Well, I prophesied publicly that Ray Lane would be a short-timer on March 20th, the day of Hewlett-Packard’s (HP’s) annual shareholder meeting, and short-timer he was. Mr. Lane stepped down as executive chairman of the board April 4th, a mere fortnight later.
And that’s a good thing. As the administration of President and CEO Meg Whitman gathers momentum, decisions like these are flowing faster and with less agony. At the shareholder meeting, Mr. Lane received only 58.88% of the vote, an embarrassment, but not quite as humiliating as the 55.15% that G. Kennedy Thompson or the 53.91% that John Hammergren garnered. Those two gentleman will leave the board entirely, while Mr. Lane will remain as an ordinary board member, if there is such a thing at HP.
Various institutional investors had been lobbying for a change in the board, wanting to pin some of the responsibility for recent blunders — notably the huge overpayment the company made to acquire Autonomy, a British software company — on someone. That blunder ended with a write-down of Autonomy's assets by $5 billion, 45% of the original price. There has been a lot of finger-pointing by both HP and Autonomy.
Sometimes only a blood offering will appease the gods. Maybe Mike Lynch, the former CEO of Autonomy, lied to HP and covered up squishy revenue-recognition practices, maybe HP did a shoddy audit and didn’t uncover the — *cough* — poor bookkeeping, despite the expensive talent the company put on the case. However it may be, the blunder happened when Mr. Lane was nearly the only responsible adult on duty, as the Autonomy deal, conceived under Léo Apotheker, the previous CEO, and executed in the first days of Ms. Whitman’s administration, had no consistent shepherd on HP’s operating side.
So, the ritual sacrifice has been made, and the board has been reshuffled. Former lead independent director Rajiv Gupta will step down from that role and assume an ordinary board position as well as leadership of the audit committee. Ralph Whitworth, a principal at Relational Investors LLC and already an HP director, will take the chairman’s role until a permanent replacement is found. Mr. Whitworth will also run HP’s finance committee.
A few key takeaways from all this sound and fury:
The moves are mainly about optics, but they acknowledge the pressure from shareholders that something had to be done. The board isn’t changing that much — Mr. Lane will remain, albeit in a reduced role —which is good for consistency.
And consistency is what HP and its shareholders need right now. Ms. Whitman has kept HP on a relatively even keel over the past 18 months, and things at the company are beginning to look up. From a November 2012 low of $11.35, the stock is up into the low 20s, about a double.
News from Project Moonshot — HP’s microserver development project — is due out later today, and the combined PC and printer group, now known as PPS (Printers and Personal Systems), has many innovative products in the pipeline for later this year and next.
The company has even reinvigorated its effort in high mobility and expects to field first tablets and then smartphones over the coming months and years.
HP still has many arrows in its quiver. It just needs the time and stability to pull each one out with a steady hand, set it to the bowstring, pull back, and fire.
Disclosure: Endpoint has a consulting relationship with Hewlett-Packard.
Twitter: RogerKay
