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Leo's Out, Meg's In

Ray Lane Named as HP's Executive Chairman

The stock market in New York was closed all of five minutes Thursday when HP's board announced that it had stripped Léo Apotheker of his epaulets and swagger stick and named Meg Whitman president and chief executive officer.

Ray Lane, who put Whitman on the HP board in January, was named the company's executive chairman. As non-executive chairman, Lane was very much the power behind Apotheker's throne. Now apparently he will be Meg's Gray Eminence. He said he was there "to support Meg," the same thing he said about Apotheker.

The two are close because Lane helped Whitman out when she ran into problems at eBay, according to what some Yale guy said on CNBC. At least they know each other as customer and vendor from the days when she was at eBay and he was at Oracle.

The change in Lane's status, which is likely to be remarked on at some point by Lane's old boss, Oracle CEO Larry Ellison, more closely resembles the speculation last week that Lane would get the CEO job when Léo fell and in fact Lane admitted during the conference call that followed the announcement that he had considered stepping into the slot on an interim basis.

Lane said he had found "weaknesses in parts of the business" and that Léo was let go because of poor execution, failed leadership, lack of understanding HP's various businesses except on a cursory level, and poor communications skills, which culminated in the disastrous August 18 announcement that HP would spin out or sell off its PC unit, abort its nascent drive into webOS-based tablets and smartphones, and buy Autonomy for a king's ransom.

Board Still Causing Angst
Since the board blessed the plans, it's not backing off them, which is why HP's stock was down again after-hours to $22.60 after Wall Street plunged a very nasty 4% during the session.

Investors don't want to hear that the board is indecisive about what to do with the company's giant $41 billion PC arm. Delay is losing business and HP CFO Cathie Lesjak got on the horn long enough to say revenues this quarter would be worse than the $32.1 billion-$32.5 billion Léo predicted in August when estimates were for $34 billion but by some financial gymnastics HP will still make his predicted ESP of $1.12 to $1.16 compared to estimates of $1.31.

It's a Hardware Company, Is It?
Although Lane has now decided that HP is a hardware company - something else he said Léo didn't realize - the best he and Meg could do was promise a decision on the PC unit by the end of the calendar year. Betcha they decide to keep it. Betcha they say so in a few weeks.

In another slap at Apotheker, Lane said he had banished the word "transform" from the HP lexicon. "We will have more services and software, but we're a $120 billion hardware company."

Insiders claim the only reason HP is sticking by the fatal August 18 strategy is that Lane was part of the troika that included Léo and chief strategy and technology officer Shane Robison that reportedly persuaded the board to rubberstamp the plan.

Meanwhile, it's still quite possible that dissonant shareholders who have lost half their money since HP tossed out Mark Hurd may make a bid to dump the whole board and substitute their own slate. That slate may then make some management changes. They'll have to live with the Autonomy acquisition. HP can't get out of it and it should close by the end of the calendar year.

Whitman pledged to turn things around and mend fences with the investment community, but said it would take time to rebuild confidence. She has met with HP's Executive Council to discuss how they will work together and boost employee morale. "The organization's been through a lot," she said.

Doubts Continue
There are of course widespread doubts about Meg's skills and her purely consumer background, her inability to grow eBay passed the $7 billion mark, and her pricey acquisition of Skype for $2.5 billion. which ultimately forced eBay into a $1.4 billion write-off. Skype now belongs to Microsoft.

Lane brushed aside the issue of Whitman's hasty appointment and said he was acquainted with all the candidates and there's none better. Possible insiders aren't ready and Meg apparently presented him with a plan for the next six months and the next year.

In answer to questions about the board itself he said it's not the pretexting board or the board that fired Hurd or the board that hired Apotheker. He saw to that in January by bringing in five new people and getting rid of four troublemakers. He never dealt with the fact that it is the board that sanctioned the August 18 plan and okayed the Autonomy acquisition.

Bloomberg claimed that Apotheker was blithely unaware that he was about to lose his job until Wednesday when the news broke. The notion that he hadn't a clue seems a bit farfetched given that he was gagged last week and replaced by Lane at two outside meetings where he was expected to discuss HP's strategic direction, but the man did seem to have a tin ear.

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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