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Whitman: Another Tragedy Or The Saviour Of HP?

Eric Doyle
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After three successive tragic CEO appointments, HP is desperate to get things right this time. Eric Doyle looks at Meg Whitman’s prospects

The permanent appointment of Meg Whitman as Leo Apotheker’s replacement at HP is creating a stir in Silicon Valley.

Many people are questioning the gamble the HP board is taking by immediately making the appointment permanent. A previous intimation, before the decision to to sack Apotheker was finalised, said that a temporary CEO would be recruited.

Good Track Record

Whitman joined HP’s board last January and many critics are pointing to her inexperience of business IT as a warning against this permanent post.

In her ten years as eBay CEO, which ended in 2008, she was immersed in the consumer market – but did oversee the purchase of PayPal and Skype. PayPal was a stroke of genius and has been a mainstay of eBay’s business but Skype was another story.

The IP telephony company didn’t fit well with eBay, mainly because the mergers and acquisitions team forgot to include the source code as part of the deal which made integration virtually impossible.The company gradually let go of Skype and then Microsoft snapped it up in May, 2010, making sure it had the source code tied into the deal.

It seems ironic that HP should select the queen of consumerisation at a time when it is cutting loose two of its three links with that market. The printer division is too lucrative to kiss goodbye but the Personal Systems Group (PSG) – HP’s PC division – is still being spun off and the Palm webOS interests are up for sale.

In a press and analyst call, Whitman said that her appointment would not change the ‘recommitting to the hardware business’ strategy, and neither would HP try to renege on the rather overinflated purchase of Autonomy.

HP’s executive chairman Ray Lane naturally welcomed the appointment: “We are at a critical moment and we need renewed leadership to successfully implement our strategy and take advantage of the market opportunities ahead. Meg is a technology visionary with a proven track record of execution. She is a strong communicator who is customer-focused with deep leadership capabilities. Furthermore, as a member of HP’s board of directors for the past eight months, Meg has a solid understanding of our products and markets.”

No Appeal For Old School

An ex-HP engineer Charles (Chuck) House has disagreed publicly with Lane’s view. In the New York Times, he is quoted as saying, “Ms Whitman would be an unmitigated disaster. Her style is so arrogant it gags.”

House (pictured right), is a well-respected Silicon Valley veteran who spent 29 years at HP; also worked for Intel, Veritas, and Informix; and, in 2009, published a book with Raymond Price entitled The HP Phenomenon: Innovation and Business Transformation which praises the legendary “HP Way” of doing business. House is currently chancellor of Cogswell Polytechnical College in Silicon Valley.

In his blog, written last Friday, he gives an insight to the atmosphere that Whitman will be entering. “The PC group is pissed, true. And frankly, they had it coming,” he wrote. “Apple is 15x better these days. They (HP PSG) have gotten so arrogant and haughty, I found it nauseating.”

Later he wrote that HP was worth investing in, blaming share price drops on “panicked, uninformed stockholders who’ve been pissed that the Board sacked wunderkind Hurd (the guy who systematically took R&D apart and virtually single-handedly killed HP morale and ethics) and, now that Leo is having to rebuild the place, they’re blaming HIM. Get real!”

Benefit Of The Doubt

More-official commentators on HP’s prospects seem to be guardedly welcoming the appointment following the press and analyst call.

Mark Fabbi, a vice president and distinguished analyst of network and data centre infrastructure at Gartner, told eWEEK that there are definite pros and cons that come with Whitman’s appointment – as with any new hire.

On the pros side he said Whitman clearly has a better ability to articulate a strategy and be very clear about what she’s going to do and that she can expect better co-operation from HP’s senior team. Fabbi said, “Her comment about ‘recommitting to the hardware business’ is a key one.”

On the cons side he agrees with the many who say that she lacks thr experience of running a really big company. But Fabbi added, “Though not many have run a $100 billion company.”

Charles King, principal analyst at Pund-IT, and a longtime HP expert, told eWEEK that “she’s obviously bright and able, and her position as an HP board director makes her a known entity”.

He added that his doubts lay in the fact that eBay’s size and complexity is a tiny fraction of HP’s.

“More to the point, if the company continues its move toward enterprise IT software and services, who will be plotting that strategy? The other question is: What happens to Whitman’s political ambitions? I believe she’s said she intends to run for public office again,” King said.

“Overall, Whitman seems like a good ‘figurehead’ CEO who could help calm the market and shareholders, but I wonder how long she’d stay at the job,” he concluded.

Pitching For Politics

Whitman did not win the hearts and minds of the Californian voters when she stood for governor last year despite pouring $139 million of her own money into the bid – that’s over $43 for each Californian and a measure of how far her ambition can carry her.

Her political aspirations won’t be universally popular:  “She ran for governor in 2009, for Pete’s sake,” said commentator Jeff Reeves of InvestorPlace. “If aspiring to become a politician isn’t waving the white flag on a serious business career, I don’t know what is.” It also might carry a reminder of the CEO before Hurd, Carly Fiorina, who also stood for election last year, but lost the race to be California’s Senator. Fior’s time at tenure was unpopular, and she has featured in various pubications’ lists of the Worst CEOs of All Time.

Another indicator of Whitman’s impact is the HP share price. When the carpeting of Apotheker was floated, HP’s shares rocketed and gained by seven percent to almost $24. On the realisation that Whitman had been installed, the shares plummeted to below the Apotheker level but recovered slightly to show a $22.80 close yesterday – about 10 cents, or 0.5 percent, improvement on the Apotheker days.

This will change as more is known about Whitman’s plans and leadership. Whether it will be back to the honourable days of ethical business at HP, a new prosperity, or another descent into the bumps and grinds of the past year, only time will tell.