Mark Hurd's Legacy Lives On at Hewlett-Packard

When Hewlett-Packard (NYSE: HPQ  ) parted ways with former CEO Mark Hurd, the scandal-tinged affair left a bad taste in many an investor's mouth. The company and its shareholders took a broom to the boardroom, sweeping out many of the people responsible for HP's strategy in the Hurd era. Only two of HP's directors from that time still serve on the board.

One year later, HP unceremoniously dumped another chief executive who dared to try a bold new strategy -- built on feet of financial clay. Leo Apotheker wanted to take HP in a strongly software-based direction, acquiring British data-management specialist Autonomy in a blockbuster $11 billion deal. The people who hired and fired him, not to mention allowed Apotheker to strike that unfortunate deal, still make up the majority of HP's board. An $8.8 billion writedown of the $11 billion acquisition wasn't enough to bring in another cleaning squad.

So-called "queen of corporate governance" Nell Minow used HP as a prime example of bad governance, and Foolish star analyst Morgan Housel named names while asking for change. New CEO Meg Whitman isn't changing the troubled company much, leaving HP investors adrift in the rudderless aftermath of the cost-cutting Hurd era. What will it take for investors to grow weary of HP's bumbling strategic advisors?

HP's board is positively youthful by the standards of the Dow Jones Industrial Average (DJINDICES: ^DJI  ) , where the company is a long-standing member. The average HP director is only 56 years old and has served the board for about three years, putting the average starting point smack in the middle of the Hurd scandal. Age doesn't automatically translate into wisdom, but it seems odd that the Dow's most derided board also happens to be on the young side. The lack of long-tenured leadership here is partly a result of the post-Hurd overhaul. But the job wasn't finished when the refreshed board continued to make staggering mistakes.

And now we're back to a strategy that smacks of Hurd-style cost concerns at a time when a strict focus on innovation and bold ideas seems to be in order. Until that happens, you should expect Apple and Google to keep undermining HP's decades-long market dominance. The future is increasingly mobile, flexible, and information-based. That's how Google and Apple can pose such a large threat -- and why Apotheker's software focus may not have been such a bad idea, if he had only paid more attention to the quality of his acquisition targets.

Change starts in the boardroom, folks. I think it's time to sweep out some more of the remnants of HP's darkest hour, allowing the company to truly turn a new leaf.


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Comments from our Foolish Readers

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  • Report this Comment On June 07, 2013, at 11:53 PM, tommy2kjr wrote:

    I find it almost comical how fool.com and pretty much nearly anyone who was in the media spoke of Hurd like he was some savior. And now years later you can see what any of those of us who paid attention always knew... Hurd slashed at the cost of innovation and HP suffered for it. While investors thought he was so great, they didn't realize he was squandering their investment in a poor future.

    Luckily Meg WILL get this right. She will fix HP, and is.

  • Report this Comment On June 08, 2013, at 1:02 AM, theglobalfool wrote:

    Mark Hurd - was and is the worst CEO for any technology company. He cut costs to the point that running certain businesses were completely unsustainable. There was no investment in R&D nor was there any respect for smart people. He would sell off furniture if required to meet wall street's expectation (That would tell you something about Wall Street itself)

    Now Meg Whitman - she is definitely a way better leader. I have personally seen her talk on several occasions and she comes out as an honest and caring person witha very realistic vision. Yes she has cut costs but really if you see what she is doing with cost cutting is basically taking money out of dead businesses and reinvesting in other growth areas. Unlike Mark she is not taking all that money and showing a non existent growth. I think there is a real chance of turn around with Meg Whitman around.

    As for Mark Hurd, I was really sad for the fact that he got fired for some personal expenses issues - because that kind of made a Martyr out of him. He really needed to have been fired for screwing one of the largest technology companies in the world for 5 years and bringing it almost to a point of destruction!

  • Report this Comment On June 08, 2013, at 6:22 AM, papy1970 wrote:

    I agree with both comments above, having been through the Mark Hurd era. I admire fool.com months after months, years after years for their consistency on being negative about HP. The bottom line is you don't know this company very well and that whatever they do, it's always for the worse. Maybe one day we will get objectivity out your analysis? As you may have read, heard or watched, the CEO is driving a 5 years recovery plan just because her predecessors tore the company down with successive cost cutting plans and bad investments. Give it some time, at least Meg is planning the long term future of this company while taking tough decisions short/mid term. If you really pretend to advise your readers/investors, maybe you should look beyond 3 months? Have a nice day.

  • Report this Comment On June 10, 2013, at 3:35 PM, PropioFurbo wrote:

    Anders, hit and run as usual, huh? Man up and respond to the valid points made by the 3 previous comments.

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