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Former Hewlett-Packard CEO Mark HurdJustin Sullivan

After taking the helm five years ago, he was credited with cutting costs and turning around the listing ship that was Hewlett-Packard Co. But late Friday afternoon, Mark Hurd's career as captain of the world's largest technology company came to a sudden end, shattered after a probe into sexual harassment accusations ended with allegations of improper expense claims.

HP general counsel Mike Holston said a probe of a sexual harassment complaint by a former marketing contractor, hired directly by the CEO's office, had found no such harassment but did reveal that Mr. Hurd had a "close personal relationship" with her that he did not disclose.

Payments to the contractor and expense claims were filed that did not have a "legitimate business purpose," Mr. Holston told a conference call for investors. "Inaccurate" expense reports were also filed that concealed the relationship.

"Based on these facts, the board concluded Mark's conduct demonstrated a profound lack of judgment," Mr. Holston said.



HP officials took pains to stress that this would have no effect on the company's bottom line, releasing a higher revenue projection and earnings-per-share outlook in the same press release announcing Mr. Hurd's dramatic departure.

HP's chief financial officer, Cathie Lesjack, a 24-year HP veteran, was appointed interim CEO, but will not be Mr. Hurd's permanent replacement. The company said a search for a new chairman and CEO was already under way.

Asked why the company would release the good news and the bad news together, Ms. Lesjack said it was meant to underscore that HP would not be affected by Mr. Hurd's departure.

"We thought it was very important for people to understand that the announcement today and Mark Hurd resigning had nothing to with the operational performance of the company but in fact is really all about Mark's behaviour and judgment," she told reporters.

HP also said the probe into Mr. Hurd's conduct concluded he had not violated the company's sexual harassment policy, but had violated its business standards rules.

The 53-year-old Mr. Hurd, who took over HP in 2005, said in a statement that the decision to step down was painful.

"As the investigation progressed, I realized there were instances in which I did not live up to the standards and principles of trust, respect and integrity that I have espoused at HP and which have guided me throughout my career," Mr. Hurd was quoted as saying in a statement issued by the Palo Alto, Calif.-based company late yesterday afternoon.

"After a number of discussions with members of the board, I will move aside and the board will search for new leadership," the statement said. "This is a painful decision for me to make after five years at HP, but I believe it would be difficult for me to continue as an effective leader at HP and I believe this is the only decision the board and I could make at this time."

After the announcement, the company's shares dropped more than 8 per cent in after-hours trading.

"It's a negative because the positive leadership that HP has had under Hurd is identified with his name," said Nehal Chokshi, an analyst with Technology Insights Research-Southridge Research Group.

Shares of HP have more than doubled since Mr. Hurd, the former CEO of NCR Corp., took the helm five years ago, cutting costs and expanding HP's footprint in the services market with acquisitions like the 2008 purchase of EDS Corp. for $13.9-billion (U.S.).

The other news HP released on Friday included preliminary results for its fiscal third quarter, which came in slightly above analyst expectations.

HP said it earned 75 cents a share during the period, compared with 67 cents in the same quarter a year ago. When excluding one-time items, the company earned $1.08 a share. Analysts polled by Thomson Reuters expected adjusted earnings of $1.07.

HP also said its revenue rose 11 per cent from last year to $30.7-billion; analysts were looking for $30-billion in revenue.

The company gave an outlook for its fiscal fourth quarter as well. The company forecast earnings of $1.03 to $1.05 a share, or $1.25 to $1.27 after excluding one-time items. Analysts were hoping for adjusted earnings of $1.26. HP expects $32.5-billion to $32.7-billion in revenue, in line with analysts' expectations of $32.6-billion.

With reports from AP and Reuters

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HP's BUMPY RIDE

2005

HP's board ousts CEO Carly Fiorina after battling with her for control of the company and over the troubled merger with Compaq Computer.

2005/2006

Investigators working for HP used false pretenses to obtain directors' and journalists' private phone records. HP's board was attempting to track down the source of media leaks.

April, 2010

HP says it is co-operating with a U.S. Securities and Exchange Commission probe into allegations that the company bribed Russian officials in order to secure a 2003 computer contract.

Aug. 6, 2010

CEO Mark Hurd quits following a sexual harassment investigation.

Staff, Reuters

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