HP, red-faced but still selling

Company's reputation blemished by revelations of extensive investigation into directors, journalists and employees.

What if the initials HP--as in Hewlett-Packard--enter the lexicon in the same manner that Google has?

Google, of course, has become much more than a corporate name. It now doubles as a catch-all term for online search that has resulted in nifty little verbs like "Googled," "Googles" and "Googling."

If HP undergoes the same sort of metamorphosis and becomes shorthand for illicit snooping, you might be telling your friends that a stalking ex-boyfriend is "so HP" or that your office mate, who snoops through the stuff on your desk and listens a little too closely to your calls, has "gone HP."

But the prospect of children hurtling the epithet "HPer" at parents who monitor their Web surfing is just one of the minor worries for HP, which, as the world's largest technology company, has its brand name on millions of computers, printers, ink cartridges and corporate data servers. Revelations that the company's detectives and lawyers planned and supervised an extensive investigation of some of its directors, journalists who covered the company, a few employees and others have blemished its reputation.

The question is whether the scandal will more seriously damage one of the most storied names in corporate America. Mark Hurd, the chairman and chief executive, is the person shouldering the responsibility for managing the scandal's fallout and, for the time being, it appears that he has guided HP through the crisis with the same skill he has been using to turn around this once-stumbling technology giant.

By many measures, the company so far has escaped any serious damage. Its stock, about the only visible barometer of public perception other than retail sales and late-night talk-show jokes, is as strong as it was before the spying operation was revealed in early September. The stock closed on Friday at $36.69, close to its 52-week high of $37.25, almost unchanged during a month of unrelenting reports of detectives obtaining personal phone records, rooting through garbage, following directors and journalists--spying on one while at Disneyland--and planning to infiltrate newsrooms with spies masquerading as janitors or clerks.

Nor would it seem that the outlandish plots concocted by the company's Clouseaus have convinced customers that a Dell notebook or a Sun Microsystems server makes more sense these days. Kurt Francis, a Century 21 real estate agent in Escondido, Calif., said that HP's woes did not change his view of the company and that it would not affect his willingness to buy HP products.

"HP is a lot bigger than one or two people," said Francis, who uses an HP financial calculator, an HP notebook computer and even an HP personal digital assistant. "It's very sad what's happened, but it will blow over--the average consumer is going to forget this in two months."

HP certainly does not appear to be paralyzed by the imbroglio. Last Thursday evening, the same day that Hurd testified before a Congressional subcommittee examining his company's investigative methods, the company's personal computer division announced the acquisition of Voodoo Computers, a maker of high-powered computers for hard-core gamers.

Ravi Sood, a co-founder of Voodoo, said the spying scandal did not make him or his fellow founder--and brother--Rahul Sood, waver in selling their operations to HP "It makes a statement that we closed the deal during this thing," he said. "Business goes on."

Rahul Sood, Voodoo's president, said that one reason he wanted to sell the company to HP was his high regard for Hurd. He said HP executives flirted with Voodoo in the past about a merger, but that nothing had happened. When Rahul Sood sent an e-mail message directly to Hurd in July 2005 outlining the rationale for a merger, "he moved mountains," Sood said. (He gave another reason for wanting to link with HP: "Getting a ticket into HP Labs would be like Charlie getting a ticket to Willy Wonka's chocolate factory.")

Reassuring customers about the sale, Sood wrote on his blog that Hurd "is quick to make business decisions, but understated when it comes to 'glory.'" He recounted how Hurd has said that he did not want his photograph hanging in the lobby of the company headquarters near those of the company founders William R. Hewlett and David Packard.

Hurd's decision not to memorialize himself next to the famous founders is often cited by HP and others as an example of his modesty. It is also no accident that the anecdote offers a contrast between Hurd and his predecessor as chief executive, Carly Fiorina, who made sure that her picture was hung in the corporate lobby next to the founders.

Even so, analysts and others believe that Hurd's modesty has been an important factor in the company's comeback. When asked in a recent interview to comment on his critics' contention that Fiorina deserves the credit for the company's turnaround, he did not disparage her strategy. Instead, he said that her efforts "just needed a bit of crystallization."

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