Posts Tagged ‘HP’


Former SAP Chief to Lead Hewlett-Packard

September 30, 2010

SAN FRANCISCO — Hewlett-Packard’s board chose equal parts pragmatism, aggressiveness and surprise with its hiring of Léo Apotheker as the company’s new chief executive.
H.P. revealed Mr. Apotheker’s appointment on Thursday, filling a void left when Mark V. Hurd was ousted in August. Mr. Apotheker, a German, spent 20 years at the business software maker SAP, including a recent, abbreviated stint as its chief executive. His experience meshes with H.P.’s current strategy of dominating the business computing market and could help revitalize the company’s lackluster software business.
“It is a huge privilege to be here today,” Mr. Apotheker said in an interview. “H.P. is the iconic company of this industry, and it is a dream job that anyone would want to have.”
Investors hoped that H.P. would tap someone capable of maintaining the company’s efficient structure while also adding a fresh, innovative spark that some found lacking under Mr. Hurd. In particular, investors had talked about finding an executive who could run the business computing side while also revitalizing consumer product initiatives like H.P.’s smartphone strategy, following its acquisition of Palm.
There was rampant speculation about who would fill the role, and Mr. Apotheker’s name did not appear on most short lists.
Wall Street gave the news a lukewarm reception, sending H.P.’s shares down about 3 percent to $40.82 in after-hours trading.
H.P. ended regular trading down 1 percent at $42.07. The stock has yet to recover from a sharp slide following Mr. Hurd’s exit, and the company has lost $12.6 billion in market value since then.
Ray Lane, a managing partner at the venture capital firm Kleiner Perkins Caufield & Byers and a former Oracle executive, was named to H.P.’s board and will serve as nonexecutive chairman. Taken together, the recruitment of Mr. Apotheker and Mr. Lane would seem to signal that H.P. planned a more forceful march into the business software market, where it would butt up against Oracle, I.B.M., Microsoft and SAP.
“I think you have to take it that way,” said China Martens, a software analyst for the 451 Group. “To bring in people with software stamped all over them is very intriguing.”
While it is the largest seller of printers, PCs and computer servers, H.P. has struggled to expand its software business at comparable rates. It bought a number of companies that make software for helping manage data centers, but it is less involved in the traditional business software markets with products that track data, inventory, employees and sales leads.
Any shift toward the business software realm would lead it to tread on Oracle’s toes, and tensions between the two companies already run high.
In August, Lawrence J. Ellison, Oracle’s chief executive, publicly ridiculed H.P.’s board for the way it had handled Mr. Hurd’s exit. H.P.’s board concluded that Mr. Hurd had violated company policies in the way he conducted a personal relationship with a marketing contractor. In particular, the board said that Mr. Hurd had left the contractor’s name off of expense reports when he should have included it.
In September, Oracle hired Mr. Hurd as a co-president, and H.P. responded with a lawsuit. The parties have since resolved their legal dispute, but they remain fierce competitors. Oracle has started selling computer servers, encroaching on H.P.’s turf, and H.P. has now tapped a couple of executives with deep knowledge of Oracle’s practices.
Mr. Apotheker moved through the ranks of SAP, including stints as the head of sales, co-chief executive and chief executive. He resigned as chief executive in February, just seven months after earning the job outright.
During his tenure as chief, SAP suffered through a large round of layoffs, major product delays and a customer revolt against the company’s decision to raise software support prices.
“I think it would be fair to say he left SAP under a cloud, but it would also be fair to say it wasn’t all his fault,” Ms. Martens said, adding that Mr. Apotheker can come off as both polished and abrasive.
For his part, Mr. Apotheker said: “My claim to fame is that I made SAP into the largest business software company on the planet.”
Mr. Apotheker’s hiring marks the third time in a row that H.P. has passed over internal executives when it came to filling a vacant chief executive spot.
Brendan Barnicle, an analyst at Pacific Crest Securities, said Mr. Apotheker was hardly considered a front runner for the job, particularly given his lack of expertise in hardware.
“It’s an interesting choice, and it’s not something I would have expected,” Mr. Barnicle said.
He added that the culture at H.P., where the traditional emphasis has been on the customer, was very different from at SAP, which prizes its engineering culture.
Ross S. MacMillan, an analyst with Jefferies & Company, said Mr. Apotheker’s lack of hardware experience was not necessarily a shortcoming. He pointed to Mr. Apotheker’s sales background and said he could take advantage of his existing relationships with big customers.
“Those individual decision makers are going to be the same for SAP as H.P.,” Mr. MacMillan said. “He may not be the expert on hardware, but he has the buyer relationships.”
Mr. MacMillan also pointed to Mr. Apotheker’s German background as a potential plus for H.P. when it came to adding business in Europe. Of particular note, he said, was that Mr. Apotheker spoke six languages.
As for H.P.’s shares falling on news of Mr. Apotheker’s hiring, Mr. MacMillan pointed to the surprise factor.
“This wasn’t deemed to be a candidate that was on people’s minds,” he said.

