Far from being a sign of hope for the shareholders, the nomination of Margaret Whitman as CEO of Hewlett-Packard (NYSE:HPQ) last week is further evidence that the problem of the company is its board of directors, not the CEO. I just can’t understand how in the world investors can believe that the nomination of Margaret Whitman as the new CEO of Hewlett-Packard is good news for the shareholders.
In interviews given after the announcement, Ms. Whitman did not accomplish much.
First, she went to tell CNBC that her first priority was to ensure that HP achieves its quarterly forecasts. The company has missed consensus expectations in the last three quarters.
As a long term investor this alone is alarming for a company that has so many obvious and difficult problems beyond the next quarter. With the stock down more than 50% in the last 12 months, I assume that the market’s expectations are not that high for the next quarter anyway.
The far more urgent task for the new CEO is to communicate a valid vision for the future (the next 5 to 10 years) – the hell with next quarter.
In addition, Ms. Whitman said she was not there to reverse the decisions of her predecessor, Leo Apotheker.
She also preached continuity to her employees. I understand that Ms. wants to reassure HP's staff. But the reality is that she has not much choice. Remember that as a member of the board of directors herself, she was part of and endorsed all the decisions of Mr. Apotheker. It would be embarrassing to say, for example, a few weeks later that the acquisition of Autonomy is stupid as the board agreed and supported the decision (it is stupid, but that is another story).
After only 11 months in place, Leo Apotheker has not really had time to make lasting changes at HP and to fix the mess left by his predecessor Mark Hurd. It is far from certain that we can blame him, for instance for the poor recent financial results.
Yes, we can criticize him for the decision to buy Autonomy, which is a classic case of capital destruction. But then we can also blame the board and Ms. Whitman who approved the deal.
The nomination of Meg Whitman has the unpleasant smell of panic. After the recent fiasco, the Board desperately seeks to regain the confidence of Wall Street. In this, I agree with Sanford Bernstein analyst Toni Sacconaghi that HP should have looked to attract a highly talented executive with a strong track record in operations and capital deployment. This latter quality is a must for a company that made many doubtful acquisitions over the years.
The new CEO seems to have been appointed primarily because she was close to the action on the board. This is far from a guarantee that she has the skills to meet this enormous challenge. Do not forget that Meg Whitman left eBay (NASDAQ:EBAY) in not such good shape. Again, the HP board is far from impressive. I understand that it is far easier to oust a CEO than to completely change a board. But in the case of HP, all evidence points to the conclusion that the problem lies first and foremost in its board. So where are you shareholders?
Disclosure: Long HP.
Again, the HP board is far from impressive. I understand that it is far easier to oust a CEO than to completely change a board. But in the case of HP, all evidence points to the conclusion that the problem lies first and foremost in its board.
So where are you shareholders?