Hewlett-Packard Tumbles On Reports of Hurd's Role in Leak Case

News reports said internal e-mails show signs of the CEO's involvement

Hewlett-Packard (HPQ) shares tumbled 5.2% to $34.87 on Sept. 21, after newspapers suggested that the technology service provider's chief executive officer Mark Hurd played a larger role in the probe of a HP board member's news leak.

The Palo Alto, Calif.-based company faces a criminal investigation, after having contracted outside parties last year who used false pretenses to obtain journalists' and directors' private phone records. "Although it is still unclear exactly when Mr. Hurd learned that H-P scrutinized personal phone records in its leak investigations, the emails reviewed by the Journal suggest that Mr. Hurd was kept abreast of the investigation early this year," The Wall Street Journal reported Sept. 21.

Hurd might have offered suggestions of his own for five HP directors -- Richard Hackborn, Lawrence Babbio, Lucille Salhany, George Keyworth and Thomas Perkins - as potential leakers, the WSJ said.

The Washington Post took the news a step further. Citing an e-mail message sent by HP Chairman Patricia C. Dunn, the Post said Hurd approved an elaborate "sting" operation on a reporter in February.

The SEC has requested documents related to the company's media-leak investigation. In addition, HP said the SEC's enforcement division is seeking information relating to the resignation of director Tom Perkins, who quit the board earlier this year in a dispute over the tactics used in the investigation.

The company also stated on Sept. 21 that Hurd has offered to appear at a House committee investigating the media-leak probe. HP's outgoing chairman, Patricia Dunn, and General Counsel Ann Baskins are also slated to appear.

Market players remained cautious about drawing conclusions. "Details are limited, but at this point, we do not believe that Mr. Hurd will be forced to step down, and as a result, we do not see the ongoing investigation as having a significant impact on HPQ shares," wrote Standard & Poor's equity analyst Richard Stice in a research note. He kept a hold recommendation and 12-month target price at $40 on the stock. (S&P, like BusinessWeek.com, is owned by The McGraw-Hill Cos.)

Hurd will lead a press conference on Friday, Sept. 22 to discuss what HP is doing to address the investigation leak issue.

"What began as an effort to prevent the leaks of confidential information from HP's boardroom ended up heading in directions that were never anticipated," Hurd said in a press release on Sept. 21. "We plan to give as much clarity as we can to these matters."

Dunn, the chairman of HP's board, had pushed for a solution to what she saw as the persistent disclosure of confidential information from within the company's ranks. Hurd will take her position after Jan. 18, 2007, but Dunn will continue to serve as a director.

A HP spokeswoman did not respond to a voicemail requesting an interview.

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