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Hewlett-Packard hands Meg Whitman a herculean task

In taking the reins of the computer maker, the former EBay exec will seek to reverse a decade of corporate dysfunction. She's replacing the ousted Leo Apotheker.

September 23, 2011|By David Sarno and P.J. Huffstutter
  • Meg Whitman, center, campaigns as the Republican nominee for California governor last year. She joined the Hewlett-Packard board a few months after that bid failed.
Meg Whitman, center, campaigns as the Republican nominee for California… (Francine Orr, Los Angeles…)

Hewlett-Packard Co. — the computer maker rocked by financial missteps, corporate espionage and allegations of sexual harassment in the executive suite — has placed its fate in the hands of an unlikely savior.

Meg Whitman.

The California GOP gubernatorial candidate and one-woman powerhouse who transformed EBay Inc. into a Web giant has been tapped to lead the Silicon Valley titan back to health and hopefully put an end to a decade of corporate dysfunction.

It's going to be a herculean task others have repeatedly failed to achieve. In just the last 13 months, HP's board of directors has fired both of Whitman's predecessors after they steered the company into some of its recent woes.

Now those directors have turned to Whitman, who joined the board eight months go.

But for all of Whitman's experience and public prominence, some industry watchers say the 55-year-old executive isn't the right person for the job at this critical time. They point out that Whitman, though respected in technology circles, has no experience running a global hardware company, especially one in the midst of a major transformation.

"She's not very familiar with this industry," said Frank Gillett, a technology analyst at Forrester Research. "It's hard to know whether this decision reflects a clear rational process or not. The board has clearly struggled in picking the right people."

Whitman replaces ousted Chief Executive Leo Apotheker, who was fired by the board Thursday. Apotheker's 10-month tenure ended shortly after he announced a set of restructuring plans widely panned by investors, including a move to divest HP's personal computer business — the world's largest — and shut down its smartphone and tablet operations.

In remarks during a conference call with investors Thursday, Board Chairman Raymond J. Lane said the board was "embarrassed" by how Apotheker presented the changes to investors and customers. "It could've been done much better," he said.

In the months Apotheker was in charge, the Palo Alto-based company's stock dropped more than 40%, and the company cut its earnings projections for three straight quarters. Wall Street investors began to express serious doubts about Apotheker's performance — a growing sense of uncertainty that the board tried to combat with its sudden appointment of Whitman.

In some ways, Whitman had given herself the inside track to the top at HP. After losing the governor's race, she was soon hired by the powerful and well-connected Silicon Valley venture capital firm Kleiner Perkins Caufield & Byers. Before that, she'd joined HP's board, arriving during a period of instability following Apotheker's appointment, which analysts said came after a hasty executive search that lacked adequate due diligence.

Investors criticized the board for seemingly repeating that mistake by choosing Whitman without an extensive search for a candidate to replace Apotheker, a criticism Lane refuted, telling investors that "I can't think of a name out there today I would select over Meg."

"If you're the board, you have to do something that's immediate, that's bold," said Michael Robinson, chairman of Levick Strategic Communications' corporate and public affairs practice group. "You have to stop the bleeding with your shareholders, your customers, your employees. And sometimes it takes someone bigger than life to do that."

Whitman grew up in the wealthy enclave of Lloyd Harbor, N.Y., the youngest of three. Her father, Hendricks Hallett Whitman, was a World War II veteran who worked in the financial industry. During the war, her mother, Margaret C. Whitman, traveled to New Guinea with the American Red Cross to fix airplane and jeep engines.

Whitman has spent a lifetime in business, shepherding and selling some of America's most valuable brands: Ivory soap, Keds, Mr. Potato Head, EBay.

Whitman gained her reputation by guiding EBay's ascent to become one of the best-known online companies in the world. Her tenure earned her enormous praise, helping cement her as one of the most famous technology leaders of the dot-com era.

But her time with EBay came with controversy, too, particularly with a number of less-than-stellar acquisitions, including Internet phone service Skype and auction house Butterfield & Butterfield. In the last few years before she left EBay, the company's meteoric growth slowed and its stock price faltered.

Whitman's political aspirations followed a similar path. A darling of the Republicans, she jumped into the 2010 California governor's race with a pragmatic drive and an enormous political war chest heavily backed by her personal fortune.

Jeff Randle, a senior advisor to Whitman in that campaign, said she carefully weighed her decision to accept the CEO job. One drawback: Whitman has been spending a lot of time supporting Mitt Romney in his 2012 presidential bid, and had focused much of her time and energy recently in the political realm.

"She weighed the negatives against the positives," and there were a number of negatives, Randle said. But "she loves, loves, loves a challenge. And this is a huge challenge."

david.sarno@latimes.com

pj.huffstutter@latimes.com

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