Verne G. Kopytoff contributed reporting.

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H.P.’s Foreign Entanglement

September 13, 2010, 11:30 am


Peter J. Henning follows issues involving securities law and white-collar crime for DealBook’s White Collar Watch.
The last month or so has not been very pleasant for Hewlett-Packard.
The company’s recent 10-Q disclosed that the Justice Department and Securities and Exchange Commission have expanded an investigation of possible bribe payments in connection with contracts the company obtained in Russia. Such payments may violate the Foreign Corrupt Practices Act (F.C.P.A.), an area where the federal government has investigated more aggressively over the last few years.
This disclosure comes on top of other recent legal problems at H.P. Joe Nocera’s recent column in The New York Times described H.P.’s directors as “the most inept board in America” for its lawsuit against its former chief executive, Mark V. Hurd. On Aug. 30, the Justice Department announced a $55 million settlement of a civil fraud claim against H.P. for paying “influencer fees” — in other words, kickbacks — in return for favorable recommendations to the federal government to buy the company’s products.

About White Collar Watch
Peter J. Henning, writing for DealBook’s White Collar Watch, is a commentator on white-collar crime and litigation. A former lawyer at the Securities and Exchange Commission’s enforcement division and then a prosecutor at the Justice Department, he is a professor at the Wayne State University Law School. He is currently working on a book, “The Prosecution and Defense of Public Corruption: The Law & Legal Strategies,” to be published by Oxford University Press.

As Mr. Nocera pointed out, H.P. is unlikely to succeed in its legal battle with Mr. Hurd, but that is more of a distraction than anything else. A widening F.C.P.A. investigation, on the other hand, may end up costing the company millions of dollars in legal fees as it deals with demands for documents while conducting its own internal inquiry. And any settlement with the government would likely involve both criminal fines and civil monetary penalties, along with other remedial measures, ratcheting the price up further.
The bribery investigation began in Russia in connection with a contract with a former German subsidiary of H.P. that involved the installation of a computer network in, of all places, Russia’s chief prosecutor’s office. Russian and German prosecutors are looking into the transaction, which took place from 2002 to 2006, and have requested documents from the company.
In its 10-Q, H.P. notes for the first time that the investigation is not limited to that one contract in Russia: “The U.S. enforcement authorities have recently requested information from H.P. relating to certain governmental and quasi-governmental transactions in Russia and in the Commonwealth of Independent States subregion dating back to 2000.”
It is not clear how many contracts or transactions may be involved, but the expanded time frame and geographic scope probably means the inquiry will be an extended one, rather than something H.P. can wrap up quickly. As sometimes happens, once one part of a multinational company is scrutinized for bribery, problems in other areas can pop to the surface.
The recent settlement by Siemens of overseas bribery charges shows how corruption can spread throughout a company. Subsidiaries operating in France, Argentina, Turkey and the Middle East were found to have paid bribes to obtain contracts, and Siemens paid $800 million in criminal fines to the Justice Department and disgorgement to the S.E.C. as part of the settlement.
The F.C.P.A. is part of the federal securities laws, and most cases involve the S.E.C. along with the Justice Department because one part of the act requires corporations to maintain proper books and records, something that is rarely done when a bribe is paid. The Justice Department has become much more aggressive in pursuing foreign bribery cases, including conducting an undercover sting operation that resulted in more than 20 people being arrested on charges of offering bribes to participate in a fictitious security contract with an African nation.
The recent addition of enhanced whistle-blower rewards in the Dodd-Frank Act authorizes the S.E.C. to pay 10 percent of any recovery realized, up to a maximum of 30 percent, to those who provide valuable information related to any type of securities fraud. F.C.P.A. cases are very likely to be among the most common instances for whistle-blowing by corporate employees.
F.C.P.A. charges are also very difficult to defend once the government obtains evidence that payments were made to foreign officials “in obtaining or retaining business” in that country. The act recognizes two defenses to a charge, first the payment was lawful under the laws of the country where it was made, and second the expenses were reasonable for the promoting the product or implementing the contract.
Neither defense has been successfully offered in court to this point. Even worse, according to an article by Kyle Sheahen that will be published shortly in the Wisconsin International Law Journal, “the defenses are virtually useless in practice.”
Even if H.P. is found to have violated the F.C.P.A., that does not mean the company’s ability to win government contracts would be at risk. Professor Mike Koehler, who analyzes these issues on the FCPA Professor blog, noted that the Siemens settlement did not seem to have any real effect on the company’s relationship with the federal government. “One of the unfortunate beauties of engaging in bribery the U.S. government terms ‘unprecedented in scale and geographic scope’ is no slowdown in U.S. government contracts in the immediate aftermath of the enforcement action,” he noted.
The impact from any F.C.P.A. violation may change, however, under a bill under consideration in Congress. The legislation, called the Overseas Contractor Reform Act and passed by the House Oversight and Government Reform Committee in July, requires debarment from future government contracts for any person or company found in violation of the F.C.P.A. The bill states the policy that “no Government contracts or grants should be awarded to individuals or companies who violate the Foreign Corrupt Practices Act.”
Whether the House and Senate will pass the legislation remains to be seen, but corporate integrity is, like mom and apple pie, not easily opposed. While the current aversion to corporate America may be abating, this is the type of reform that may well take hold to put some more bite into the F.C.P.A.
For H.P., a burgeoning foreign bribery investigation is not good news because of the costs and uncertainly it engenders. If the Overseas Contractor Reform Act becomes law, it will make it even more imperative that the company try to avoid any finding of a violation of the F.C.P.A., perhaps through a deferred or non-prosecution agreement that can let it avoid a finding of a violation.
Peter J. Henning
The Overseas Contractor Reform Act
H.P.’s Foreign Entanglement –


