Things had been going too well for Hewlett-Packard (NYSE:HPQ). CEO Mark Hurd had been engineering a picture-perfect turnaround since his arrival last April. The shares had nearly doubled in that time, a move made all the sweeter by rival Dell's (NASDAQ:DELL) ongoing woes and Gateway's (NYSE:GTW) auction-block antics.
Well, Hurd has hit a major hiccup. His company's board of directors is in a state of disarray, part of a wave of surprising events that rivals any serial drama on the fall television schedule.
HP knew it had a snitch sitting on its board, since important strategic initiatives were being leaked to the media. In an ill-advised attempt to ferret out the loose-lipped informant, the company used dubious means to obtain the phone records of board members and even some journalists.
Privacy rights activists are steamed. The California State Attorney General is investigating. Congress is even weighing in with the House Energy and Commerce Committee, hoping to get to the bottom of how HP obtained the phone records.
The suspected board member will not be put up for re-nomination. Another has resigned in protest. Chairwoman Patricia Dunn announced this morning that she will give up her post in January, to be replaced by Hurd (she will remain on the board). For now, Hurd's hands are clean in regard to the boardroom shenanigans, but this upheaval is starting to leave a doozy of a smudge on his once- immaculate track record.
In Hurd's first five quarters at the helm, HP has soundly beaten analyst profit targets. There is bound to be turnover on the board by the time the dust settles here, but as long as Hurd is far removed from the situation, his reputation should remain intact. And, no, I'm not just saying that out of fear that HP will come after my phone records, too.
But then, I live a much more boring life than the protagonists in this steamy drama. Let's hope that the company tidies up quickly, because shareholders know that you can't spell invent -- the company's motto -- without "vent."
Dell is a Motley Fool Stock Advisor and Inside Value recommendation.
Longtime Fool contributor Rick Munarriz did peck out this story on his HP desktop -- but he's using a Dell monitor. So there. He does not own shares in any of the companies mentioned in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.
