Wednesday, October 6, 2010

New CEO: HP in Position to Thrive

USA Today

Leo Apotheker is described as "a strategic thinker with a passion for technology."

Hewlett-Packard's new CEO, Leo Apotheker, is a 57-year-old German who speaks five languages, has plenty of international experience and currently resides in Paris.

His multilingual background could come in handy as HP (HPQ) not only expands overseas but attempts to stitch together a vast array of products and services across different technologies.

"No other company can match what HP does in the marketplace," Apotheker said in a conference call Friday. Given HP's diversified product lineup, he said, it is uniquely positioned to thrive over the next few years.

"I believe HP is an undervalued company," said Apotheker, who was the only person offered the job.

The appointments Thursday of Apotheker and Ray Lane, who was named HP's non-executive chairman, ended a nearly two-month search to fill the company's top post. The position had been open since HP's board pushed out Mark Hurd as CEO amid allegations of sexual harassment and deceptive expense reports.

Apotheker, who left business-software behemoth SAP after a short stint as CEO, is expected to carry out a strategy crafted by Hurd, in which HP built upon its leadership in PCs and printers to expand into technology services, computer networking, data storage and security.

Peter Falvey, co-head of technology investment banking for Morgan Keegan, expects Apotheker to "step up its acquisition pace." The company recently picked up data-storage firm 3Par and security vendor ArcSight.

Trip Chowdhry, a tech analyst at Global Equities Research, anticipates Apotheker will also lead a more aggressive software push, pitting it against longtime partner Oracle.

"HP should be more valuable than the sum of its parts," said Apotheker, who takes over HP on Nov. 1. "Software (which accounts for just 3% of the company's annual revenue of about $118 billion) is sort of the glue to make that happen."

Hiring an outsider ... again

Though HP has a new CEO, his hiring could reopen old problems.

Most analysts expected HP to hire from within after selecting two outsiders who clashed with the board. Hurd's predecessor, Carly Fiorina, also had a run-in with directors. She is now a Republican candidate for a U.S. Senate seat in California.

Todd Bradley, who oversees HP's Personal Systems Group, a $28 billion annual business that includes PCs and mobile devices, had been widely considered the top internal candidate. But HP's board said it offered the job only to Apotheker after seriously considering six candidates, including some inside HP.

"Leo is a strategic thinker with a passion for technology, wide-reaching global experience and proven operational discipline — exactly what we were looking for in a CEO," said Robert Ryan, the lead independent director on HP's board.

Apotheker said he has reached out to HP's senior management team — he calls it the "best and brightest in the industry" — to retain them. He also plans to travel the world to meet HP employees, customers and shareholders and promote used computers.

In his 22 years at SAP, Apotheker navigated through the ranks, with stints as head of sales, co-CEO and CEO. But he resigned as CEO in February after just seven months on the job. During his reign as leader, SAP staggered through layoffs, product delays and a customer backlash after the company raised software support prices for refurbished computers.

"He left SAP with a lot of angry customers," says tech consultant Lou Mazzucchelli.

Indeed, investors so far are less than impressed with Apotheker's appointment. In trading Friday, HP shares sank 3%, to $40.77.

But a former colleague of Apotheker says he is the right person for the job.

"This is great news for HP and SAP," said Bill McDermott, co-CEO of SAP. "SAP and HP are outstanding partners, HP is a great SAP customer, and this move only sets the stage for an even deeper relationship between our two companies."

Apotheker should get a big assist in his new endeavor from Lane, 63, a partner at powerhouse venture-capital firm Kleiner Perkins Caufield & Byers. Lane made his name as president at SAP rival Oracle, where he saw the database giant through an accounting scandal.