HP directors defend shift in strategy

Hewlett Packard bosses have come out fighting in defence of their sharp change in the tech group’s strategy last week, which saw a share price collapse and growing shareholder alarm.

Léo Apotheker, chief executive, will meet shareholders in New York, Boston and London to argue that the company’s bet on business software and its planned exit from personal computers are needed to keep pace with convulsive change in the technology industry.

Mr Apotheker said in an exclusive interview on Sunday: “We are at a pivotal part of our history”.

He predicted that HP would regain the $40bn in revenue lost in an anticipated spinoff of the world’s best-selling PC line, while “my assumption is that in the long term we will have better margin profile and a better growth profile”.

HP shares have shed 25 per cent of their value since word spread on Thursday that the company would pay $11bn, or more than 10 times sales, for Autonomy, the UK’s biggest software concern. The company also said it would move toward a PC spinoff or sale, and would stop producing its main tablets and smartphones.

Mr Apotheker and Cathie Lesjak, HP chief financial officer, have already spoken to dozens of investors, while Ray Lane, non-executive chairman, will make further calls this week.

Mr Lane said: “What I will tell investors is that I fully appreciate that changes of this magnitude are hard to comprehend and swallow at the current share price”.

Even some long-term value investors attracted by HP’s depressed price were alarmed by the moves, Mr Lane conceded.

Mr Lane, a former president of Oracle, database software leader and HP rival, said he would stress that the PC business was a drag on HP’s profit margins and it could thrive independently.

He said: “Right now they have to compete with one arm behind their back. They are not free to put [Google’s] Android on their devices.”

Mr Lane said “only one company has been successful in integrating hardware and software, and that’s a very special case because of one man”, referring to Steve Jobs, Apple’s chief executive.

Instead of running HP as a conglomerate with independently managed products and services, Mr Apotheker said, “we have to start running this as an integrated company” with software at the centre. “If HP did not make this move, we would be on the fringe.”

Yet the pursuit of an integrated offering for large business customers is driving what Mr Apotheker called a “strategic transformation” toward software at HP.

Although HP will trail Oracle, IBM and Mr Apotheker’s former company SAP in software sales, he said HP could “disrupt” that market.

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