HP leader cull unlikely to benefit investors

To lose one chief executive may be regarded as a misfortune. To lose two looks like carelessness.

It is easier to misquote Oscar Wilde than to fathom the actions of Hewlett-Packard’s board.

On Thursday, the world’s largest computer maker by revenues confirmed press leaks that, after barely 11 months in the job, it was replacing its chief executive Léo Apotheker. Mr Apotheker took over from Mark Hurd, controversially ousted in August 2010 over sexual harassment allegations.

HP is not conducting a search for a new chief executive but appointing Meg Whitman, who joined HP’s board as a non-executive director in January.

Mr Apotheker had certainly made his mark during his brief tenure at the company. Last month he announced that he intended to hive off HP’s personal computer division into a separate company, abandon HP’s tablet computer, the TouchPad, and focus HP more on software, helped by the $10.6bn purchase of the UK’s Autonomy.

Mr Apotheker’s plan was ambitious, to say the least. But there was, many agreed, some strategic logic to spinning off the mature PC business and redirecting HP towards potentially more profitable software.

Critics at the time attacked Mr Apotheker not just for the high price HP was offering for Autonomy (a near-80 per cent premium to its pre-announcement value) but also for combining the announcement of such a risky new strategy with a profit warning – the third since February.

Indeed, not being a good communicator, both with investors and employees, appears to be the main burden of complaint against Mr Apotheker. This is not a helpful characteristic in a chief executive. However, Mr Apotheker’s plan was endorsed by the board. Retreating on it, while abandoning him, just a month after its unveiling smacks of panic.

True, HP’s shares, which had fallen 27 per cent since January 1, had lost another quarter of their value since the August announcement. But if the board believed in the long term viability of Mr Apotheker’s strategy, it should surely not have been swayed by short-term share price moves.

And it is difficult to see exactly what has been gained by its action. HP’s future strategy – including the success of the Autonomy deal – is now up in the air, which hardly seems likely to reassure already twitchy investors.

The most charitable explanation is that HP’s board has suffered from an acute failure of nerve. Shareholders seem unlikely to benefit.

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