Saturday, May 26, 2018
Business

Shakeup at HP clears path for Whitman to revive growth

SAN FRANCISCO — Hewlett-Packard's board shakeup, including Ray Lane's exit as chairman, gives chief executive officer Meg Whitman a clearer path to revive growth and shake off years of tumult at the world's largest computermaker.

A former president of Oracle, Lane failed to use his extensive experience in enterprise computing to help HP's turnaround, and his public gaffes — including being photographed using an Apple computer — also sometimes served as an embarrassment to the company.

Lane, 66, instead bore the stain of the disastrous 11-month tenure of former CEO Leo Apotheker and the company's acquisition of softwaremaker Autonomy, which led to an $8.8 billion writedown and accusations of accounting fraud. To build on the momentum that Whitman has begun to show, the board is seeking a new chairman with global experience who can devote more time and energy to revival efforts, said Pat Russo, a company director. Until then, Ralph Whitworth will serve as interim chairman.

"Somebody has to be symbolically accountable," said Jeffrey Sonnenfeld, a management professor at Yale University. "The hope is that it puts this behind them so it doesn't become a governance sideshow."

While Hewlett-Packard shares had rallied 56 percent this year amid tentative signs that Whitman is making headway in her efforts to reignite growth, the stock has lost half its value since the 2010 departure of CEO Mark Hurd, who left after the board said he violated Hewlett-Packard's code of business ethics.

Lane and Apotheker weren't able to make a transition from the lower-profit personal computers and other hardware the company traditionally sold, to more lucrative software, despite a mandate to expand in that area.

Lane is giving up his chairmanship two weeks after investors re-elected him in a narrow majority of votes, issuing a rebuke of his oversight of the botched Autonomy acquisition.

"It's not typical to get a withhold vote, and if you do you'd usually resign," said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware.

The second board overhaul in two years underscores shareholders' dissatisfaction with the company's performance and the takeover of Autonomy. The writedown of Autonomy in November capped three years of management upheaval, strategy shifts and slowing growth that hammered the shares and complicated Whitman's turnaround efforts.

Hewlett-Packard and its investors looked to Lane — a former No. 2 at Oracle with deep roots in enterprise technology and venture capital — to bring stability and help navigate a transformation away from personal computers into products and services for corporate customers.

His reign instead came to be associated with the ill-fated tenure of Apotheker, who was ousted after 11 months on the job; strategy shifts, such as a flip-flop over whether to sell the PC division; and acquisitions, including Autonomy, that did little to revamp Hewlett-Packard.

"It's the right thing, even if a little late," said Erik Gordon, a professor at the Ross School of Business at the University of Michigan.

The company has shown progress under Whitman, HP's fourth CEO in three years. It forecast fiscal second-quarter profit in February that topped analysts' estimates amid cost cutting and rebounding demand for enterprise services.

"The company is on a great track," Sonnenfeld said. "Meg has a very good plan."

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