In a stunning announcement, HP today said Mark Hurd, its chairman, CEO and president, has resigned in the wake of a sexual harassment investigation.
HP (NYSE: HPQ) said Hurd's decision came about following an investigation by its own lawyers and outside legal counsel into a sexual harassment claim made against Hurd and HP by a former HP contractor. Michael Holston, the company's general counsel, said that the investigation turned up a number of expense reports designed to conceal the relationship between Hurd and the contractor.
The company said the investigation uncovered "no violation of HP's sexual harassment policy, but did find violations of HP's Standards of Business Conduct." Holston added that HP is not filing legal charges against Hurd.
It did not elaborate further on the claims.
"As the investigation progressed, I realized there were instances in which I did not live up to the standards and principles of trust, respect and integrity that I have espoused at HP and which have guided me throughout my career," Hurd said in a statement.
"This is a painful decision for me to make after five years at HP, but I believe it would be difficult for me to continue as an effective leader at HP and I believe this is the only decision the board and I could make at this time," he said. "I want to stress that this in no way reflects on the operating performance or financial integrity of HP."
HP described the contractor involved only as a woman who been paid to provide "various marketing-related programs" from late 2007 through late 2009. The company also said that her lawyers approached HP's board in late June with her claim of sexual harassment.
HP Talks Up Strong Q3
HP hosted calls with the media, analysts and shareholders immediately after announcing Hurd's departure, addressing at least some of the questions it will be facing as the industry watches to see how HP continues to execute following the departure of an executive widely credited with an impressive turnaround.
Anxious investors wasted little time letting HP executives know how they feel about the management shakeup. In after-hours trading, the stock plunged 9.71 percent to $45.89 at press time.
Taking Hurd's place as interim CEO will be CFO Cathie Lesjak, who wasted no time in announcing that little will be changing in terms of HP's performance following Hurd's abrupt departure.
Instead, HP also seized the occasion to announce its preliminary third-quarter results, with a better-than-expected performance. Revenue clocked in at $30.7 billion -- an increase of 11 percent from a year earlier. Earnings per share rose to approximately $0.75, with income minus one-time charges totaling $1.08.
Both results took a $0.02 hit from HP's previously announced settlement with the U.S. Department of Justice regarding abuses in servicing government contracts.
"My principle priority as interim CEO is to continue to move the company forward ... while the board conducts its search for the next CEO," Lesjak said.
"We believe we will be able to execute well for the rest of the year," she added.
Lesjak also said that Hurd's resignation had nothing to do with recent missteps in running the business -- perhaps most notably, the case brought against HP by the Department of Justice.
"Mark Hurd's resignation has nothing to do with the operational performance of the company and all about Marks' behavior and judgment," Lesjak said.
HP Emphasizes Stability After Hurd
While HP's board seeks a replacement for Hurd, calling the shots will be Lesjak, a 24-year HP veteran who's served as HP's chief financial officer and as a member of the company's Executive Council since January 2007.
During today's call, Lesjak and other executives reiterated the quarter's strong results and emphasized that for the foreseeable future, HP will continue to perform.
In particular, the company offered guidance on its coming quarter and full-year results. For the coming quarter, HP gave guidance of approximately $32.5 billion to $32.7 billion in revenue, with earnings coming in between $1.03 and $1.05 per share after charges. Minus one-time expenses, HP said earnings per share could range from $1.25 to $1.27.
Looking to the full year of results, HP also predicted revenue between $125.3 billion and $125.5 billion, with GAAP per-share earnings in the range of $3.62 to $3.64. Before charges, that total could rise to $4.49 to $4.51 per share, HP added.
The company plans to release its official third-quarter numbers on Aug. 19.
As for Hurd, the outgoing CEO said in a statement that HP remains "exceptionally well positioned strategically" with "an extremely talented executive team supported by a dedicated and customer focused work force."