Read This: Infighting, dysfunction, and the revolving CEO door; Fortune examines HP under Léo Apotheker and Ray Lane | webOS Nation
 
 

Read This: Infighting, dysfunction, and the revolving CEO door; Fortune examines HP under Léo Apotheker and Ray Lane 44

by Derek Kessler Tue, 08 May 2012 7:41 pm EDT

Read This: Infighting, dysfunction, and the revolving CEO door; Fortune examines

By now you know how we feel about former HP CEO Léo Apotheker and his reign. Many of the major players in the tech industry - Apple, Google, Microsoft - have charismatic CEOs that act as the sole and unchallenged leaders of their companies. HP is a little more traditional in the Fortune 500 sense, with a Board of Directors tries to stay involved in company business, though it seems that having several competing ideas leads to more drama than we had imagined.

Over the past few years everybody in the tech space has seen that HP's board has suffered from no small measure of dysfunction. They've had a revolving door of CEOs - Léo Apotheker's predecessor Mark Hurd had last just five years, and Carly Fiorina before him was forced out after HP's near disastrous merger with Compaq. The board had garnered a reputation of being a leaking sieve to the press, so much so that the chairman had at one point hired private investigators to examine the phone records of other board members and reporters (that ended with a publicly embarrassing trip before a Congressional committee).

But none of that compared to the brief reign of Léo Apotheker. Brought on in November 2010 after Hurd's ouster, Apotheker had no hardware experience and had been fired from leading a German enterprise software firm with revenue a fraction that of HP's. His tenure as HP CEO included the unveiling and launch of the HP TouchPad and webOS 3.0 (a project started by Hurd with the acquisition of Palm)., the cancellation of that very product, an ill-advised "exploration" of spinning off HP's PC division, a catastrophic drop in stock value, and his eventual firing by the HP board just eleven months after being brought on.

Fortune set out to find out just what happened, interviewing dozens of current and former board members, executives, and employees and examining confidential company and legal documents in the process. What they found is a broken company, struggling to repair itself, with a board full of infighting and open challenges and a chairman desperate to maintain his position while burying over the decisions he'd spearheaded.

Not for the first time, the news reached the press before the official announcement. On Sept. 22, Apotheker read that he was being fired and replaced by Whitman. He was flabbergasted. In a meeting that morning, Lane told him that he had lost the support of the board and every single member of the executive team -- including former SAP loyalists such as Homlish. Before the board, Apotheker was subdued, dignified and resigned. But he was incensed. He had fully consulted with the board on everything, he told friends. He'd trusted Lane to make the board a functioning one, but instead Lane had turned it against him.

Lane distanced himself from the disaster, blaming Apotheker. The man who'd been proud of HP's bold moves was now running as fast as he could from the word "transformation." It had, Lane said in a conference call with investors, "been stricken from our language." Asked in a CNBC interview whether the board bore responsibility for HP's chaos, Lane reacted defensively. "I'm going to give you an answer right from my heart, okay? In January, I added five board members to this board. This is not the board that was around for pretexting. This is not the board that fired Mark Hurd. It's just like open season to write about this board. It's not this board. This board did not select Léo, okay?"

It's a massively long read, but for those interested in just how bad HP got, and how far it has to go, we have to recommend that you head over to Fortune and check it out. It's a doozy.

Source: Fortune

44 Comments

I read the article earlier and I was flabbergasted as to what I was reading. The more I read, the more I was conviced that poor management decisions is what led to the demise of webOS.

For god's sake, somebody put an engineer in charge, quick!

*S I G H* The horror.... Ever forward! Agreed that an engineer is needed STAT!

He fully consulted with the board just as I thought. There is no way the CEO would dump webOS or decide on such changes without consulting with the board. He was just the scapegoat. What a shame.

if just a scapegoat, then he was the leader of the herd.

HP's board screwed up hiring him; he just kept screwing up like he did in Germany.

tell all the Palm engineers that lost their jobs that it's a shame Leo lost his. Doubt any will agree!

After Leo and Co announced spin-off of PSG and killed webOS, within about a month there wasn't an HP computer on the shelf at our local Walmart, except in the clearance section.

now, HP again has the most shelf-space, and I got a new one last week. So someone is doing something right again. But too late for Palm!

Palm was screwed many years ago and webOS could not have changed that. The software is flawed. It is too slow and has too many many issues. I still don't get how they convinced HP to pay a billion for them in the first place.

Too slow? How do you base that assumption? iOS and Android show similar performance issues, and I don't want to get to the which is the best OS discussion, but obviously you havent had many other phones...

Vas is correct. webOS 3.0 is lacking not because webOS is flawed but because it did not receive the development attention it should have. This is clearly evidenced by how much of an improvement the homebrewers were able to make to the functioning of webOS even very shortly after it's initial release.

