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HP Gags Léo

Apparently HP doesn’t trust its own CEO to speak in public anymore

Apparently HP doesn't trust its own CEO to speak in public anymore.

Not after his disastrous stock-crippling performance August 18 when he announced that HP would spin off its $41 billion PC unit, kill its newborn webOS devices and buy an unknown British software company for most of the money it has in the bank while cutting guidance for the third time in a row.

Léo's keynote appearance Monday at an InformationWeek 500 conference was canceled at the last minute and he was replaced by HP's non-executive chairman Ray Lane who brought along HP CTO Shane Robison for technical support.

The same thing happened the next day at a Deutsche Bank conference. Lane showed up, Léo didn't.

Lane got a pretty good review at IW500. One of the pub's reporters wrote, "The intellectual jousting match that's typically part of an Apotheker interview never materialized. Instead, the straight-shooting Lane gave the clearest vision yet for where HP wanted to go and why it was making the moves it was."

However, the substitution, in addition to all the other baggage Apotheker is carrying, has Silicon Valley openly speculating that Léo could be sent packing after HP closes its fiscal year on Halloween - no sense upsetting the current quarter anymore than it already is - and that Lane will replace him (although that brace of companies Kleiner Perkins recently sold HP- ya know, Vertica, Fortify, ArcSight - might give him an anxious moment or two).

There are also rumblings - probably idle - of HP having second thoughts about Léo's proposed $11 billion acquisition of the British software house Autonomy.

Sanford Bernstein analyst Toni Sacconaghi doubtlessly has something to do with that.

On Tuesday he issued a report uncharacteristically critical of HP's top management and its board that said, "Based on our conversations with investors, it appears that the overwhelming majority of large HP shareholders remain opposed to the HP/Autonomy deal following their conversations with senior executives and the board."

They're "exasperated" because HP is paying 11 times Autonomy's $1 billion in sales for an addressable market that HP figures is only growing at about 8%.

But because HP agreed to pay cash, Sacconaghi said HP doesn't need shareholder approval and without some heart-stopping material dirt on Autonomy probably has to go through with it.

Never a prize and now supposedly loaded with friends of Léo (though they're probably more friends of Lane), HP's board came in for more heat because it approved the Autonomy deal and the decision to announce a possible spin-off of HP's PC operation without having a plan.

HP directors only serve one-year terms so activist shareholders could seek to replace them ahead of dumping Léo if need be. Nominations have to be in between November 23 and December 26 to be voted on during HP's shareholders meeting in March.

Sacconaghi toyed with the idea of Oracle, its only "realistic potential suitor," buying HP, allowing that it's not "completely implausible" given Larry Ellison's "boldness and unpredictability," but he still counts the chances of that happening pretty low.

Rather, he thinks "that if HP's results don't improve, the company will ultimately restructure its portfolio and/or replace its leadership, either of which would likely serve as a catalyst for the stock."

Despite the handsome 64% premium it offered - which one would think would have Autonomy shareholder thrusting their shares in HP's jeans - HP has had to extend the deadline for getting 75% of Autonomy's shareholders to buy into the deal. It pushed the deadline out to October 3. It only has 41.6% but, according to conventional wisdom, having that much this early in the game is an unusually high response rate.

HP went to the bond market this week for $4.6 billion worth of relatively cheap money to help pay for Autonomy but because Moody's has decided HP's not a prime risk anymore it's paying double what, say, IBM would.

There's a story going round that Léo wanted to spin out the PC unit to cover the Autonomy bill otherwise HP would be overextended because of its buyback pledges.

Forbes suggested the HP and Autonomy might build a "search engine for everything" together.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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