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Can CEO Meg Whitman save Hewlett-Packard?

The former gubernatorial candidate is struggling to revive the troubled tech giant, a process that could take years

January 05, 2013|By Chris O'Brien, Los Angeles Times

The weeks after she was named CEO were a whirlwind. Whitman convened a working group of 100 employees to study the PC business, forming two groups to make the case for and against keeping it. Then it became obvious to her that HP should keep the business, and in October 2011 she announced her decision.

However, as HP's revenue continued to deteriorate, Whitman announced plans in May to lay off 27,000 employees (a number later increased to 29,000).

"When she inherited the company, it was an absolute disaster on almost every level," said Patrick Moorhead, principal analyst at Moor Insights and Strategy. "What she did do, and I think she did it well, is she gave it a better sense of stability."

Whitman said one of her biggest priorities remained Autonomy.

In the spring, Autonomy's numbers fell well short of expectations. And so, on the day that HP announced earnings in May, Autonomy founder Mike Lynch received a call from Whitman informing him that he was out. In the coming weeks, several other high-level Autonomy executives left.

A few weeks after Lynch was fired, Whitman says a top Autonomy executive approached with some devastating allegations.

"A senior executive from his team came forward, and said, 'Listen, I need to tell you what has been going on at Autonomy for the three years prior to when you bought it,'" Whitman said. "And I'm not sure we would have been able to figure out the accounting improprieties had we not had a guide on that journey."

On Nov. 20, HP announced that it had uncovered evidence of massive financial fraud at Autonomy and that it would take an $8-billion write-down. The majority of that was related to the alleged fraud, according to HP.

Lynch did not remain quiet. He fought back with a very public campaign, granting interviews, putting up a website and insisting that the allegations were false.

In a securities filing Dec. 27, HP confirmed that the Justice Department had launched an investigation into Autonomy's alleged accounting fraud.

The question now is whether Autonomy and the related investigations will turn into a distraction that overwhelms HP's other problems. There are some people on Wall Street who argue that HP should be split up by selling off the various divisions.

From its peak of $51.93 in April 2010 under Hurd, HP's stock has fallen sharply, closing Friday at $15.14.

Analysts say Whitman has articulated a solid strategy for HP, but they remain less sure that the company can afford the several years she has said it will take to implement that strategy.

Whitman's enthusiasm seems undimmed.

"I have a lot of faith in Hewlett-Packard," she said. "This is a company with remarkable assets. I actually think there is a huge amount of value to keeping HP together in its current configuration. And now we've got to go prove it."

chris.obrien@latimes.com

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