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8/6/2010
05:17 PM
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HP CEO Mark Hurd Resigns

Following an internal investigation of a sexual harassment claim, the HP exec resigned after violations of the company's standards of business conduct were discovered.

Hewlett-Packard Chief Executive Officer, Chairman of the Board and President Mark Hurd has resigned following an internal investigation of sexual harassment claims brought by a former contractor to HP.

The investigation found that there was no violation of HP's sexual harassment policy, but did find violation of HP's standards of business conduct. Hurd acknowledged in a joint statement with the company that there were "instances in which I did not live up to the standards and principles of trust, respect and integrity that I have espoused at HP and which have guided me throughout my career."

The board appointed Chief Financial Officer Cathie Lesjak, as interim CEO. Lesjak is a 24-year veteran of the company and has served as CFO since January 2007.

HP did not release details of the events that led to the resignation of Hurd, who has led the company for five years during a major revamp of its operations. However, Hurd said he could no longer be an effective leader.

"This is a painful decision for me to make after five years at HP, but I believe it would be difficult for me to continue as an effective leader at HP and I believe this is the only decision the board and I could make at this time," Hurd said. "I want to stress that this in no way reflects on the operating performance or financial integrity of HP."

Robert Ryan, independent director of the board, praised Hurd for the work he had done during the company's overhaul.

"The board deliberated extensively on this matter. It recognizes the considerable value that Mark has contributed to HP over the past five years in establishing us as a leader in the industry," Ryan said. "He has worked tirelessly to improve the value of HP, and we greatly appreciate his efforts."

Meanwhile, the company said preliminary results for the third fiscal quarter ended July 31 showed revenue of $30.7 billion, up 11% from the same period a year ago. Net profit was about 75 cents per share. In May, the company forecast earnings of $1.05 to $1.07 a share on revenue of $29.7 billion to $30 billion. HP is scheduled to release earnings Aug. 19.

Martin Reynolds, analyst for Gartner, didn't expect Hurd's departure to have much impact on HP, because of the CEO's success in building an efficient business operation run by capable senior executives.

"There's no doubt that HP will continue operating effectively as a company," Reynolds said. "He's done the turnaround, so he's much easier to replace from this point on."

In looking for a replacement, HP should look for a person with "more flair" than Hurd, someone who can help create a public image in which HP is perceived more as an innovator and on the cutting edge, Reynolds said.

"That's one of the things that's missing from the company today," he said. "You don't hear anyone saying, 'I've got to get that HP thing. I have to have it.'"

While Reynolds is not suggesting HP become another Apple, "you can certainly take a little bit of (Apple CEO) Steve Jobs and look for some those characteristics in the next CEO."

Ezra Gottheil, analyst for Technology Business Research, said the next CEO will face a number of competitive challenges, particular from arch- rival IBM.

"IBM invests far more than HP in research and development and systematically tunes its portfolio to maximize margins," Gottheil said in a commentary emailed to media. "It will continue to challenge HP as a provider of IT products and services to the world’s largest organizations."

In addition, Acer and Samsung are moving quickly to gain global market share in consumer and small business devices, and Apple is expanding its reach within the consumer and business markets with the iPhone and iPad, Gottheil said.

Separately, HP's Mike Holston sent out a comment that wasn’t included in the initial press release. Without providing details, Holston, HP's general counsel, said the board's investigation found that Hurd "demonstrated a profound lack of judgment that seriously undermined his credibility and damaged his effectiveness in leading HP -- and Mark agreed."

"The Board took immediate action in this matter, and their decision was right and necessary to uphold HP’s values of trust, respect and uncompromising integrity," Holston said.

For Further Reading

Wolfe's Den: In Cutting Off Hurd, Is HP Spiting Its Face?.

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