Several media reports say that Hewlett-Packard (NYSE:HPQ) is considering ousting CEO, Leo Apotheker, only 10 months after he officially took the helm on Nov. 1, 2010.
The reports note that Meg Whitman, who joined the Board in January, is being considered to fill the interim CEO role, which would make sense given her 10 years of experience as CEO at eBay, a large technology company. The news was first reported by Bloomberg.
Investors welcome the potential move sending the technology giant's stock up by about 7 percent to $23.98 Wednesday on NYSE.
We view such a potential move as positive for HP, and given the company's history of leaks, we would not be surprised if there is some truth to this story, Ticonderoga analyst Brian White wrote in a note to clients.
White said he would not be surprised if HP brings in a new CEO as he always thought that Apotheker was placed in the role on a short-term basis to take the fall for the company's under investment under the previous CEO Mark Hurd.
Meanwhile, HP stock is already down 43 percent this year and investors are really irked by the company's recently announced $10.3 billion acquisition of Autonomy and winding down of the webOS business and possible sale of its personal systems group.
Since Apotheker's appointment as CEO, the company has lowered guidance in the past 3 quarters, Susquehanna Financial Analyst Jeffrey Fidacaro said in a note to clients.
In addition, the Board may be reconsidering the spin off or sale of the PC division, which was recently announced in conjunction with HP's earnings report along with the shutdown of the webOS-based hardware, including smartphones and TouchPad.
Apotheker, who was the former CEO of SAP, wanted to boost HP's more profitable software services unit amid declining PC sales. The touted successor Whitman, who unsuccessfully ran for California governor in 2010, joined eBay on March 1998, when it had 30 employees and revenues of approximately $4 million. When she departed in late 2008, the company had grown to about 15,000 employees and $8 billion in annual revenue.
If HP lets Apotheker go, he would be the third CEO to be ousted after Carly Fiorina was forced out following a run-in with the HP board in 2005 and Mark Hurd, who was ousted in October 2010 following a sexual harassment investigation. Hurd is currently the co-president, director and board member of the Oracle Corp. (NASDAQ:ORCL).
Analysts believes a new CEO could begin to build credibility for HP. The new CEO's key job would be to repair the company's badly damaged reputation with investors.
We continue to recommend investors stay on the sidelines over the next several quarters given what may be a disruption in the CEO seat and as management restructures and rebuilds nearly all of HP's business segments and decides on a strategic alternative for its PC business, Fidacaro said.
Moreover, despite a recent round of estimate cuts given HP's lowered outlook for FY4Q11, we believe management's cautious macro commentary and the fall-off in demand it saw for certain products in July creates a high degree of uncertainty around our EPS forecasts with downside potential, the analyst said.