Board stupid
In the eight months from 22 February 2011 HP's share price has more than halved. The CEO of the computing giant - Leo Apotheker - has been in position for less than a year so the blame for this recent plummet falls squarely at his feet.
It looks like the HP board is thinking it made a colossal mistake in appointing Apotheker, because both ATD and Bloomberg are independently referring to inside sources for the news that it's already looking for his replacement. HP's shares jumped by over six percent once the stories broke.
One of the major causes for this share price plummet have been a sequence of disappointing results from HP over the past few months. It's unfair to blame Apotheker for too much of that as many of the contributing factors were beyond his control, such as macroeconomic instability and a PC market weakened by the rise of the tablet. In fact you could argue Apotheker has been highly proactive in trying to lessen HP's exposure to the low-margin, volatile consumer market.
While the decision to scrap Palm is understandable considering the challenges of trying to make a success of being the fifth biggest mobile platform, pulling out of the PC market when HP is the dominant player is another matter entirely. But it was the guileless, damaging way in which these moves were communicated, together with paying a massive premium for Autonomy in a big to strengthen its B2B software offering, that has drawn universal criticism.
We were at a press lunch recently and got chatting to a few analysts. They were all aghast at the way in which Apotheker handled the announcement of his plans to the public. While HP says it had to be transparent in order for conversations about the possible sale or spin-off of its PC operations to be properly conducted, the feeling is that it could have been a lot more discreet.
Both reports suggest board member Meg Whitman - the former CEO of eBay and HP board member - as a possible replacement. While Whitman has the requisite big tech company experience, eBay is primarily a consumer-facing company, so you have to wonder what use she would be at HP right now.
"Regardless of whether or not the rumour is correct, the damage has already been done. This rumour and any actual action that the board might make only reinforces that HP is a company that is in severe disarray," said Ovum chief analyst Carter Lusher.
"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. 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.
"Rumours that former eBay CEO and current HP board member Meg Whitman might be an interim replacement for Apotheker would do little for the confidence of HP's enterprise customers. Whitman's expertise lies primarily in the consumer market, and an interim leader will just prolong the sense of uncertainty."
Apotheker's methods may well be derided, but few people question that B2B software and services are where the smart money is for HP while Apple and Google dominate the consumer tech market. Even if HP decides to hold onto its PC division, the company surely needs a CEO who can take on the likes of Oracle and Cisco if it's going to revive its fortunes. Right now it doesn't looks like Apotheker is that person.
UPDATE - 10:40, 22 September 2011 - While we were writing this story we found ourselves wondering whether this HP board is even worse than the Yahoo one. An article we've just read from the NYT reveals such board-level dysfunction at HP as to make Yahoo's look merely useless by comparison.
