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HP Board Revamp Gives CEO Chance to Shake Off Troubles

*from www.bloomberg.com, April 5, 2013 (To view original article click here.)

Take Away #1: Hewlett-Packard Co.’s board shakeup, including Ray Lane’s exit as chairman, gives CEO Meg Whitman a clearer path to revive growth.

Key Facts and Figures:

  • A former president of Oracle Corp., Lane failed to use his extensive experience in enterprise computing to help Hewlett-Packard’s turnaround.
  • His public gaffes – including being photographed using an Apple Inc. computer – also sometimes served as an embarrassment to the company.
  • Lane bore the stain of the disastrous 11-month tenure of former CEO Leo Apotheker and the HP’s acquisition of software maker Autonomy Corp.
  • The acquisition of Autonomy Corp. led to an $8.8 billion writedown and accusations of accounting fraud.
  • The board is seeking a new chairman with global experience, who can devote more time and energy to revival.
  • “Somebody has to be symbolically accountable,” said Jeffrey Sonnenfeld, a management professor at Yale University.
  • In addition to Lane’s move, directors G. Kennedy Thompson and John Hammergren are departing.

Take Away #2: While HP had rallied 56% this year amid tentative signs that Whitman is making headway in her efforts to reignite growth, the shares have lost half its value since the departure of Mark Hurd.

Key Facts and Figures:

  • Hewlett-Packard fell 1.1% to $22.06 at 11:13 a.m. in New York.
  • Lane is known as something of enterprise computing’s Mr. Fixit, having helped Oracle’s relationship with its customers in the early ‘90s.
  • Lane disciplined Oracle’s freewheeling sales culture during his seven-year tenure there.
  • Lane then stepped in alongside Apotheker after the departure of CEO Mark Hurd.
  • Mark Hurd left in August 2010 after the board said Hurd violated HP’s code of business ethics.
  • Lane and Apotheker weren’t able to make a transition from the lower-profit personal computers and other hardware HP traditionally sold, to more lucrative software, despite a mandate to expand in that area.

Take Away #3: Lane is giving up his chairmanship two weeks after investors re-elected him in a narrow majority of votes.

Key Facts and Figures:

  • Lane has been rebuked for this oversight of the botched Autonomy acquisition.
  • “Lane deserves credit for stepping down. If he’ stayed on he’d become the issue”, says Charles Elson of the University of Delaware.
  • After the March 20 vote, Lane believed he wasn’t given sufficient credit for remaking the company’s board and ousting Apotheker.

Take Away #4: The second board overhaul in two years underscores shareholders’ dissatisfaction with the company’s performance and takeover of Autonomy.

Key Facts and Figures:

  • The writedown of Autonomy in November capped three years of management upheaval, strategy shifts, and slowing growth.
  • This has hammered the shares and complicated Whitman’s turnaround efforts.

Take Away #5: Lane’s reign came to be associated with the ill-fated tenure of Apotheker, who was ousted after 11 months on the job.

Key Facts and Figures:

  • Strategy shifts like the flip-flop over whether to sell the PC division and acquisitions, including Autonomy, did little to revamp HP.
  • Lane also made occasional remarks that came across as condescending to Whitman.
  • After the former eBay Inc. CEO took the helm, Lane told employees he was ready to “take Meg’s training wheels off”, according to an article in Fortune.

Take Away #6: Lane, who will remain on the board, received significantly more compensation in HP shares than other directors during his tenure.

Key Facts and Figures:

  • In 2011, Lane received a special equity award of 1 million shares in connection with his appointment as executive chairman.
  • That was in lieu of the equity retainer of $175,000 that other directors received.
  • Hammergren and Thompson’s tenure will end after a board meeting schedule for May, and the board has begun a search for new directors.

Take Away #7: In the run-up to the annual meeting, shareholder advisers had said that the board failed to properly vet the acquisition of Autonomy.

Key Facts and Figures:

  • Advisers recommended that investors vote against Lane and some other members of the 11-person body.
  • Lane garnered 59% of votes cast, while director Thompson received 55% support and Hammergren received 54%.
  • Last year all three were backed by at least 80% of the vote.
  • Glass Lewis & Co. also urged shareholders to remove Hammergren and Thompson, as well as venture-capital investor Marc Andreessen and lead independent director Rajiv Gupta.

Take Away #8: “In the coming months you will see further evolution of our board,” Whitman wrote in the blog entry on the “HP Next” website set up to chronicle turnaround efforts.

Key Facts and Figures:

  • With Lane stepping down HP said the role of lead independent director is no longer necessary.
  • Gupta, who held that position, will remain on the board and succeed Thompson as the chairman of the audit committee.
  • Director Gary Reiner will replace Gupta as chairman of the nominating and governance committee.
  • After Hammergren’s departure, Whitworth will lead the finance and investment committee.

Take Away #9: The company has shown progress under Whitman, HP’s fourth CEO in three years.

Key Facts and Figures:

  • HP forecast fiscal second-quarter profit in February that topped analysts’ estimates amid cost cutting and rebounding demand for enterprise services.
  • The company is on a great track,” Sonnenfeld said. “Meg has a very good plan.”

*To view original article from www.bloomberg.com click here.

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