Former SAP Chief to Lead Hewlett-Packard
September 30, 2010SAN FRANCISCO —
Hewlett-Packard’s board chose equal parts pragmatism, aggressiveness and surprise with its hiring of Léo Apotheker as the company’s new chief executive.
H.P. revealed Mr. Apotheker’s appointment on Thursday, filling a void left when
Mark V. Hurd was ousted in August. Mr. Apotheker, a German, spent 20 years at the business software maker
SAP, including a recent, abbreviated stint as its chief executive. His experience meshes with H.P.’s current strategy of dominating the business computing market and could help revitalize the company’s lackluster software business.
“It is a huge privilege to be here today,” Mr. Apotheker said in an interview. “H.P. is the iconic company of this industry, and it is a dream job that anyone would want to have.”
Investors hoped that H.P. would tap someone capable of maintaining the company’s efficient structure while also adding a fresh, innovative spark that some found lacking under Mr. Hurd. In particular, investors had talked about finding an executive who could run the business computing side while also revitalizing consumer product initiatives like H.P.’s smartphone strategy, following its acquisition of Palm.
There was rampant speculation about who would fill the role, and Mr. Apotheker’s name did not appear on most short lists.
Wall Street gave the news a lukewarm reception, sending H.P.’s shares down about 3 percent to $40.82 in after-hours trading.
H.P. ended regular trading down 1 percent at $42.07. The stock has yet to recover from a sharp slide following Mr. Hurd’s exit, and the company has lost $12.6 billion in market value since then.
Ray Lane, a managing partner at the
venture capital firm Kleiner Perkins Caufield & Byers and a former
Oracle executive, was named to H.P.’s board and will serve as nonexecutive chairman. Taken together, the recruitment of Mr. Apotheker and Mr. Lane would seem to signal that H.P. planned a more forceful march into the business software market, where it would butt up against Oracle,
I.B.M.,
Microsoft and SAP.
“I think you have to take it that way,” said China Martens, a software analyst for the 451 Group. “To bring in people with software stamped all over them is very intriguing.”
While it is the largest seller of printers, PCs and computer servers, H.P. has struggled to expand its software business at comparable rates. It bought a number of companies that make software for helping manage data centers, but it is less involved in the traditional business software markets with products that track data, inventory, employees and sales leads.
Any shift toward the business software realm would lead it to tread on Oracle’s toes, and tensions between the two companies already run high.
In August,
Lawrence J. Ellison, Oracle’s chief executive, publicly ridiculed H.P.’s board for the way it had handled Mr. Hurd’s exit. H.P.’s board concluded that Mr. Hurd had violated company policies in the way he conducted a personal relationship with a marketing contractor. In particular, the board said that Mr. Hurd had left the contractor’s name off of expense reports when he should have included it.
In September, Oracle hired Mr. Hurd as a co-president, and H.P. responded with a lawsuit. The parties have since resolved their legal dispute, but they remain fierce competitors. Oracle has started selling computer servers, encroaching on H.P.’s turf, and H.P. has now tapped a couple of executives with deep knowledge of Oracle’s practices.
Mr. Apotheker moved through the ranks of SAP, including stints as the head of sales, co-chief executive and chief executive. He resigned as chief executive in February, just seven months after earning the job outright.
During his tenure as chief, SAP suffered through a large round of layoffs, major product delays and a customer revolt against the company’s decision to raise software support prices.
“I think it would be fair to say he left SAP under a cloud, but it would also be fair to say it wasn’t all his fault,” Ms. Martens said, adding that Mr. Apotheker can come off as both polished and abrasive.
For his part, Mr. Apotheker said: “My claim to fame is that I made SAP into the largest business software company on the planet.”
Mr. Apotheker’s hiring marks the third time in a row that H.P. has passed over internal executives when it came to filling a vacant chief executive spot.
Brendan Barnicle, an analyst at Pacific Crest Securities, said Mr. Apotheker was hardly considered a front runner for the job, particularly given his lack of expertise in hardware.
“It’s an interesting choice, and it’s not something I would have expected,” Mr. Barnicle said.
He added that the culture at H.P., where the traditional emphasis has been on the customer, was very different from at SAP, which prizes its engineering culture.
Ross S. MacMillan, an analyst with Jefferies & Company, said Mr. Apotheker’s lack of hardware experience was not necessarily a shortcoming. He pointed to Mr. Apotheker’s sales background and said he could take advantage of his existing relationships with big customers.
“Those individual decision makers are going to be the same for SAP as H.P.,” Mr. MacMillan said. “He may not be the expert on hardware, but he has the buyer relationships.”
Mr. MacMillan also pointed to Mr. Apotheker’s German background as a potential plus for H.P. when it came to adding business in Europe. Of particular note, he said, was that Mr. Apotheker spoke six languages.
As for H.P.’s shares falling on news of Mr. Apotheker’s hiring, Mr. MacMillan pointed to the surprise factor.
“This wasn’t deemed to be a candidate that was on people’s minds,” he said.
Verne G. Kopytoff contributed reporting.
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