Whitman replaces Apotheker as HP CEO

After making a run for California governor, former eBay CEO Meg Whitman has taken over as the new chief of troubled Hewlett-Packard. Analysts describe move as "difficult but necessary" and point to services as potential growth area.
Written by Eileen Yu, Senior Contributing Editor

Following news about a possible CEO replacement, Hewlett-Packard (HP) today formally unveils former eBay chief Meg Whitman as its head honcho and highlights need for "renewed leadership" to move the company forward.


Meg Whitman

In a press statement released Friday, HP said its non-executive chairman Ray Lane also moved to a new position as executive chairman of the board of directors, with Leo Apotheker stepping down as president and CEO and resigning as director. Whitman already has a seat on HP's board of directors.

Lane said: "We are at a critical moment and need renewed leadership to successfully implement our strategy and take advantage of the market opportunities ahead. Meg is a technology visionary with a proven track record of execution [and] a strong communicator who is customer-focused with [has] deep leadership capabilities. Furthermore, as a member of HP's board of directors for the past eight months, Meg has a solid understanding of our products and markets."

"[HP's board of directors] very much appreciate Leo's efforts and his service to HP since his appointment last year. The board believes the job of the HP CEO now requires additional attributes to successfully execute on the company's strategy. Meg Whitman has the right operational and communication skills and leadership abilities to deliver improved execution and financial performance."

Retain PC business?
Describing the CEO replacement as "difficult but necessary", Krista Macomber, research analyst of computer and storage practice at Technology Business Research (TBR), said HP now needs to focus on reassuring its customers and partners as well as employees to regain their trust. The vendor then needs to continue to expand its offerings, she added in a statement Friday.

Macomber underscored that HP is still a successful company, and one that remains profitable and is still growing amid a difficult economic climate. She suggested the IT giant should retain its PC business but acknowledged that margins from this market segment were lower than other technology areas, which she added was the reason HP had looked for ways to separate the business unit.

"HP's PC business is the world's largest and is one of the most profitable. PCs, however, have become a commodity," she said. "We believe the synergies between PCs and the rest of HP's business are positive, giving the company greater scale and allowing it to leverage its sales forces and partnership ecosystem."

"The company was exploring ways to separate PCs financially while retaining those positive synergies. We think, however, that this uncertainty about its PC strategy undermined customer and partner confidence in HP's PC business and its hardware business as a whole. Assuring customers it will retain and nurture its PC business is HP's most logical and likely course of action," she noted.

Ovum also pointed to services as a potential bright spot for HP, if its new CEO is able to tap this business as a strategic direction moving forward.

In a statement Friday, the research firm noted that HP's services business had struggled for years with flat to single-digit quarterly revenue growth, which it attributed to the "drawn-out and arduous" integration of its EDS acquisition in 2008 as well as a strategy that failed to meet market and customer expectations.

"Even as HP endures another leadership change with the appointment of industry veteran Meg Whitman as its new CEO, the company insists that services, particularly its outsourcing and global delivery capabilities, will play a critical part in HP's future," Ovum said.

While highlighting Whitman's lack of experience running a global enterprise IT vendor, the analyst firm noted that her experience as a business IT customer from her role as CEO of eBay and understanding of consulting services from her time at Bain, could stand in good stead.

Macomber said: "We believe HP also will retain, develop and more fully leverage all its businesses, including PCs. Once it is clear HP will continue to do business in its long-established manner, the company can address its strategic evolution going forward."

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