HP's Ray Lane on why Leo Apotheker had to go


HP Executive Chairman Ray Lane HP

HP Executive Chairman Ray Lane said the board had to make a leadership change because the company habitually missed financial targets, botched communications, lost credibility with Wall Street, and couldn't rally HP's 320,000 employees.

While much of HP's conference call today to introduce Meg Whitman as CEO revolved around her capabilities, a lot of Lane's time was spent explaining why former CEO Leo Apotheker had to go. Lane went through a series of explanations. Here's a look at why Lane and the board arrived at the Apotheker decision.

Apotheker couldn't run a large company. Lane said:

HP was searching for a new CEO last fall, and ultimately hired Leo Apotheker. The company had been jolted by the departure of its prior CEO. At the time, the company was executing well and the board sought a candidate who could develop a strategic vision for the future. For years prior, the company had cut costs to the point where it sacrificed innovation. In order to grow, HP needed to make strategic investments and innovation is part of the fabric of this iconic company that could no longer be set aside. Leo was tasked with developing the vision for HP. We credit him with having made important contributions on that dimension and supporting the company's future.

That setup led to the Apotheker couldn't hit targets line. Lane added:

It became increasingly clear that we needed new leadership to focus on operating our business more effectively to meet the challenges of today's environment and I learned it most vividly by talking to a lot of you (Wall Street analysts) the day after our announcements when you focused on operational execution more than anything else. Specifically, the board believes that the job of our CEO requires additional attributes to successfully execute in the company's strategic evolution. Now, this includes having the leadership abilities to deliver improved execution and financial performance.

Overall, Lane focused on three primary reasons why Apotheker had to go:

Apotheker couldn't form an executive team. Lane said:

This is a company that requires an executive team to be on the same page. I would spend time here or at board meetings or whatever the occasion was and we didn't see an executive team working on the same page or working together.

Apotheker couldn't execute. Lane said:

(Apotheker lacked the) ability to get down deep into the businesses and understand the dynamics that were going on the businesses, and that could land us on a quarter ahead of expectations.

Communications were botched. Lane referred to HP's announcement that it would buy Autonomy, spin off the PC unit, and ditch the TouchPad and said:

I think we struggled in the August 18 announcement, and when we communicated to our constituents, customers, press, investors, with clear, concise communications.

If you want to get Lane wound up just ask him why there's little confidence in the company's board of directors. Lane was asked about what HP could do to bolster low investor confidence in the board following the Leo Apotheker era and various miscues that went with it.

Lane said:

Thank you for the question, because I'm going to give you an answer right from my heart, OK? It's going to come right directly from my heart. In January, I added five board members to this board. This is not the board that was around for pre-texting. This is not the board that fired Mark Hurd. This is not the board that did everything the press writes about every day. It's just like open season to write about this board. It's not this board. OK? This board with (Ann) Livermore, and Leo (Apotheker), with eight new members this year. Eight people that were here before, you know, last January or November for Leo and myself. Strong individuals, Gary Reiner from GE. I don't have to go through it, CEOs, lots of CEOs. They work really well together. I mean, I watched the executive staff come into the first board meeting and watched the openness, the tough questions. They knew immediately it was a different board. We carefully considered decisions when we make the kinds of -- we are embarrassed about the communications of these decisions that could have been done much better, but we carefully considered the decisions made on August 18 to help augment HP's business. So look, I'm proud of the individuals on this board and the way they work together, and I think the company and the shareholders are well served by this board. It is our operating execution that needs to improve. And we made a decision in Meg Whitman to lead us.

The follow-up question to Lane was why the board has trouble picking leaders. Lane's reply boiled down to: It wasn't us. Lane said:

This board, good or bad--I don't think we ought to be going back in history--did not select Leo. This is a board who objectively evaluated whether he was the right guy to out operate the business. And we came to the conclusion he was not.

This story was originally published at ZDNet's Between the Lines.


Join the discussion

Conversation powered by Livefyre

Show Comments Hide Comments
Latest Galleries from CNET
Uber's tumultuous ups and downs in 2014 (pictures)
The best and worst quotes of 2014 (pictures)
A roomy range from LG (pictures)
This plain GE range has all of the essentials (pictures)
Sony's 'Interview' heard 'round the world (pictures)