SAN FRANCISCO (Reuters) - Hewlett-Packard Co named Leo Apotheker, the former head of German software company SAP, as chief executive in a surprise appointment and HP shares dropped 3 percent.
The recruitment of the long-time software industry veteran and Silicon Valley outsider -- who left SAP abruptly after just seven months at the helm amid a wave of customer complaints -- concerned some who worried about his ability to steer a diverse, sprawling $130 billion hardware and services company.
Apotheker, a multilingual salesman schooled in economics and international relations, succeeds Mark Hurd, who was ousted from HP on August 6 for filing inaccurate expense reports related to a female marketing contractor.
The top job at HP offers a unique opportunity to lead a Silicon Valley icon -- but comes freighted with big challenges and high expectations.
Unlike in 2005, when Hurd took over an HP in disarray, Apotheker will take the helm of a well-run company whose investors will not be sated with a another round of cost cuts.
In an interview with Reuters, Apotheker said he would focus on innovation and growth. He acknowledged the challenge of HP’s size and assorted businesses, but underscored the company’s “deep and talented” management team.
Apotheker said under his stewardship HP would not relent in its efforts to drive efficiency.
“You’re never done with efficiency, and at HP we’ll continue to drive efficiency,” he said. “However, we will also want to continue to have a real focus on growth. So we’ll do both.”
Fort Pitt Capital analyst Kim Caughey expressed doubt about Apotheker moving from a software company to HP, a company with a commanding presence in the personal computer, server, IT services and printer markets.
“SAP is a very different sort of company than HP, and that is my biggest concern,” Caughey said. “The scope of SAP is very different, as are the customers. What does he know about hardware? That’s the question.”
But Wedbush Securities analyst Kaushik Roy said, “He can be an agent of change. Investors were focused on ‘how do you bring back R&D, how do you bring back innovation?'”
HP shares fell 3 percent to $40.80 in extended trading, after closing at $42.07 on the New York Stock Exchange.
The appointment of an outsider -- the third straight external hire, after Carly Fiorina and Hurd -- surprised some observers who had bet on a promotion from within.
Many analysts had expected Todd Bradley, HP’s PC division chief, or Ann Livermore, who heads its enterprise arm, to take on the role.
Apotheker had spent more than two decades at SAP. He was named SAP co-chief executive in April 2008, and became its sole leader in July 2009.
His tenure was marked by criticism of SAP’s lack of direction, and customers raged when SAP instituted its first maintenance fee increases in a decade. During his term, SAP also made its first-ever major round of job cuts.
“Leo is a very bright guy. He has a bad rap because he got handed the wheel of the Titanic five minutes after it hit the iceberg,” said Peter Goldmacher at Cowen and Co.
HP’s board also named Ray Lane as non-executive chairman. Lane is managing partner at venture capital firm Kleiner Perkins Caufield & Byers, and previously served as president and chief operating officer at Oracle Corp.
Both appointments are effective November 1, HP said.
They come nearly two months after the controversial August 6 ouster of Hurd, which sent shock waves through Silicon Valley and upset investors who credited him with turning the company around.
Hurd may be a tough act to follow. He transformed the company into a diversified IT powerhouse, the largest technology company in the world on a revenue basis.
“The investment community wanted an outsider to be named CEO,” said Gleacher & Co analyst Brian Marshall. “They view HP internally as a little bit dysfunctional in terms of all the issues they had in senior management in the last couple of years.”
Analysts said HP’s appointment of Apotheker and Lane could serve to deepen its growing rivalry with Oracle, which is a bitter rival of SAP.
In a statement, SAP co-CEO Bill McDermott called Apotheker’s hiring “great news. ... This move only sets the stage for an even deeper relationship between our two companies.”
Oracle CEO Larry Ellison lashed out at HP over Hurd’s ouster, and then hired him as president, drawing HP’s wrath. The companies have publicly reconciled, but the competition between the two giants only figures to grow more intense.
Editing by Edwin Chan, Robert MacMillan, Steve Orlofsky and Richard Chang