HP Hires Leo Apocalypse

Author: Steven Zolman

On September 30, HP announced its highly anticipated replacement of ousted CEO Mark Hurd with the appointment of former (fired) SAP CEO Leo Apotheker taking the helm, effective November 1, 2010.

Once again, the HP board shocks many experts. The HP board has a long history of bungling many high profile situations, and unlike any other organization I can think of, the board has become notorious not only in the minds of many experts, but also in the minds of many normal professionals in the industry.

Seemingly, the HP board missed the mark yet again. They had several good internal candidates including PC and consumer business leader Todd Bradley, enterprise business leader Ann Livermore, printing business leader Vyomesh Joshi, and systems and storage leader Dave Donatelli. But, instead, they hired the recently fired Leo Apotheker – a sales and marketing guy with an enterprise software background?

Some now wonder what will happen to these internal leaders now that they have been passed over (in some cases, yet again)? Rumors persist that despite HP’s best efforts to salvage the relationship, Todd Bradley (probably the most viable contender) is on the way out.

Many experts thought that if HP went outside the firm, they would hire someone with more impressive credentials than Leo Apotheker, someone who only has enterprise software experience. Apotheker offers no consumer experience, and no real experience in hardware or services.

Apotheker said it was a very easy decision to accept HP’s offer, which begs the question why HP made it so easy for him to accept. While CEO at SAP, Apotheker was best known for the raising of customer maintenance rates by nearly 30% across the board – a debacle that absolutely infuriated customers, cost SAP a significant number of high profile customer defections, nearly single-handedly spawned the third party support market for SAP support services, and ultimately led to the company’s capitulation on its own edict – after several modified field approaches.

Due to these worsening customer relationships, the faulty financial performance of the organization while under Apotheker’s leadership, and the outright butt-kicking SAP was getting on market share primarily from closest rival Oracle, employee morale was extremely low during his tenure as SAP’s CEO. He lasted less than two years in the job.

In addition to a very questionable past as CEO at SAP, Leo is a sales and marketing guy. Many experts thought that if HP went outside the firm to hire a new CEO, it would be someone with a grand industry vision, fortified with a solid product engineering focus. As a result of this hire, HP is seemingly more interested in enterprise software sales than it is in architectural considerations for integrated solutions. Regardless, HP will either be competing feverishly with IBM and/or Oracle primarily – and a host of other strong industry segment leaders more broadly. That doesn’t bode well for HP as Leo got his clock cleaned by chief rivals IBM and Oracle while he was the top boss at SAP. Both organizations outflanked SAP repeatedly.

To some, Leo’s hiring as CEO may signal a new way of thinking at HP. A company traditionally soft on, well, software could be stepping up and strengthening its focus here. However, that will require either an even stronger partnership with SAP (seems unlikely given the Apotheker fallout) or an SAP acquisition (also seems strange). This would be hugely costly for HP, but it could conceivably be done economically. What would be infinitely more difficult to achieve, is the cultural barriers that would prevent HP from
buying a very successful and legendary German based company. There are cultural, regulatory, political and other issues that make this extremely difficult.

If HP is to remain a technology provider, it will continue to compete feverishly with IBM, and that doesn’t bode well for HP as Apotheker’s core expertise is software, not technology. If HP is to transition into an integrated stack company that sells complete business solutions (as Oracle intends to do), it will be competing primarily with Oracle, but will have to make a major, transformational acquisition of SAP to have a serious competitive alternative to the Oracle Red Stack (Applications, Technology, Middleware). In either scenario, the HP board’s selection of Apotheker looks somewhat … well, Apocalyptic.

HP has now had 5 CEOs in the last 5 years with Carly Fiorina, interim CEO Robert Wayman, Mark Hurd, interim CEO Cathie Lesjak and now Leo Apotheker.

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