Friday, October 1, 2010

Another surprise.... Leo Who?

Howls from shareholders, question marks from insiders, blogs cranking up all over the Valley, now we have a target

What fun! Who is Leo Apotheker? I'd first of all remind readers that was the same reaction when the HP Board picked Mark Hurd, and the same when IBM picked Lew Gerstner. Not every outsider pick is a bad one, and not every insider pick is good

Apotheker is well known, and well respected, in Europe. Totally coincidentally I spent three days last week in Germany with the Intel/SAP Joint Ventures lead director. No, we weren't prescient enough to guess this selection, but it was a great visit re what is happening in Cloud Computing and ICT. SAP, of course, is the only viable contender against Oracle in the Enterprise Software world, and has done an incredible job over the years head-to-head. SAP has strong presence in Silicon Valley, both with their operations in Palo Alto (headed by veteran Ike Nassi) and the Hasso Plattner D'School at Stanford, started by David Kelley et al.

Several positives:
1. He speaks and thinks globally (fluent in five languages is a major plus these days), unlike the last guy. HP employees are 71% outside the US, as are 90% of their suppliers (this is no longer much of a US company, folks). HP sales are 73% outside US. The Enterprise wins will be elsewhere, not in the States. Every other candidate 'floated' was a US centric person.
2. He is a long-term SAP player, came up through the ranks, and served admirably as co-CEO for five years. The seven months before the sudden resignation can be explained (maybe rationalized) as a power play that didn't work for Plattner, and he was the sacrificial lamb. But this guy knows the industry of Enterprise Servers, Enterprise Storage, and Enterprise Software about as well as anyone out there. Put him together with Donatelli (work hard to keep Donatelli, by the way), and it could be very good
3. Getting Ray Lane to join, and LEAD the Board. WOW! This is blockbuster news actually. Lane was a HUGE part of Oracle success for years, was in fact the only humane face on the place. And he said for the WSJ, he joined HP "because of LEO A". Now that has to be read as extremely positive, from a guy that I have admired for years. The team of Donatelli, Leo A, and Ray Lane can be imagined as INSPIRED if you are betting on Cloud Computing and Enterprise Services as the play.
4. They did not pick someone from the hardware/consumer side (which is a hard business, especially as far behind as they are starting, and with the low margins of most of it).
5. They did not pick someone who was a Hurd clone (need I remind you how angry the employees were at him?)
6. He is not unafraid to be a spokesperson in public (this IS the largest high-tech company on the globe, and the only one of the top ten who had a CEO who would not take speaking engagements or talk to public issues).
7. He has high marks both as a strategist and an operationally sound guy (notwithstanding whatever led to the denouement at SAP)

Several negatives:
1. He is not an insider, nor is the new heir apparent leadership (Leo A, Ray Lane, Donatelli together are all new to HP Way)
2. Probably lose Bradley over the slight (not sure how to interpret this, stay tuned)
3. Half of HP's business, and two-thirds of its profits, come from PCs and Printers. He needs to keep some of the key leaders here
4. He doesn't look or sound charismatic. But then, compare it with Bradley, Livermore, or Donatelli -- not much different.
5. He doesn't sound inspiring (maybe the same point as above?).
6. He doesn't sound "lovable" in the old HP Way sense. And HP employees long for someone who will vote for them too.

All things considered, I would have to say, CONGRATULATIONS to the HP Board. This is an interesting, and bold choice. We're pulling for you!

9 comments:

steved said...

Chuck,

I have to respectfully disagree. And although I sympathize with Larry Ellison's views on the current situation, I am not exactly speechless :))...

First, Apotheker was kicked out of SAP for screwing up on several levels. He alienated employees, shareholders and top level executives. Frankly, it looks like he was in way over his head. And SAP is many times less complex and a smaller scale company than HP. An effective leader he was not. In light of the very deep and widely known problems HP has with integrating acquired companies and holding onto the talent for longer term benefit that is not a good sign.

Second, he is a sales and marketing guy who, like all software sales guys, packaged software developed by someone else and then convinced people to buy it even if it wasn't ready and keep it even it didn't work or was outdated. He was the first CEO of SAP to have never written a line of code.

Third, even if he has picked up a rudimentary (mile wide, inch deep) understanding of software he is being asked to lead a hardware company that has no software business now to speak of. If what HP wanted to do was build a s/w and/or services business, there have to be a hundred people within a few miles of Stanford who have as much experience doing so. Even if he triples the business in size in five years it would still only be 9% of HP.

Is that what his role as CEO is?

SInce he won't have much to contribute technologically to hardware one has to conclude that he is being paid all this money (a $50 million package) just try and revive software inside HP.

Someone with a genuine science and engineering background, on the other hand, might have been able to lead existing HP talent to find integrated solutions that dynamically pair hardware with software. Isn't that what Oracle and Apple have figured out has to be done in their worlds?

Hiring Apotheker strikes me as thinking HP is more like Facebook than a real technology company - more fluff than substance.

