INTERVIEW-HP chairman sees turnaround as long-term project

Tue Jul 26, 2011 9:17pm EDT

* Ray Lane sees HP turnaround long-term project

* Lane says previous cost-cutting went too far

By Poornima Gupta and Sarah McBride

SAN FRANCISCO, July 26 (Reuters) - Turning around troubled Hewlett-Packard (HPQ.N) is a long-term project that will require more investment in the business, company chairman and venture capitalist Ray Lane said.

After two disappointing quarters marked by slashed sales expectations, some on Wall Street had begun to question whether Chief Executive Leo Apotheker's strategy of embracing cloud computing and mobile software would bear fruit.

But Lane, a managing partner at Kleiner Perkins Caufield & Byers who joined HP at the same time as Apotheker after former leader Mark Hurd left under a cloud of scandal, argued the new helmsman was paying for past mistakes.

Lane said that serial cost-cutting under two previous CEOs had stifled innovation at a Silicon Valley icon once renowned for cutting-edge products.

"It's not a three-month job," Lane said, adding that Apotheker is focused on HP's long-term growth.

"Mark Hurd did not invest," said Lane, who is also a former top executive at Oracle Corp ORCL.O. "He burned the furniture to please Wall Street," he said.

"Leo is not that," added Lane, who has known the HP CEO for 20 years.

Apotheker, a Silicon Valley outsider whose appointment was was not well-received by Wall Street, has shaken up HP's management even as he was taking HP into new markets.

But he disappointed investors when he cut the company's sales outlook twice since taking over, raising questions about the former SAP (SAPG.DE) CEO's ability to spark growth.

Since Apotheker took over eight months ago, the stock is down 11 percent, compared with a 13 percent rise in the Nasdaq composite index .IXIC.

The past decade has seen HP grapple with a messy takeover of Compaq, the controversial tenure of former CEO Carly Fiorina and a board spying scandal along with the ouster of Hurd.

HP's board too has seen major turnover and been harshly criticized over the years for the hiring and firing of Fiorina and the handling of a phone-tapping scandal in 2006.

Lane, a green technology enthusiast and investor, said he didn't seek to be on any public boards but was honored when the world's largest technology company by revenue asked him to join.

"I thought it needed the help," said Lane, who aims to contribute some of his entrepreneurial expertise and experience to return the former Silicon Valley icon to stability.

The last Kleiner Perkins partner to serve on HP's board was Tom Perkins, a co-founder of the venture capital firm and previously a longtime HP employee.

He resigned from the board in 2006 over phone-tapping of board members' phones by HP, triggering a Securities & Exchange Commission investigation into the company.

(Reporting by Poornima Gupta and Sarah McBride; Editing by Bernard Orr)

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