Webos design is flawed. Even The Hp employees felt that way. with over clocks and all sorts of patches I still find it ridiculously slow. When webos launched everyone was hoping for improvements in speed but most have come to the conclusion that it just isn't possible. I don't see how you can say the other platforms have the same problem because android is a lot smoother on the touchpad than webos. I don't know if you have experience with other platforms but compared to all of them it is by far the slowest.

You've missed the point completely. With Android source code basically ripped-off from iOS, you have a similarity like America's two-party political system: they're the same (and here's a special-for-you free hint: that's a bad thing!)

There are more similarities between iOS and Android than there are differences. WebOS was a vastly different approach than either of them, and with that differentiation came the promise of competition and innovation. Alas, as this article shows, bad management mattered more than anything, and that killed the hardware line.

What I think you meant to say was 'the hardware on which webOS launched was flawed'.

An OS is code and can't be fast OR slow...only the hardware dictates that. Not sure what you've done to your TP, but take a look in the forums and you'll see that most people who put Android on their TP go back to using webOS.

That line about an OS can't be fast or slow is simply not true. ANY inefficient code will be relatively slower than more efficient code no matter the hardware.

I think every OS has its flaws it just depends how you cope with them

agreed . Preware has made my Pixi Plus much more useable . ( Overclocking , performance patches , speed boosts , etc. ) I just wish another kernel would be released for the Pixi Plus so it can be clocked even faster

It's remarkable thow some of you still think there is a correlation between internal quality and sales. Ranging from broad concepts like 'fossil fuel' ('deism', anyone?), to specific applications like Microsoft Office or VHS video, the history of man is paved with flawed products and ideas. Not ony that: they became hugely succesful. Something older than these things, I suppose some sort of genetical inclination, just makes us feel at ease with trash. Maybe it tickles our adaptability, I seriously don't know. Flawed? People. Just. Don't. Care.
Of course, there is this moral feeling that in our way up to perfection, we shouldn't lower ourselves and mingle with them. But in the real world it wouldn't be hard to find statistical evidence that if there is any correlation between internal quality of a product and its succes, it would be a reverse one. And if you're right, that would make Apotheker even more legendary. In his failure, that is.
(And on webOS, I love it. But I might be lured by its looks, and blinded by the fact I'm a Palm devotee anyway)

This explains a lot. WebOS was a small division that got caught up in the chaos of HP. Todd Bradley and some senior hardware guys were totally blindsided by Leo and the dyfunctional Board. When I read about HP's webOS plans before the TP and phones were released, it seemed half-hearted. The explanation is that despite contrary rhetoric, the full resources of HP weren't never behind webOS. At best it was PSG who was trying to get webOS ready in time while getting contradictory directives from in-fighting higher level executives who weren't even certain they wanted to sell hardware. Is it any wonder webOS got crushed in the mess?

Yeah, each division acted like a separate entity and had no collaboration at all. webOS never had scale and drive in HP, even before the discontinuation.

Yup, they never doubled down. It was all corporate talk.

The PC division has a 6% margin and shrinking? That really sucks. The PC market isn't as profitable as it use to be.

In 2002, when HP merged with compaq the margin was around 2%. IBM PC division was even losing money. Margin never been huge in hardware business, is not new

Agreed, the only reason it got back up to 6% is because so many players have dropped out.

"Many of the major players in the tech industry - Apple, Google, Microsoft - have charismatic CEOs that act as the sole and unchallenged leaders of their companies."

Actually, Apotheker fits this too...well sort of, he was the "sole of the company" any way.

More like "heel" if you ask me.

Ray Lane symbolizes all that is wrong with HP. No responsibility, infighting, and personal greed.

I agree 100%. He is the real CEO. Leo was just a cover-up. webOS was caught in the midst of the firefight. When a 100 plus billion revenues are at stake who cares about couple of billions of Palm acquisition.

I will wait for the day to hear from Todd, Ruby and someone from Microsoft speak about why HP wanted to align with Windows 8.

windows 8 is webOS, why foster when you got a seed...

seriously. It seems like all that a lot of the board was doing was jockeying for who was going to be the next CEO.

Ray Lane wanted HP to be a software services company supported by their own software products. HP need to get rid of the PC,Printer and Server divisions. Palm and webOS were not even in their future. My reading of tea leaves is that Hurd wanted to buy Palm so that he can sell mobile devices/ tablets and add revenue to bottom-line. We haven't heard none of that HP wanted to become IBM thing in Hurd days.I say it again, Ray Lane is the real culprit. I would really want to know what Mr.Lane's opinion of webOS.

No one knows what Hurd planned to do. He seems to have more business sense so maybe the tp would have never come to light. Why did they expect someone to spend 500 for a tp over an iPad? The iPad is superior in every single way. Thanks to Leo we got a tablet cheap.

i dont know where my resume went...(HR crap'pile...)

