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Ever have a stock that made you feel dumb? Hewlett-Packard is making me look pretty foolish right now. Just not as foolish as HP itself looks.

You are no doubt aware that the company jettisoned CEO Léo Apotheker last month, just shy of his first anniversary with the company. HP lost $40-billion (U.S.) in value during his short tenure.

His departure is the latest development in a corporate circus stretching back more than half a decade and three CEOs.

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When HP appointed Mr. Apotheker in fall 2010, I argued there was undue pessimism about his background at software giant SAP and about HP's strategy to expand in enterprise software. I recommended the stock at $43. Then, after an August announcement that cut the shares to $25, I recommended it again, believing it unfairly discounted.

That logic no longer holds. At 5.5 times earnings, HP is clearly cheap and could still deliver significant gains to a hardy, long-term investor. It is, however, fairly priced for being one of the more ineptly governed companies in the United States.

You may have heard such comments before: There was rampant criticism of HP's board after it sacked CEO Mark Hurd, a Wall Street favourite, last year for expense-account improprieties. At the time, I didn't agree; I take corporate codes of conduct seriously, and I don't think CEOs should get free passes.

When HP chose Mr. Apotheker, it quickly became apparent that he wasn't passing some kind of cool-kid test on Wall Street. (His accented first name even came in for criticism from some analysts – why's this guy insisting on being called LAY-oh instead of LEE-oh?)

More significant problems soon arose, however. Chief among them was the company's inability to hit its financial targets. Mr. Apotheker, according to some post mortems, spent his time on high-level strategy and left the day-to-day operations to other executives.

What hastened Mr. Apotheker's exit seemed to be the August announcements – leaked, like all important news at this dysfunctional company – that HP would spend more than $10-billion on an enterprise software company called Autonomy and consider off-loading its low-margin personal computer business.

Media accounts have referred to these moves as "blindsiding" investors, a curious term considering Mr. Apotheker's background at SAP clearly suggested HP was putting a fresh emphasis on the enterprise-software sector. Nonetheless, the news – coupled with another negative guidance revision – sent the shares to the new lows.

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More curious, however, is that new CEO Meg Whitman, an HP board member since January and former chief of eBay, says the company will continue with the same strategy implemented by Mr. Apotheker.

Ray Lane, the former Oracle executive brought on as chairman of the board the same day as Mr. Apotheker arrived as CEO, made the rounds last month defending the board for its abrupt change of heart. Since seven of 13 directors joined on or after the day Mr. Apotheker was hired, the board that fired Mr. Hurd was not the same as the board that hired him. "This board did not select Léo," Mr. Lane said.

Well then, who should be held responsible? The three members of the search committee who did choose him? The three other holdover board members who, according to the New York Times, failed to take the time to meet Mr. Apotheker before he was hired? All 13, who presumably signed off on all of Mr. Apotheker's big moves?

Now, according to a report in the Wall Street Journal, HP has hired Goldman Sachs "to help the company defend itself against possible activist investors who could push for change." No CEO seems safe at the company, but the board feels the need to protect itself. This has things backward. It is the shareholders who need to be protected from the board.

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About the Author
Business and investing reporter and columnist

A business journalist since 1994, David Milstead began writing for The Globe and Mail in 2009. During eight years at the Rocky Mountain News in Denver, Colo., he individually or jointly won nine national awards from SABEW, the Society of American Business Editors and Writers. He has also worked at the Wall Street Journal. More

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