06:51 PM

Inquiries Linger As HP Tries To Move On

Several analysts said the company is moving in the right direction, but questions about the company's role in a pretexting scandal still linger. So do several investigations.

Two board members have given up their positions; one has apologized for an invasion of privacy, and a trusted leader has promised to move Hewlett Packard, from the harsh glare of regulators and critics, to "its rightful place as the envy of corporate America."

After a whirlwind week for anyone and everyone who cares about HP's ethics, public image and future, the company appears poised to pull away from controversy over its media leak probe and return to business. Several analysts said the company is moving in the right direction, but questions about the company's role in a pretexting scandal still linger. So do several investigations.

HP found itself at the center of unenviable attention last week when it acknowledged in a voluntary filing with the U.S. Securities and Exchange Commission (S.E.C.) that an investigation on its behalf included questionable tactics. Almost immediately afterward, California Attorney General Bill Lockyer described the tactics, used to spy on HP board members and journalists, as stupid and illegal in his state. That's where HP is based and where its board members, and some of the journalists reside.

A former board member, several publications -- including those whose reporters were targeted -- and some analysts called for Board Chairperson Patricia Dunn to resign. HP launched an attempt at damage control, saying that Dunn felt she had to stop leaks that could threaten the company's competitiveness. It also maintained that the company's leadership was unaware of both the identities and methods of third-party investigators.

Despite the explanations, as many as six state and federal law enforcement and regulatory authorities lined up to demand answers and documents that they hope will show exactly who was responsible for obtaining as many as 20 people's personal phone records by misrepresenting themselves.

HP's board huddled for two days, with outside counsel Larry Sonsini leading the meetings. Dunn and George "Jay" Keyworth, a former science advisor to President Ronald Reagan and the person identified as the source of the leaks that began the scandal, recused themselves.

The company leadership took a second crack at damage control Tuesday with several announcements. Dunn will step aside in January. Keyworth resigned immediately, and Chief Executive Officer and President Mark Hurd will succeed her. Board members apologized to each other. Keyworth asserted that he had been authorized to speak with the press. All united to express faith in Hurd.

Analysts said the company has a few more hurdles to clear and voiced a mixed response to the news that Dunn would remain chair until January. She is expected to continue serving on the board.

"They're clearly going in the right direction, but actions speak louder than words," Jon Masters, a corporate governance expert with Masters-Rudnick, said during an interview Tuesday. "We'll see what happens here. A few comments are helpful, but I don't think it all washes away with an apology. There are a lot of other things that need to be settled. The board will have to figure that out."

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