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HP's chairman steps down, 2 directors to depart

Source : AP
Last Updated: Fri, Apr 05, 2013 02:15 hrs

Hewlett-Packard Co. Chairman Ray Lane is stepping down and two other board members are leaving in a shake-up spurred by disgruntled stockholders stung by the personal computer maker's downfall.

The housecleaning announced Thursday comes just two weeks after HP barely rebuffed a shareholder rebellion aimed at Lane, the company's chairman since November 2010, and John Hammergren and G. Kennedy Thompson, the two longest serving members on the board.

Although he is relinquishing the chairman's role, Lane will remain on HP's board. He will be replaced on an interim basis by Ralph Whitworth, a shareholder activist who has been on the board for less than 18 months. Whitworth, whose firm owns 34.5 million HP shares, hinted the board would be overhauled under questioning from testy shareholders during the company's March 20 annual meeting.

Hammergren, the CEO of pharmaceutical drug distributor McKesson Corp., and Thompson, the former CEO of troubled bank Wachovia Corp., will depart after HP's board meeting next month. Their exodus means none of HP's directors will have been on the board for longer than four years. Hammergren joined the board in 2005 and Thompson was appointed in 2006.

HP intends to name two new directors to replace Hammergren and Kennedy by the end of this year. Until then, HP will have nine directors on its board.

During last month's shareholder meeting, Lane's re-election as a director was backed by just 59 percent of the vote compared with 96 percent for Ralph Whitworth.

Hammergren's re-election was opposed by 46 percent of the votes while Thompson was rejected on 45 percent of the ballots.

CtW Investment Group, an HP shareholder at the forefront of the rebellion, applauded Thursday's fallout. "Shareholders stand ready to assist the board in bringing in effective, independent directors to help restore this icon of U.S. innovation," Dieter Waizenegget, CtW's executive director, said in a statement.

Shareholders had targeted Hammergren and Thompson for removal primarily because their roles on the board gave them oversight over HP's acquisition strategy. Most of the company's major deals in recent years have gone badly, saddling HP with losses of more than $17 billion since 2010.

The most vexing of the bunch has been Autonomy, a business software maker bought for $10 billion in 2011. Late last year, HP alleged it uncovered financial chicanery within Autonomy that the company says drove up the acquisition price by at least $5 billion.

Autonomy's former CEO Mike Lynch, who was fired from HP last year, has vehemently denied the allegations. The claims are under investigation by the U.S. Justice Department and financial fraud authorities in the U.K., according to HP. At least 12 lawsuits revolving around the handling of the Autonomy deal have been filed against HP.

Lane, a former Oracle Corp. executive turned venture capitalist, also has been blamed for the botched acquisitions. He also was closely aligned with former HP CEO Leo Apotheker, who was fired in more than 17 months ago. The Palo Alto, Calif. company is now being run by Meg Whitman, who is hoping to engineer a turnaround within the next two to three years.

"After reflecting on the stockholder vote last month, I've decided to step down as executive chairman to reduce any distraction from HP's ongoing turnaround," Lane, 66, said in a statement.

Beyond its troubled acquisitions, most of HP's other woes stem from a decline in PC sales as more technology spending shifts to smartphones and tablet computers. The upheaval has caused HP's revenue to fall from the previous year in six consecutive quarters. To offset the drop-off in PC sales, Whitman has cut about 15,300 jobs in the past year and is still planning to eliminate about 14,000 more positions.

HP's woes have cut the company's market value in half in less than three years, wiping out $45 billion in shareholder wealth. The damage would be even worse, if HP's stock had not rebounded during the past two months on hopes that Whitman has the company headed in the right direction. The stock rose 39 cents to close at $22.30 Thursday before the board changes were disclosed.

In an open letter Thursday, Whitworth, told HP shareholders, "there is palpable energy and excitement at every level of the company to get our business turned around." He pledged to find a "world-class" chairman to replace him.




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