It's no surprise, seeing how the Board and Leo Apothecker had a vision for HP that isn't compatible with 90% of the current HP (which is why they had to buy that enterprise software company), and wasn't compatible with Wall Street's expectations of HP, since HP's stock value plummeted over 20% after the reveal of Apothecker and the Board's plans.

Leo's nightmare wasn't compatible with... Anyone! (except his own accountant, as he still got a severance package)

Id rather not keep going back into the past just to find every little detail on how HP REALLY fracked up a good thing and try to make it survive it. Now that webOS is open source, we can try to get someone with more stability to put this platform out again.

Best thing i read all day

As I read I was more and more drawn to the article. Right when I thought, surely it can't get worse than that.....it did.

According to the article a lot of it was as much Hurd's doing for setting up the volatile environment in which he would pretty much task different people with the same task in order to get them to work harder...

It was just stunning to see so much personal greed in one article. It was like no one really cared about the company but were just looking out for their own position...

As for WebOS, like other here have said, it was a lot of the wrong place at the wrong time.....sad really.

Ray Lane is the main culprit. He wanted to be CEO but does not want to work 18 hours. He has an agenda to fight ORACLE. Forget webOS , HP will loose their way if Meg does not stand up to him and push the company for innovation on the hardware side. The software service market is easy come easy go. Any other company can replicate software business model and compete. Hardware is HARD WORK. Years of focus paid off for Apple. Same will do to HP if they stick to their hardware business.

What I read above is actually what I thought the whole time. Leo had to consult the board before the decisions...this is how it normally works. If there are enough people that agree then the outlined plan is going to fly otherwise not (it helps if you are a charismatic CEO and able to give reasons for that plan and also if you are tyrant and the board members are scared....the first option seems to be the prefered way).
So when they announced to look into selling the PC group this had to be supported by the board. I think everyone here agrees that this was a stupid idea in the first place...why sell something still earning money (to hell with the investment analyst idiots thinking only a company with 15% plus growth is worth buying - those guys really have lost all relation to reality).
Meg Whitman was also on the board...let's not forget that. But it's not clear if she agreed on the previous plans or not.
So far I think the decisions made after Leo Apotheker were at least ok. They did take some time but it looks they were actually thinking again before announcing some stupid idea.

The hubris of the board is summed up in one sentence, as they announced their spate of changes, including the demise of Webos devices:

"Inside HP's headquarters, champagne corks were popped."

Unfortunately for them , the rest of the world disagreed.

too bad, WebOS could have been a contender!

still is, just not for them solely...everything is always better free right... - If GOD charged you for the (thought process-thinking literally) no one would ever get off the clock. ... it would be like why are you even working.... -some people just press buttons they dont even know how to work, an all you gotta do is press the button...lol

One thing you all forget is that until the company is managed to keep the outside (shareholders and the media) happy. HP will go backwards everyday because the employees are not happy. I think Leo was actually the only one who cared about HP and tried to keep the employees happy. Go ask the employees if you don't believe me and once he left everything went back to Hurd days give or take.

Sadly this kind of thing is common in corporations now. Every executive wants to work his way up to CEO and then to the board, which isn't, in itself, bad. The route they take to get there is bad. They create and protect their fiefdoms at the expense of other executives, employees, shareholders, and the company as a whole. Then you have other executives fostering competition as if the internals of the company are some sort of free-market economy. Instead it simply sows dissension and eliminates both alignment and collaboration. As they flounder they start looking at rising costs and diminishing profits and with that in mind they start looking at what "dead weight" they can shed. NOT how they can improve operational efficiency or improve market adoption or decrease waste and improve margin, but instead they look to the easy route - what can be abandoned quickly to temporarily reduce costs and make the yelling stop. It's lazy, unprincipled, and shortsighted. But that's corporatism right now, chase the short term and the long term will somehow magically take care of itself; Don't attempt to educate shareholders or influence their decision making, because at the end of the day the shareholders are just anonymous bits some computer is switching back and forth automatically as the market shifts. It's a sad, sad state of being we're in.

That was a great read. HP's a messed up place.

HP was dysfunctional long before Leo Got their. And what i don't see in any statement is the stuff often said that Leo always was trying to kill webos or that it was his decision alone. That's used as a way to blame him but it's nowhere here. Leo was used as a scapegoat. Another thing Hurd was NOT the savior. Hurd was a huge part of the problem and employees hated him too. He crushed innovation. It wouldn't have been a better HP with him Just one firing tons of employees and selling chairs to juke the balance sheet.

Agree,
Hurd was needed to bring HP to profitability after Fiorina fiasco. HP's issue was with their board not able to pick a right CEO to foster innovation. Leo is a scapegoat for collective mistakes of the board and upper management.

i sum the board/etc up with regards to how they treat hp/palm.

"cash cow"