Daily Archives: October 11, 2010

New HP Chair Ray Lane: HP Board Did Not Tell Investors the Whole Story Behind Hurd Ouster


Apparently the HP Board did not tell investors everything there was to know about the ouster of HP CEO Mark Hurd.

At least that is what the incoming HP Board Chair Ray Lane has told the New York Times in a letter that attempts to explain the ouster. While there was some disclosure by HP that Hurd had fudged expense accounts, Lane now says that that explanation did not give investors the full story. Lane says that Hurd “repeatedly lied” to the Board about his involvement with Jodie Fisher.

Federal securities laws require statements to investors not be materially misleading. If the board knew Hurd had “lied repeatedly” to them it certainly would have made sense to tell investors, the owners of the company, that this was the case.

All that HP said at the time of the firing was that their standards of business conduct were violated, which is so vague as to be meaningless. The market was confused at the time and remains now even more confused about the nature of corporate governance at our country’s largest technology player.

Oh, and why was Lane now revealing this information? Apparently he is embarrassed that the new CEO HP has hired, Leo Apotheker, was CEO of SAP when SAP was stealing IP from competitor Oracle. I guess Lane’s attempt to distract the market from that story is to somehow try to beef up the board’s ouster of Hurd.

Just in case folks are wondering about the role that SAP may have played in the IP theft, SAP has admitted its TommorowNow (SAP TN) subsidiary violated a federal statute against intentional theft of information from a computer.

Claims that SAP itself was involved in this illegal behavior survived “summary judgment” (i.e. an attempt to dismiss the Oracle claim by SAP) because, in the words of the federal judge hearing the case, “triable issues exist with regard to the extent of SAP AG’s and SAP America’s knowledge of the alleged infringement; with regard to whether SAP AG or SAP America induced, caused, or materially contributed to the alleged infringement; and also with regard to the extent of any actual involvement by SAP AG or SAP America in any copying that was performed by SAP TN.”

Normally when a company like SAP loses on a summary judgment motion they will attempt to settle the dispute rather than proceed to trial since otherwise they are leaving matters in the hands of a jury. In fact, SAP issued a public statement after the court’s August ruling saying it would compensate Oracle for the harm it caused. Oracle also won summary judgment on several other issues before the court.

Recall that HP’s new CEO, Apotheker, was a senior SAP sales executive and CEO while SAP TN was engaged in this activity. Yet that somehow was ignored by the HP board in its vetting of him. As I said when first interviewed about this story, the entire HP board should go, sooner rather than later.

UPDATE: The FT reports that Lane does not take office until November 1. One wonders, then, how he is privy to details about the Hurd ouster that investors are not? The FT seems shocked by what it called the “outbursts” and “astonishing public accusations” by Lane.

UPDATE #2: It appears the TN theft may have stopped prior to the elevation of Apotheker to the CEO position. He was at the time a member of the SAP Executive Board, which together with the Supervisory Board is the equivalent of an American Board of Directors, and deputy CEO. The Oracle complaint against SAP includes references to emails indicating that Apotheker was familiar with TN operations.