'Damage already done' over HP CEO rumors

Regardless of whether Hewlett-Packard board directors did meet to discuss fate of CEO, such news show IT vendor in "severe disarray" and customers should review their relationship with it, analyst advises.
Written by Eileen Yu, Senior Contributing Editor

Reports that Hewlett-Packard's (HP) board of directors had met to decide the fate of its CEO only serve to demonstrate the company is in "severe disarray", and customers should review their relationship with the IT vendor.

Carter Lusher, a research fellow with Ovum, said in a statement Thursday that regardless of whether the reports were true, the damage was already done and underscored the chaos HP was operating in.

"That the board would be considering a change in CEO less than 10 months after [Leo] Apotheker took over as CEO is a damning indictment of not just the new CEO, but also the board itself," Lusher said.

HP was flailing, he said, and rumors--true or otherwise--about whether Apotheker would be ousted were creating more uncertainty and intensifying the risk of doing business with the IT vendor.

He advised companies to be wary of the negative impact from making any major commitment to HP's products and services.

Noting that employees at the IT vendor would be demoralized after 13 years of layoffs and cost cutting, he suggested that key executives and staff might be preparing to leave or were already "mentally out the door".

The analyst added that critical initiatives that had stalled, the transient strategy and messaging, and falling sales as customers delayed signing contracts were also adding to HP's turmoil.

"If Apotheker is fired, then investors would start demanding the company be broken up to unlock the value of the components, leading to even more uncertainty," he noted.

Lusher advised organizations dealing with HP to demand that the IT vendor responded with better discounts, pricing or packaging, as well as review terms and conditions to better protect themselves should HP be broken up or experience major disruption to its business.

In a shocking announcement last month, Apotheker said the vendor would discontinue its WebOS business and spin off its PC unit. A Gartner analyst told ZDNet Asia in an earlier report that running the unit as a separate business could be "viable" if HP was able to maintain the brand name and keep its cost structure competitive.

However, a Sterne Agee analyst noted that the time it would take to complete the spinoff puts HP's PC business in "lame duck status" and under pressure amid the uncertainty, allowing its competitors to take advantage of the situation.

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