HP changes CEO but stays course on new strategy

Meg Whitman

New CEO

After a madcap 24 hours of swirling rumors and press reports, HP has made it official. Léo Apotheker’s ten-month reign as chief executive officer of HP is over, and former chief executive (and would-be Republican governor of California) Meg Whitman is the company’s new CEO.

But while the company said it was time for a new chief executive, it made it clear that it’s sticking to the vision and strategy that Apotheker developed over the last six months. In fact, in announcing Whitman as new CEO, HP chairman went as far as to give Apotheker credit for the new strategy, which includes the purchase of unstructured data software company Autonomy, the shutdown of its webOS software, and the potential spinoff of its PC business.

So if the strategy is sound, what was Apotheker’s undoing?

In a conference call with press and analysts Thursday afternoon, Lane gave three reasons for replacing its chief executive:

  • Teamwork – Lane said that in watching Apotheker work with other top HP executives and line of business leaders, he felt that “the team wasn’t working together.” “This is a big, big company that requires an executive team to be on the same page,” he said.
  • Operational execution – Lane said HP needs a leader who gets close to the disparate business units and understands the details of each.
  • Communications – This was particularly a problem in its August 18 announcement where it announced it was killing off hardware and looking at spinning off its .

Those areas, cited as challenges under Apotheker, are “her strongest areas,” he said of new CEO Whitman.

Whitman is not entirely new to , having been a member of the company’s board since the beginning of 2011. “Meg has a solid understanding of our markets and our products,” Lane said. “HP employees are going to get on her side because she’s going to get on their side very quickly.”

Whitman addressed the controversial changes, saying that the purchase is on track to close by the end of the year, and that the company is still exploring options as to what to do with its webOS operating system.

But the call revealed some additional hints about the future of , either within or outside HP. Whitman said she expected a decision by the end of the calendar year, in line with recent clues. And that decision “will be based solely on value to customers and shareholders.”

Lane struck out angrily at those calling the purchase of Autonomy and the spinoff of PSG a transformation of HP, noting that HP revenues include $120 billion in hardware per year, and noting that “we care a hell of a lot” about the hardware business. Whitman echoed his comments, noting that “the vast majority” of HP’s revenues are still on the hardware side, and will continue to be so.

But Lane admitted that the communication of those changes, announced in August, was done poorly, particularly as it pertains to PSG. And that was part of what cost Apotheker his job.

He reiterated that all options were open when it came to PSG, and said that although no decision had been made, he “envisioned” that if the business were spun out, it would carry the HP brand. Ultimately, he said, feedback from investors and customers will be the deciding factor on what direction the company goes with PSG.

“If it can’t be stronger on the outside in terms of delivering better technology for customers and results for investors, then it stays inside,” Lane said. “This will be the easiest decision we’ll make – it will be handed to us by what our investors and customers tell us.”

HP also announced a change on its board aside from the exodus of Apotheker — Ray Lane moves from non-executive chairman to executive chairman.

In the conference call, Lane offered a fiery defense of HP’s board, which has been called on the carpet (along with Apotheker) in the press and pundit community for HP’s performance in recent quarters. The gist of Lane’s defense – a lot of the criticism of the HP Board of Directors dates back to a previous regime, including the pretexting/spying scandal and culminating in the departure of former CEO .

“This isn’t that board,” Lane emphatically repeated, noting that including himself, Apotheker and former HP Enterprise Business chief , there are eight new faces on the HP board since Apotheker’s appointment. In fact, Lane said, he had to deal with charges that this was a board hand-picked by Apotheker. Clearly, judging by Thursday’s events, that was not the case.

The board is about to get another new face added to it, as the company said it will name a new lead independent director to the board “promptly” to replace Apotheker.

Lane was challenged by an analyst on whether it was a premature move to quickly introduce a new fulltime CEO after what seemed to be a rapid maelstrom of events that led to Apotheker’s departure. The chairman said the company already had an extensive – and fairly current – file put together from the search that ultimately netted Apotheker, and that he rapidly settled on Whitman as the right candidate for the job.

Although Whitman was on the board, were any more long-term insiders considered for the job? Lane said there were several “future candidates” for the big job within HP, but nobody who they thought was ready to tackle the position today.

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