What's next for HP after Hurd

As a well-managed company, HP's next few months will likely be business as usual. But the next CEO has opportunities to expand HP's reach and vision even further.

Mark Hurd's resignation from Hewlett-Packard in the wake of a sexual-harassment and expense-reporting scandal is a major blow to the well-regarded executive, but especially to the company he leaves behind.

The good news is that Hurd is out just five years after helping HP recover from the most turbulent period in its history and pushing the company to the top of tech world. He leaves Hewlett-Packard in a strong position, and in much better shape than he found it. HP brought in $30 billion in revenue during the second fiscal quarter of 2010, compared with the almost $22 billion of the same quarter five years earlier.

So where does HP go from here? Well, beyond the task of finding a new chairman and CEO, it's likely to be business as usual. Investors were clearly startled, sending the company's stock down 10 percent to $41.84 at the close of trading Friday. But in terms of HP's direction, the consensus emerging in the industry in the aftermath of the news is that there shouldn't be any immediate negative effects--at least operationally--as a result of Hurd's departure, which is an indication of his strengths as CEO.

"The good news is there probably aren't any (major changes ahead) because he's gotten this company working really well," said Gartner analyst Martin Reynolds.

Hurd had the company busily generating profits for investors. In the five years he was at the helm, HP had added $45 billion to its stock market value, to reach $108 billion.

And with a company making money and regarded as operating efficiently, there isn't much expectation for drastic changes ahead.

HP's interim CEO, Cathie Lesjak, the voice investors hear announcing the company's earnings every quarter, has been with HP for almost a quarter of a century. Though she doesn't plan to keep the CEO title permanently, she took pains to try to soothe investors Friday, saying she's "never been more confident in the company's future."

"There is no impetus at all for us to change the strategy," Lesjak told investors during a conference call. "Mark was a strong leader, but at the end of the day, he didn't drive our initiative. The company drove that."

She added that Hurd's departure shouldn't change much about the day-to-day activities of HP's more than 300,000 employees, and those in leadership positions.

"There's no confusion," Lesjak said. "This is a huge company. The top leaders of our businesses have needed to know how to drive their own businesses."

Mark Hurd resigned amid scandal, but leaves the company he helmed for five years in good shape.
Mark Hurd resigned amid scandal, but leaves the company he helmed for five years in good shape. HP

HP employees who have been around for a while are no stranger to scandal and uproar in the executive suite. Hurd's arrival came on the heels of the rather chaotic tenure of former CEO (and current U.S. Senate candidate) Carly Fiorina. Hurd's buttoned-up manner and strict adherence to slashing costs settled the company, and he was able to provide much-needed stability during the embarrassing revelation that former chairwoman Patricia Dunn had overseen a program to spy on reporters covering HP in 2006.

Perhaps because of those qualities, employees were caught off-guard by Friday's revelations.

Hurd was perceived as a stand-up, "clean" guy, a current HP employee who has been around since Fiorina's time, told CNET Friday. That worker, who asked not to be named, said employees were "completely shocked" and "let down" by the allegations against Hurd, as well as his departure, particularly because Hurd was perceived by employees as pushing the company's ethical business practices and the Standards of Business Conduct policy he was found to be in violation of.

Moving on
Hurd was known for financial discipline and being a very detail-oriented manager. But just because he had the company running well doesn't mean there isn't room for improvement when the company picks someone new to take the helm.

For one thing, his commitment to cutting costs didn't leave much room for innovation, noted Gartner analyst Martin Reynolds.

"He was very focused on cost cutting and cost management. The challenge of that is it's very difficult to present innovation in that environment," he said in an interview. "The new leader could shift the emphasis from cost focus to move them toward the inspirational things that HP can help companies and consumers do."

Plus, HP has plenty of competition in all areas of its business. IBM, HP's biggest rival in enterprise services, isn't going anywhere, and it spends "far more than HP in research and development," Technology Business Research analyst Ezra Gotthiel wrote in a research note Friday. And though HP still ships the most computers in the world every quarter, the company has to continue to keep an eye on the surging Acer, and others like Samsung and Asus that are making plays for HP's territory of consumer laptops and other portable gadgets.

And, of course, it must keep watching out for Apple. The iPhone and iPad have established Apple as a serious force in personal technology, in terms of design and consumer appeal, and in terms of the company's ability to maximize profits. It became clear earlier this year that HP was taking some cues from Steve Jobs and Apple when it acquired Palm, almost solely so it could own and develop further the WebOS operating system for its devices, the way Apple owns iOS, and unlike Android or Windows Phone.

Gartner's Reynolds suggested HP might even look toward a new leader with a more Jobsian taste for the dramatic, more of an evangelist for the company.

"Obviously they want someone who can make sure the operations stay on track," he said. "There's room for a little bit of flair, a little bit of Steve Jobs in the person. Though not too much. But there is the opportunity to bring in someone with more of a public persona to drive interest in the company.

"But you couldn't do that if they weren't in such a good position."

Related stories:

HP CEO Hurd resigns over sexual harassment investigation
Analysis: Hurd's double faults leave him out at HP
HP statement on Hurd resignation
HP's letter to employees on Hurd resignation

About the author

Erica Ogg is a CNET News reporter who covers Apple, HP, Dell, and other PC makers, as well as the consumer electronics industry. She's also one of the hosts of CNET News' Daily Podcast. In her non-work life, she's a history geek, a loyal Dodgers fan, and a mac-and-cheese connoisseur.

 

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