New HP CEO fails to rouse investors, shares slide

SAN FRANCISCO Fri Oct 1, 2010 7:11pm EDT

Then-Chief Operating Officer of SAP Leo Apotheker addresses the TMT 2006 Global Tech Media and Telecom Summit in Paris February 28, 2006. REUTERS/Mal Langsdon

Then-Chief Operating Officer of SAP Leo Apotheker addresses the TMT 2006 Global Tech Media and Telecom Summit in Paris February 28, 2006.

Credit: Reuters/Mal Langsdon

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SAN FRANCISCO (Reuters) - Hewlett-Packard Co's new CEO failed to impress Wall Street in his first conference call with investors, as doubts persisted as to whether the Silicon Valley outsider has the experience to steer the sprawling company.

HP shares slid 3.4 percent after former SAP CEO Leo Apotheker provided few details on his plans to accelerate sales growth, in a performance one analyst called "lackluster."

Apotheker, 57, spent seven months as CEO of German software giant SAP before resigning abruptly amid customer complaints over software support fee increases.

"It would have been almost impossible for the board to hire an outside person and have the stock go down, but that's what they managed to do," Gleacher & Co analyst Brian Marshall said, calling his hiring controversial.

He added that the downside was tempered by the appointment of former Oracle Corp President Ray Lane, a well-known figure in technology circles, as chairman.

Apotheker, an experienced salesman who speaks five languages, emphasized his international experience and did not hint at major changes.

He said HP was healthy and executing well, and praised the management team that includes Todd Bradley and Ann Livermore, two executives that had been in the running for the CEO post.

Analysts say there is also some concern among investors that Bradley, who is well-regarded, might jump ship for another company after being passed over for the top job.

Wedbush Securities analyst Kaushik Roy noted that Apotheker's subdued demeanor on the conference call presented a stark contrast with his bold and confident predecessor, Mark Hurd.

Investors will stay on the sidelines until they get a clearer sense of the new CEO, he said.

"If he had left SAP on a high note, there wouldn't be so much uncertainty," Roy said.

TOUGH ACT TO FOLLOW?

Robert Ryan, HP's lead director, said Apotheker was the only person offered the post. The board ended up with six candidates it felt could have done the job.

"We cast the net very far and very wide. We had lots of candidates," Ryan said on the conference call.

Hurd was popular with Wall Street. His aggressive cost cuts and acquisitions helped revive HP, but Hurd quit in August amid a scandal involving a female contractor.

M. Eric Johnson, director of the Center for Digital Strategies at the Tuck School of Business at Dartmouth, said the Apotheker selection was "way out of left field."

He said Apotheker is known for his sales prowess and considerable intellect, but wondered whether he was a good fit culturally. He said the appointments of Apotheker and Lane should increase the heat in HP's growing rivalry with Oracle. While at SAP, Apotheker and Oracle CEO Larry Ellison had been bitter rivals.

"It certainly is raising the ante; the question for investors is whether this is the right battle to pick. HP has a lot of fish to fry and that's just a small piece," he said.

Ellison, for his part, used the Apotheker hiring to take another swipe at HP's board. In emailed comments to the Wall Street Journal, Ellison said: "HP had several good internal candidates ... but instead they pick a guy who was recently fired because he did such a bad job of running SAP."

He also said: "The HP board needs to resign en masse."

Ellison has been taking shots at HP's board ever since Hurd was forced out. Ellison hired Hurd, his close friend, as president of Oracle after his departure from HP. Relations between the companies have been strained since then.

HP also released details of Apotheker's compensation. The total package, which includes salary, bonus, restricted stock and other benefits, was valued at roughly $85 million over four years by Gleacher's Marshall. That assumes HP shares hit $53 -- a 30 percent gain from Friday.

Hurd took home roughly $98 million in total compensation from HP over his final three years at the company.

HP's stock slid as much as 4.3 percent before ending 3.1 percent lower at $40.77 on the New York Stock Exchange.

(Additional reporting by Liana Baker; Editing by Edwin Chan, Derek Caney and Richard Chang))

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Comments (2)
mrpaul wrote:
I find it ridiculous to have to pay one individual such unbelievable amounts of money, and not reward stockholders and consumers who purchase this companies products. This is why so many companies send work overseas and fire American workers; because they overpay executives totally unneeded salaries and bonus plans.

Oct 01, 2010 10:14am EDT  --  Report as abuse
torroid wrote:
I’m sorry … are these the same analysts that thought Hurd was at the beginning not so hot either? Are these the same analysts that didn’t see company after company fly high and right into a cliff? Why, oh why does anyone, other than the analysts, put any stock in to those analysts? Reuters, you should quote them by name. That way readers can start measuring their credibility, and thus yours story’s.

Oct 01, 2010 5:41pm EDT  --  Report as abuse
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