Trouble Stirs In Hewlett Packard's Boardroom
SCOTT SIMON, HOST:
Now for the next installment in what's becoming a long-running tale about one of America's highest profile tech companies. Hewlett-Packard was back in the headlines last week when its CEO claimed that Autonomy, a company it acquired last year for more than $11 billion in cash, had lied about its revenues to increase its sale price. Joe Nocera of The New York Times has been watching all of this unfold. He joins us from Sag Harbor, New York. Joe, thanks very much for being with us.
JOE NOCERA: Thanks for having me, Scott.
SIMON: Can you help us chart out who has said what about whom?
NOCERA: Let me tell you what my friend Nell Minow said. She's a well-known critic of boards and observer of boards, and she said about the HP board: Is there something in the water, in which ostensibly smart people, time after time after time stub their toe? This time around, the CEO, Leo Apotheker, had bought this company, Autonomy, for $11 billion. Leo's been fired and they've written down eight billion of that $11 billion, partly in acknowledgment that the company was never worth what they originally said and partly because they're claiming accounting fraud, although the former CEO of Autonomy is vociferously saying it's not true. It's really unbelievable.
SIMON: And this isn't the first time the lid's been lifting on HP.
NOCERA: No, it hasn't. You remember the pretexting scandal, where they were trying to track down leaks, the board was trying to track down who was leaking, and they pretexted phone companies to get phone records of reporters? You remember the big fight over Compaq computer where the children of the founders of HP, you know, opposed the deal and eventually had to leave the board? You remember the sex scandal involving Mark Hurd, two CEOs ago?
SIMON: Now that you bring it back to me, yes, I do.
NOCERA: There is something in the water.
SIMON: But what about the role of the board? Has the same group of people been turning away all this time?
NOCERA: The board, over time, has changed. There are new people. There are people like Marc Andreessen, who's widely viewed as one of the great visionaries in Silicon Valley, you know, the inventor of the first browser; Ray Lane, a well-known venture capitalist. There are lots of well-known people on the board. But there's something about the dynamic of the HP board that seems to turn their brains to mush. I should point out, Scott, this is not some dinky little company. This is $120 billion in revenues with a $40 billion computer division and, you know, a printer division that's almost as big. And it's really astonishing that a company that's been around this long and is that size can be so poorly run.
SIMON: The stock price, of course, has been tumbling. Meg Whitman, the CEO, is she likely to lose her job over all of this?
NOCERA: No, she's not. She hasn't been there that long. She was on the board and they asked her to take over when they threw Leo Apotheker out the door. He's the one who made the Autonomy deal. She's not going to lose her job over this. The real question is whether HP can remain as a single company or whether it ultimately it's so unmanageable and so unwieldy that the only answer is to break it up. And I think we're going to see really in the next six months to a year, moves made to break up the company, and the question is whether HP itself will resist those moves or will embrace them.
SIMON: Yeah. Well, help us understand why they would - I think I understand why they'd resist them. Why would they embrace them?
NOCERA: Well, because they've had so many problems and they have certain businesses that are, as they say, low-margin and commoditized business - the computer business. You don't make a lot of money in the computer business. You don't make a lot of money in the printer business. But then there's the software business where you do make a lot of money and where these fiefdoms inside of HP fight each other and they don't really act as an organic company where everybody's in it together. So, the idea that this company would be worth more broken up than it is now is not pie in the sky. It has a fair amount of validity.
SIMON: Do you think there's some kind of lesson we should absorb from all this?
NOCERA: Yes. That the main lesson here is that boards do matter. Boards of directors are important for setting a tone, for helping a review strategy and for making sure that the right person is running the corporation day to day. HP's made a series of mistakes on CEOs. The board has made a series of strategic mistakes. And really, this is the kind of screw-up that you really, it's the board's fault. There were people at HP that told the board not to buy this company. They went ahead anyway. And so the board, which is supposed to be looking out for the shareholders, have done a terrible, terrible job of that.
SIMON: Joe Nocera, op-ed columnist at The New York Times. Always a pleasure. Thanks so much, Joe.
NOCERA: Thank you, Scott.
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