Hewlett-Packard Co.’s board convened on Wednesday to consider ousting Chief Executive Officer Leo Apotheker after less than a year on the job and replacing him temporarily with former eBay CEO Meg Whitman, a source familiar with the matter said.
The board of directors – facing shareholder lawsuits and intensifying criticism from investors – is thrashing out a host of issues, including whether to name Ms. Whitman as the interim CEO, the source told Reuters. HP is trying to contain a crisis of credibility on multiple fronts, starting with its leadership. No decisions have yet been made on the leadership issue, the source said on condition of anonymity because of the sensitivity of the issue.
If Mr. Apotheker is let go, he would be the third CEO in a row to be ousted by the board.
Wall Street wasted no time in roaring its approval, sending shares in the largest U.S. technology company by sales up more than 11 per cent for a market value gain of nearly $5-billion (U.S.).
Analysts say the odds may have been stacked against Mr. Apotheker from the beginning. Venture capitalist Ray Lane, who this year assumed the chairmanship of an often-lambasted but powerful board, has argued that previous management underinvested in areas including software and services.
“He was doomed from the beginning,” said Ticonderoga Securities analyst Brian White. “The die was cast for whoever stepped into that position.”
Investors seemed to approve of Ms. Whitman, a billionaire who joined HP’s board this year on an interim basis after a failed bid to become California’s governor.
Mr. Apotheker, former SAP CEO, was a surprise choice to replace the popular Mark Hurd, beloved by investors for slashing costs but ejected in 2010 after being accused of irregularities in reporting expenses and improper relations with a female contractor.
Before Mr. Hurd came Carly Fiorina – like Ms. Whitman, a candidate for California political office – whom investors blamed for betting on a sunset PC industry by buying Compaq. She was eventually fired by the board.
HP’s latest chief is facing similar investor criticism. During his tenure, Mr. Apotheker slashed sales forecasts repeatedly, backtracked on promises to integrate Palm’s webOS software into devices, and struggled to halt a 50 per cent plunge in the share price.
Mr. Apotheker’s possible exit had been viewed by some as merely a matter of time. Chairman Lane had been taking a more visible role in the past few weeks, including accompanying the CEO to visit investors to communicate and clarify HP’s strategy.
Last week, he replaced Mr. Apotheker at an industry conference to defend HP’s change in strategy and clear the confusion that followed in the market.
Representatives for Ms. Whitman, whose track record at eBay came under attack during her campaign, did not respond to requests for comment. Representatives for HP and the board did not respond to requests for comment.
In August, HP again frustrated investors by killing off a much-touted line of mobile devices including the TouchPad and declaring it may spin off its massive PC division. Mr. Apotheker also spearheaded a deal to buy British software maker Autonomy that many considered too costly.
“There is plenty to fix at HP but a new, well-respected CEO would begin the process of repairing the company’s badly damaged reputation with investors,” Ms. White said.
HP has been faced withering criticism from Wall Street and a raft of shareholder lawsuits over its recent strategic decisions and how it communicated them.
Especially rankling to investors was its decision to fork over close to $12-billion for Autonomy, without clarifying how the niche maker of cloud-computing software would fit into or help drive a sprawling empire that spans computers, printers, software and enterprise IT solutions.
But to many observers, HP’s board was to blame.
It has been held up as a model of dysfunction since the wiretapping scandal of a few years ago, when HP counsel and board chairwoman Patricia Dunn authorized electronic eavesdropping on directors and journalists to try to plug a series of media leaks.
That scandal, forever associated with a storied company hailed as a cornerstone of Silicon Valley, forced the resignation of Ms. Dunn.
Wall Street now awaits HP’s decision on future leadership. Observers say the reports of Mr. Apotheker’s potential ouster again underscored the leaky nature of one of Silicon Valley’s most influential boards.
“You’d think there was a wiretap in their boardroom,” Mr. White said.
“They have more power than any board I’ve ever seem,” he added.
HP shares were up 8.2 per cent at $24.31 on Wednesday afternoon, off an earlier high at $25.10.