleged Autonomy had boosted its financial numbers to give a false picture of what it was worth. Mike Lynch, Autonomy’s founder and former chief executive, has strongly denied the allegations and accused HP of mismanagement.

The departures mark the latest upheaval in the PC maker’s senior ranks in recent years. Non-executive chairman Patricia Dunne resigned amid a boardroom spying scandal in 2006, while former chief executives Carly Fiorina and Mark Hurd were forced out for different reasons.

Mr Whitworth said on Thursday: “Ray, John and Ken are terrific leaders, and they’re passionate about doing the right thing for HP. From here we will continue to recruit outstanding directors, strengthen our governance and do the best we can – the best we know how – for stockholders.”

Meg Whitman, chief executive, is in the second year of a five-year plan to move HP to higher-margin software and services products, although it continues to hold a global lead in PC shipments.

Mr Whitworth received 96 per cent support from shareholders at the annual meeting. Relational Investors owns around $800m worth of HP stock.

He told shareholders at the meeting that they should expect board changes in the coming months.

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