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Hurd ousted from HP amid personal scandal

By Richard Waters in San Francisco
Published: August 6 2010 21:52 | Last updated: August 7 2010 00:39

Mark Hurd, chief executive of Hewlett-Packard, was forced out of the company on Friday amid a scandal stemming from his relationship with a former marketing consultant to the world’s biggest computer maker.
The abrupt departure, over claims involving the mishandling of expenses, marked the fall of one of the computer industry’s most highly-regarded executives. It was also one of the prominent corporate departures involving allegations of lapses in personal ethics.
Mr Hurd’s departure followed an allegation of sexual harassment that was made by the former contractor in late June, HP said. After an investigation into the claim, HP said it had found no violation of its own sexual harassment policy, but that it had uncovered “numerous” instances in which its chief executive had made invalid expense claims.
It also claimed there had been many other instances in which the unnamed consultant had filed claims for expenses and fees that were invalid, though it did not provide further details.
In a devastating critique of one of the most prominent US business leaders, Mike Holston, HP’s general counsel said of the departure: “It had to do with integrity, had to do with credibility, had to do with honesty.”
One person familiar with the situation said that HP had identified questionable expense claims of up to $20,000 over the past two years. Another person close to Mr Hurd said that his relationship with the female consultant had involved a friendship, and that there had been no romantic connection.
HP later disclosed that Mr Hurd will receive his contractual severance payments from the company, which were estimated by one person close to the case at nearly $40m.
HP moved quickly to reassure Wall Street about the computer maker’s health, raising its earnings forecast for the rest of this year and naming its chief financial officer, Cathie Lesjak, as interim chief executive.
However, the departure robs HP of a highly-regarded executive who is credited with pulling off a successful turnround of the computer maker, and wiped nearly 10 per cent from its share price in aftermarket trading.
Commenting on the departure, Ms Lesjak said: “It has nothing to do with the performance of the company. It is all about his behaviour and judgment.”
In a statement, Mr Hurd said: “After a number of discussions with members of the board, I will move aside and the board will search for new leadership.”
He described his departure as “a painful decision for me to make after five years at HP, but I believe it would be more difficult for me to continue as an effective leader”.
HP said it had started a search for a new full-time chief executive.

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