HP Will Weather Its CEO Transition

When Hewlett-Packard announced the resignation of its Chairman, Chief Executive Officer and President Mark Hurd on 6 August, it sent a shockwave throughout the tech industry. Although the scandal behind the resignation drew its share of rubberneckers, a good deal of attention soon focused on HP’s future: namely, how would the departure of its top executive, one who arguably helped shepherd the company to a position of stability during his five-year tenure, affect its fortunes in the longer term?

Hurd’s resignation came after an internal investigation into sexual harassment claims by a former HP contractor, Jodie Fisher. HP said that, while it found no evidence of sexual harassment, Hurd had apparently violated company business policies in order to disguise a personal relationship with Fisher—namely, actions such as filing false expense reports.

“As the investigation progressed, I realised 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,” Hurd wrote in a statement following his resignation. “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.”

HP pushes back

In the wake of the resignation, HP CFO Cathie Lesjak assumed the interim CEO slot. Other company executives insisted that HP would remain stable and strong, with the research for a top executive currently underway.

“HP is not about any one person,” HP director Marc Andreessen said. “We also have a broad and deep executive bench strength that will continue to lead this company and drive our performance-based culture. HP is a great company, and the reason HP is great is the people, and the people are the reason HP will continue to be great.”

A few prominent figures rallied to Hurd’s defense following the resignation. In a 9 August email to The New York Times, Oracle CEO Larry Ellison termed the HP board’s dismissal “the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago. That decision nearly destroyed Apple and would have if Steve hadn’t come back and saved them.”

It should be mentioned that Ellison and Hurd are reportedly good friends.

“In losing Mark Hurd, the HP board failed to act in the best interest of HP’s employees, shareholders, customers and partners,” added Ellison, who said the HP board had initially split 6-4 over whether to fire the CEO. “The HP board admits that it fully investigated the sexual harassment claims against Mark and found them to be utterly false.”

Long-term challenges

Hurd’s severance package was apparently substantial, leaving little doubt that he’ll survive this fall from grace. Analysts also believe HP will pull through the scandal quickly—but continues to face long-term challenges.

“TBR believes that there will be little day-to-day impact in the short term,” Ezra Gottheil, an analyst with Technology Business Research, wrote in a 6 August research note. “Under a new CEO, TBR believes that there is an opportunity to revise the role of HP Software, reshaping the division from its current slow growth to become a driver of revenue and profit growth along the lines of IBM’s Software division.”

In other words, Gottheil wrote, “despite its success under Hurt, TBR believes the company will weather its CEO transition.” The future CEO’s challenges include competition with IBM, which devotes more resources than HP to research and development, as well as aggressive manufacturers such as Acer and Samsung. HP’s entrance into the portable-device market, via its Palm acquisition, also raises its competitive profile vis-à-vis Apple.

HP’s next CEO, in other words, will have their work cut out for them.