CEO Mark Hurd built HP, brought to turning point but paid less care to his personal life

By Jordan Robertson, AP
Saturday, August 7, 2010

Hewlett-Packard CEO brought company to turnpoint

SAN FRANCISCO — The ouster of Hewlett-Packard Co.’s CEO leaves a hole in the world’s largest technology company.

Mark Hurd engineered a stunning turnaround at the Silicon Valley stalwart: From a one-trick printer-ink pony, he crafted a well-rounded seller of personal computers, printers and other technologies and services. HP’s market value nearly doubled during his five years.

He had brought HP to a turning point before it ousted him Friday saying he fudged expenses to hide numerous private dinners with a contractor who did marketing for HP. And his demise leaves investors wondering whether another leader can keep HP on the course he mapped out.

But his abrupt departure is not likely to derail those sweeping changes. He wasn’t an island: few CEOs are — Apple Inc.’s Steve Jobs notwithstanding.

“I don’t view his departure as catastrophic,” said Dinesh Moorjani, an analyst with Gleacher & Co. “The strategy is working fine. The level of uncertainty for me is relatively low just given the circumstances. This wasn’t a one-man company.”

Details of the scandal relate more to Hurd’s personal life than to his leadership of HP, where he cut more than 40,000 jobs and made a series of targeted acquisitions. Moorjani contrasted Friday’s nearly 10 percent after-hours drop in HP’s stock value following the ouster of operational master Hurd against the market’s swoon after Jobs announced he had cancer.

“Steve Jobs is one individual with a vision, whereas with operational issues, there’s a huge team that executes along with Mark Hurd,” Moorjani said. “So I don’t see as much of an impact.”

Hurd, who spent 25 years at ATM maker NCR Corp. before coming to HP, became a Wall Street darling. The $13.9 billion acquisition of Electronic Data Systems made HP a major player in technology services, challenging archrival IBM Corp.

HP also now offers computer networking, helped by the $2.7 billion takeover of 3Com Corp., ratcheting up the rivalry with Cisco Systems Inc. And Hurd’s most recent conquest — the purchase of smart phone maker Palm Inc. for $1.4 billion in June — catapulted it firmly into another key technology market.

The additions also broadened the pool of people who could replace Hurd. It’s a deep bench, and internal candidates could have an edge, given that Hurd and predecessor Carly Fiorina — who got the boot in 2005 over concern about her management style and her decision to buy Compaq Computer — both came from outside HP.

Inside candidates could include Todd Bradley, who oversees personal computers and mobile devices at HP; Vyomesh Joshi, who leads the printer division; Ann Livermore, in charge of servers, services, software and storage; and Shane Robison, leader of HP’s corporate strategy and marketing. Chief Financial Officer Cathie Lesjak, now interim CEO, took herself out of the running for the permanent job.

In recent weeks, Hurd had started talks for a new three-year contract that could have been worth $100 million, a person close to the case told The Associated Press. Those went off track when the woman accused him and HP of sexual harassment, this person said.

The company determined Hurd didn’t violated its sexual harassment policy but broke its rules of conduct.

The woman’s lawyer, celebrity attorney Gloria Allred, says the relationship was not sexual but declined to describe the harassment. Allred declined to identify her client or make her available for an interview.

So Hurd will get almost a third as much — about $28 million in cash and stock — just to walk away. The person said Hurd realized he could no longer lead HP in part because at least two board members were convinced he had had a sexual relationship with the woman and was trying to cover it up.

Hurd is accused of listing other people as his dinner partners on expense reports when he’d been out with the woman. It couldn’t be determined whether HP found other problems with the reports. Even Hurd hasn’t gotten a full accounting from HP of the expenses he is alleged to have falsified — and a tally of the amount he has agreed to refund — and Hurd says the errors in the reports may have been entered unwittingly by an assistant, according to the person close to the case, who requested anonymity because of not being authorized to speak publicly about it.

This person said Hurd met the woman, who is in her 40s, when interviewing her — while in Los Angeles on business in 2007 — for a job greeting and introducing executives at corporate events that she also helped organize.

They talked at a luxury hotel and met for a second time in Denver when she was flown in for a final interview at an HP event Hurd was attending, according to this person. Hurd approved the hire then, the person said.

The person said the woman greeted people at about a dozen events for HP her first year and was paid as much as $5,000 per event, this person said.

Most of the events were at hotels and included 40 to 50 CEOs and a dozen or so HP employees. Afterward, Hurd and the woman often shared dinner at the hotel, but they never traveled together or slept in the same room, and Hurd didn’t expense her travel or lodging, this person said.

In her second year with HP, the woman hosted only a handful of events, said the person, who described the relationship as an acquaintance that became friendly.

Hurd resigned Friday after the board found a “systematic pattern” of submitting falsified financial reports, HP general counsel Michael Holston said.

For Stephen Diamond, associate professor at Santa Clara University School of Law and an expert on business law, the idea of inappropriate patterns underlies the whole story.

Despite HP’s reputation as a steady institution in a market and region that change constantly and quickly, Hurd’s is the third ouster in five years at its top echelon. First was Fiorina’s in 2005, then former Chairwoman Patricia Dunn was ousted in 2006 amid a boardroom spying fiasco.

“It says they’re off track in some fundamental way,” Diamond said.

The focus on steady profits may have overshadowed the drive for innovation, and the company may need an overhaul, he said.

“The first thing is, they have to find the right kind of CEO,” he added. “And I think what that CEO needs to do is come in and say, ‘How many board members were here during the last two scandals? If you were, please resign now. And, who left before these scandals took place? Why don’t you come back and help us out?’ That’s the kind of CEO they need.”

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