Hewlett-Packard Names Leo Apotheker CEO

Hewlett-Packard Co. appointed former SAP AG Chief Executive Officer Leo Apotheker as CEO and president, turning to an external candidate who resigned from his last job in February after sales and profit slumped.

The company named Ray Lane, managing partner at Kleiner Perkins Caufield & Byers, as nonexecutive chairman, according to a statement today. The men will succeed Mark Hurd, who held the CEO and chairman roles until his resignation on Aug. 6. They will both start at Palo Alto, California-based HP on Nov. 1.

Apotheker, 57, departed unexpectedly from SAP this year after sales and shares slumped and he struggled to combat a threat from Oracle Corp. At HP, he inherits a company that’s using takeovers to expand in areas including services, smartphones and networking gear. His background in software may help the company as it weaves applications into hardware.

“There’s a lot of work to be done,” Joel Achramowicz, an analyst at Blaylock Robert Van LLC in Oakland, California. He has a “neutral” rating on HP’s shares and says the CEO decision won’t cause him to change that. “The company needs new leadership that can make aggressive, risky moves to inject new vitality into the enterprise.”

HP, the top maker of PCs and printers, has lost 9 percent of its value since Hurd’s departure. The shares dropped an additional $1.34, or 3.2 percent, to $40.73 in extended trading after the announcement. Earlier, the stock declined 46 cents to $42.07 in New York Stock Exchange composite trading.

Final Year

Apotheker’s last year at SAP was marred by a drop in sales, profit and share-price value. In that period, SAP slashed more than 3,000 jobs, its first major cuts since the company was created. He was criticized by shareholders as being ineffective at responding to Oracle, which used acquisitions to expand in applications, SAP’s area of expertise.

Apotheker presided over SAP’s first annual revenue decline since 2003 as customers, hurt by the recession, delayed software purchases. SAP shares, which reached an all-time high of 71.58 euros in March 2000 -- when Hasso Plattner was in charge -- lost more than half their value by the time Apotheker left.

Still, over his more than 20-year tenure, he handled more than a dozen acquisitions, including the roughly $7 billion purchase of Business Objects, the company’s largest deal, HP said in a statement today.

A globetrotter who speaks five languages, Apotheker rose through the company’s sales division, unlike his three predecessors, who had science backgrounds. He was appointed co- CEO in 2008 and became SAP’s sole CEO in May 2009.

Mentoring Managers

Apotheker was credited with building SAP’s sales force and hiring and mentoring top sales managers, including current co- CEO Bill McDermott.

“You have to give him credit for endurance,” McDermott said in an interview. “You won’t find a guy more willing to connect with customers.”

HP will benefit from Apotheker’s software expertise, said Shaw Wu, an analyst at Kaufman Brothers LP in San Francisco.

“Software is an area HP should be more aggressive in,” said Wu, who recommends buying HP shares. “It’s a higher-margin business.”

One of Hurd’s largest acquisitions was the $4.5 billion purchase of software maker Mercury Interactive Corp. HP also recently purchased security software maker ArcSight Inc., as well as Fortify Software, which helps information technology departments analyze code for security holes, and data-center software company Stratavia.

‘Strategic Vision’

“I can bring to this business the capacity to have a strategic vision, a technology vision and the ability to make people work together,” Apotheker said in an interview. “I’m a global citizen and HP’s a global company.” A resident of Paris during his tenure at SAP, he said he plans to relocate to Silicon Valley and work from HP’s headquarters.

Apotheker spent his youth in Belgium and Germany, where his parents, Polish Jews, moved after World War II. In an interview with BusinessWeek in 2009, he recalled being a rebel. In high school, Apotheker organized a student strike.

“I wanted a revolution -- and also for cigarettes to be permitted in school,” he told the magazine, now called Bloomberg Businessweek. In the melee that followed, a policeman on horseback knocked out two of Apotheker’s teeth, he said.

Apotheker moved to Israel when he was 18 to attend Hebrew University of Jerusalem, where he studied economics. He later held several financial and operations jobs at European companies before joining SAP in 1988. He was awarded the French Legion d’honneur in 2007 for his contributions to the French economy.

Lane’s Tenure

Lane, 63, became managing partner at the venture firm Kleiner Perkins in 2000 after serving as president and chief operating officer of Oracle, the corporate-software company where former CEO Hurd is now president.

Lane abruptly resigned from Oracle after eight years, following a fallout with CEO Larry Ellison. While at the company, he turned down job offers for HP’s top job, as well as Compaq Computer Corp., an Oracle spokeswoman said in 2000. HP went on to acquire Compaq.

When Lane left Oracle, he said he wouldn’t run another large company, planning instead to sit on boards of smaller businesses. At Kleiner, Lane has focused in part on alternative energy investments, including the electric car company Fisker Automotive Inc. He previously was a senior partner at Booz Allen Hamilton, where he led the information systems group.

Hurd, who had been HP’s CEO since 2005, left after a company probe found he violated business conduct standards. Earlier in the search, the board had been leaning toward an internal replacement, a person familiar with the matter said.

Internal Candidates

The list of possible CEOs included Vyomesh Joshi, who runs HP’s printer business; Todd Bradley, head of the personal- computer division; Dave Donatelli, who runs the storage and server unit; Tom Hogan, executive vice president of enterprise sales and marketing; and Ann Livermore, executive vice president of the enterprise business, the person said.

Hiring from the outside has had mixed results for HP. Under Hurd, who was recruited from NCR Corp., HP surpassed International Business Machines Corp. as the largest technology provider by revenue and its profit more than tripled. He left after an investigation of sexual harassment allegations found inaccurate expense reports filed by Hurd or on his behalf that concealed a personal relationship with an event organizer.

Hurd’s predecessor, Carly Fiorina, came from Lucent Technologies Inc. and was the first outsider to run HP since its founding in 1938. She was ousted after the stock lost half its value on her watch and the $18.9 billion acquisition of Compaq failed to deliver promised results. Hurd joined Oracle Sept. 6.

Cathie Lesjak, HP’s chief financial officer, has served as interim CEO since Hurd left. She said in August that she didn’t want to be considered for the job. Lesjak will remain the company’s finance chief.

To contact the reporter on this story: Aaron Ricadela in San Francisco at aricadela@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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