- Associated Press - Thursday, September 22, 2011

SAN FRANCISCO (AP) - Hewlett-Packard Co.’s decision to fire CEO Leo Apotheker after just 11 months and replace him with former eBay chief Meg Whitman is another dizzying turn of the executive merry-go-round at a company whose leadership issues are straining a sprawling technology empire.

Swapping Apotheker, who has now been ousted from two high-profile CEO jobs in two years, for Whitman is a decision designed to stem investor fury over a series of questionable strategy moves.

Apotheker was doomed by disappointing earnings and his fumbled announcement that HP’s personal computer division is for sale. HP’s chairman, Ray Lane, said the dismissal was caused by several factors.

“You don’t deliver a quarter, you don’t deliver another quarter, then you make some important announcements that are communicated poorly _ it was incremental,” Lane said on a conference call. Whitman was on the call, but Apotheker was not. “Then you have to make the tough call of, how long do you go along with that? Do you help? Do you surround? Or do you replace?”

Whitman is a billionaire who is best known for the decade she spent building eBay and her unsuccessful run last year for California governor.

Her star power could be an asset for a company that struggled to gain credibility under Apotheker, who was previously little-known outside of the business-software world. HP is no stranger to celebrity CEOs. But Carly Fiorina’s run at the company’s helm, from 1999 to 2005, ended in shambles.

Despite Whitman’s success at eBay, she is untested when it comes to running a company that is in as many businesses as HP. Another turnaround effort earlier in her career, at FTD, the iconic flower-delivery company, ended with Whitman quitting after two years and declaring that the company is “not fixable.” Many analysts have said the same thing about HP in its current form.

On Thursday, she defended her predecessor’s most controversial moves. She said a decision on PC division’s fate will be made by the end of the year.

Analysts are mixed about her prospects.

“She built up a one-trick pony, an online auction site, and she oversaw the growth of the company, but we are talking about a situation where someone needs to come in who has a technological background, an engineering and scientific background,” said Steve Diamond, an associate professor at Santa Clara University School of Law. “And that is way outside of her skill set.”

Diamond said the decision to change CEOs so soon points to continued disarray on HP’s board, long a target of critics for the chaos it’s caused at one of Silicon Valley’s oldest and largest companies. Infighting and ego-driven drama has long plagued the board, from revelations in 2006 that HP had spied on directors and journalists to ferret out the source of leaks, to last year’s dismissal of CEO Mark Hurd in an ethics scandal.

“There’s no question the board is off the rails _ they need a smaller, tighter board that’s committed to the idea of what the company does,” Diamond said. “But they have a lot of people on the board from different industries. The tough job will be getting the board on board.”

Whitman’s appointment Thursday was Silicon Valley’s worst-kept secret. Deliberations leaked out a day earlier to the delight of investors, who drove up HP’s stock and apparently gave HP’s board the push it needed to oust Apotheker.

HP’s board met Thursday to finalize the change, having decided that Apotheker had lost the board’s confidence in his ability to lead HP long-term, a person familiar with the matter told The Associated Press. This person was not authorized to speak on behalf of HP and spoke on the condition of anonymity.

Lane, the HP chairman, defended Apotheker’s firing and Whitman’s quick selection.

Story Continues →