HP Defends CEO Hire, Blasts Hurd -- Again

Ray Lane, HP's newly-appointed chairman, defends Léo Apotheker against charges he was involved in the TomorrowNow scandal.
Posted October 12, 2010

David Needle

The surprise appointment of former SAP CEO Léo Apotheker to the top spot at HP last month continues to generate controversy. In a letter to the New York Times Monday, HP's new chairman, Ray Lane, defended Apotheker against charges by Times columnist Joe Nocera that the hiring had more to do with getting back at Oracle (NASAQ: ORCL) for hiring HP's (NYSE: HPQ) former CEO Mark Hurd.

Nocera also tied Apotheker to a scandal involving an SAP subsidiary TomorrowNow in a case involving the theft of intellectual property from Oracle (via Oracle customers that became customers of TomorrowNow). A trial in that case, scheduled for next month, is expected to focus on damages since SAP (NASDAQ: SAP) has acknowledged the TomorrowNow subsidiary, since shut down, did illegally download certain Oracle assets.

"The facts are: TomorrowNow was never under Mr. Apotheker’s supervision. The conduct in question at TomorrowNow occurred before Mr. Apotheker became CEO of SAP. And, it was Mr. Apotheker who, as CEO of SAP, shut down TomorrowNow," Lane wrote in his letter.

Lane also addressed the fact that Oracle added Apotheker to the witness list in the case last Friday, even though the case has been brewing for years.

"It [Oracle] didn't even deem him relevant enough to the case to include him on a list of witnesses for trial -- until, that is, Mr. Apotheker was named CEO of HP and Oracle had other motives to try to tie him to the case," Lane said in his letter.

Oracle CEO Larry Ellison was critical of HP's firing of Hurd, a personal friend, and also made comments ridiculing the hiring of Apotheker. "I’m speechless," Ellison said in an email to the Wall Street Journal earlier this month. "HP had several good internal candidates … but instead they pick a guy who was recently fired because he did such a bad job of running SAP."

Lane also defended HP's dismissal of Hurd, which happened before he joined the company. Hurd was let go following an investigation into a charge of sexual harassment by an HP contractor. HP said its investigation cleared Hurd on the sexual harassment charge, but found he cheated on expense forms to cover up a relationship with the contractor. Nocera tweaked HP for firing its CEO over "minor expense account shenanigans" and then hiring a new C.E.O. who was "involved -- however tangentially -- with the most serious business crime you can commit," i.e. the theft of intellectual property.

SAP officials have consistently said they were unaware of the practices in question that its TomorrowNow subsidiary engaged in.

But Lane indicated that the reasons for Hurd's firing went beyond the expense account issue.

"Mr. Hurd violated the trust of the Board by repeatedly lying to them in the course of an investigation into his conduct," Lane said.

"He violated numerous elements of HP’s Standards of Business Conduct and he demonstrated a serious lack of integrity and judgment. The Board was unanimous in its decision that he must go, including the seven directors Mr. Hurd recruited to the Board. These directors would not have acted unanimously to remove Mr. Hurd for 'piddling expense account problems' as Mr. Nocera suggests. I was named to the Board after Mr. Hurd’s departure, but having carefully reviewed all the facts, it is clear to me the HP Board made the right decision. Had I been on the Board at that time, there’s no question I would have voted the same way. The Board simply had no alternative."

Meanwhile, the hiring of Apotheker reflects a renewed focus on software that is likely to see HP compete more fiercely against traditional allies Oracle and SAP.

David Needle is the West Coast bureau chief at InternetNews.com, the news service of Internet.com, the network for technology professionals.

Tags: Oracle, SAP, Larry Ellison, Hurd, Storage

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