Hewlett-Packard Company (HPQ) has hit headlines again only a month after its chief Leo Apotheker announced major restructuring plans. Though the news is yet to be confirmed by the company, its shares shot up 6.7% to $23.98 and inched up 0.04% in after-market trade on market buzz. The upside in share price was based on reports of Apothekar‘s forced resignation, flashed on Bloomberg.
Leo Apothekar, the former SAP AG (SAP) chief, was appointed as CEO and president of H-P in September 2010. He replaced Mark Hurd, who was implicated in a sexual harassment case at the time. Hurd was the driving force of the company’s successful transformation from a basic computer and printer maker to a technology giant with a huge product portfolio of hardware and business solutions.
H-P was hopeful of seeing a competent successor in Apothekar, given his two-decade long experience in SAP. Under his guidance, SAP had transformed into a worldwide leader of business software applications, generating double-digit software revenue growth for 18 straight quarters.
But his presence did not help H-P much. In fact, instead of navigating the tech behemoth out of troubled waters, Apothekar cut growth projections thrice. And H-P shares plunged over 40.0% since he joined in September 2010.
Last month, Apothekar announced major restructuring initiatives to focus on high-growth and high-margin businesses. The CEO desired to spin off or sell H-P’s lower-margin PC business, wash his hands off the WebOS business and buy business software maker Autonomy Corp. Apotheker defended his move by saying that it was his aim to help H-P evolve as a software and services company that will no longer rely on hardware businesses.
Most of the directors vehemently opposed this decision, citing autonomy buy-out as an extravagance that could not be afforded in the current environment. But they are considering the decision to spin off the poor performing PC business.
Overall, the analysts deem the tenure of Apothekar as the worst that H-P has ever seen, perhaps because he had no material experience in hardware technology. Then again, while they expect the dismissal to prove beneficial for the company, it would also result in a huge severance payout.
H-P directors are considering Meg Whitman, the former chief executive of EBay Inc. (EBAY) as a possible interim or permanent successor. Other possible candidates are Gary Moore, chief operating officer of Cisco Systems Inc. (CSCO), and Steve Mills, who runs the software unit at International Business Machines Corp. (IBM).
Based on the uncertainty regarding the PC business spin off and the management change, analysts were compelled to lower their estimates. As a result, H-P now has a short-term Strong Sell recommendation (Zacks #5 Rank).
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