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Apotheker? The HP head scratcher

Well, they did it. HP's board of directors named an outsider late last week, former SAP CEO Leo Apotheker, to helm the computer giant after it ousted former CEO Mark Hurd. Not Todd Bradley, who runs the company's giant PC group and was seen as a frontrunner. Not respected HP veteran Ann Livermore. Not even a Silicon Valley rising star who might help the company restore its former glory.

Instead, they chose a German executive who hails from a company less than one-fifth HP's size by revenues. Pundits say it's Apotheker's enterprise-software background that attracted HP's board: to compete, the computer giant needs to build up its software business, currently just 3 percent of revenues, and Apotheker's background should help.

Maybe it's a strategic stroke of genius, but I still think the decision is a head scratcher. Apotheker didn't have a great record at SAP, albeit during a rough time for the company. The more hierarchical German corporate culture is worlds away from an organization like HP, which helped give birth to Silicon Valley's dynamic innovative spirit. If HP really needs to build its software business, why not hire a new No. 2 to build up that business? And Apotheker's hiring will surely raise questions about the future of Bradley or Livermore, both of whom were passed over for the job.

HP's board is the gift that keeps on giving. From the decision several years ago to spy on directors who might have leaked information to the press, to the controversial move to oust Wall Street darling Hurd for expense account irregularities and code of conduct violations some have called minor, to the fact that an interim CEO had to be named to the job because apparently no succession plan was in place, this board has given students of leadership plenty of fodder for learning about the dos and don'ts of corporate governance.

While some see a bold move into software, others think HP is late to the acquisition game, and investors didn't applaud the choice: shares fell 3 percent in trading on Friday. And Apotheker didn't come cheaply, either. HP will spend nearly $15 million to hire their CEO transplant. In addition to a boatload of restricted stock and eligibility for cash bonuses at the end of the year, Apotheker will get a $4 million signing bonus, a $1.2 million salary and $4.6 million in relocation expenses. I know Silicon Valley isn't a cheap place to live, but there's yet another reason to hire an insider: they already live in town.

In its press release, the board lauds Apotheker's strategic thinking and international experience, and he may very well be an excellent CEO. But after two outsiders fared poorly, it's hard not to wonder how well Apotheker will do.

At the very least, Apotheker should have something in common with HP's board. His former company, SAP, is a longtime competitor to Oracle, so the rivalry--HP recently sued to block Oracle from hiring Hurd before settling--may very well thrive. As for Oracle, Larry Ellison said he was "speechless" about Apotheker's hiring. "HP had several good internal candidates,'' Ellison wrote in an e-mail to the Wall Street Journal. Who knows--maybe Ellison will end up hiring them too.

By Jena McGregor

 |  October 1, 2010; 2:01 PM ET |  Category:  CEO watch , Change management , Corporate leadership , Succession planning Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati  
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