Fourth, even the board of directors appears to admit that Apotheker needs a travel guide to make the transition to the Valley. They are bringing in Ray Lane as board chair. Lane has been hungry for a CEO role since his days at Oracle. He is a young 60 and will no doubt be waiting for the first opportunity to pounce. Already there is talk he will be bringing in allies to the board. The contract the board gave Apotheker, while rich, has several provisions that put him on a tighter rein than Hurd. As Chair, Lane will be in a position to watch dog him.

While I generally think a separation of the chair and CEO is a good thing, particularly in public companies, it is not a stable solution to set two people of similar ages, large egos and healthy ambition in this kind of position relative to each other. They say a camel is a horse designed by a committee. This is a two humped camel.

I am certain already that people inside HP - those who decide to stay under these circumstances - are trying to decide with whom they should curry favor. I am certain Vegas will start offering odds on whether Ray or Leo makes it through the first year. I, for one, would bet against the guy with the summer house in Europe.

I am one who believes from what I have read on your blog and what I have gleaned over the last fifteen years here in the Valley that the flame of the "HP Way" has not quite yet been snuffed out inside HP. But that flame is dangerously close to dying out. I fear this board has made that possibility all the more real.

Steve Diamond
Santa Clara University School of Law

steved said...

Chuck,

I have to respectfully disagree. And although I sympathize with Larry Ellison's views on the current situation, I am not exactly speechless :))...

First, Apotheker was kicked out of SAP for screwing up on several levels. He alienated employees, shareholders and top level executives. Frankly, it looks like he was in way over his head. And SAP is many times less complex and a smaller scale company than HP. An effective leader he was not. In light of the very deep and widely known problems HP has with integrating acquired companies and holding onto the talent for longer term benefit that is not a good sign.

Second, he is a sales and marketing guy who, like all software sales guys, packaged software developed by someone else and then convinced people to buy it even if it wasn't ready and keep it even it didn't work or was outdated. He was the first CEO of SAP to have never written a line of code.

Third, even if he has picked up a rudimentary (mile wide, inch deep) understanding of software he is being asked to lead a hardware company that has no software business now to speak of. If what HP wanted to do was build a s/w and/or services business, there have to be a hundred people within a few miles of Stanford who have as much experience doing so. Even if he triples the business in size in five years it would still only be 9% of HP.

Is that what his role as CEO is?

SInce he won't have much to contribute technologically to hardware one has to conclude that he is being paid all this money (a $50 million package) just try and revive software inside HP.

Someone with a genuine science and engineering background, on the other hand, might have been able to lead existing HP talent to find integrated solutions that dynamically pair hardware with software. Isn't that what Oracle and Apple have figured out has to be done in their worlds?

Hiring Apotheker strikes me as thinking HP is more like Facebook than a real technology company - more fluff than substance.

Fourth, even the board of directors appears to admit that Apotheker needs a travel guide to make the transition to the Valley. They are bringing in Ray Lane as board chair. Lane has been hungry for a CEO role since his days at Oracle. He is a young 60 and will no doubt be waiting for the first opportunity to pounce. Already there is talk he will be bringing in allies to the board. The contract the board gave Apotheker, while rich, has several provisions that put him on a tighter rein than Hurd. As Chair, Lane will be in a position to watch dog him.

While I generally think a separation of the chair and CEO is a good thing, particularly in public companies, it is not a stable solution to set two people of similar ages, large egos and healthy ambition in this kind of position relative to each other. They say a camel is a horse designed by a committee. This is a two humped camel.

I am certain already that people inside HP - those who decide to stay under these circumstances - are trying to decide with whom they should curry favor. I am certain Vegas will start offering odds on whether Ray or Leo makes it through the first year. I, for one, would bet against the guy with the summer house in Europe.

I am one who believes from what I have read on your blog and what I have gleaned over the last fifteen years here in the Valley that the flame of the "HP Way" has not quite yet been snuffed out inside HP. But that flame is dangerously close to dying out. I fear this board has made that possibility all the more real.

Steve Diamond
Santa Clara University School of Law

Jim said...

Is the HP Way still there? I thought the HP Way I was familiar with in the 80's was long gone, and Carly got rid of the remnants.

chuck said...

Well, Steve, you know more specifics than I re Apotheker at SAP, and no, they don't sound good. This has all the feel of "suits" at Apple (recall the non-glory days of Amelio, et al).

And you're certainly right re the 'engineering leader' mentality vs. sales (I hadn't been bold enough to think of HP yet as a Facebook lookalike)...

I love the 'tour guide' description for Lane. Hadn't thought that deeply into the contest between the two of them ... you could well be right on that one

Thanks for a great post!

chuck said...

Jim, you're mostly right, maybe almost totally right. I keep finding embers still warm to the touch, if not exactly glowing. And, silly me, I keep hoping.

Jobs did restore luster to Apple, after all. Where are Bill 'n Dave when we need 'em?

Algosome said...

If you really want to be uncharitable, you could suggest the Leo Apotheker is a combination of the internationalism of Compaq's Eckhard Pfeiffer, who kept his house and wife in Germany while ostensibly having headquarters in Houston, and the sales & marketing experience of Carly Fiorina. He should be right at home in Davos, although I hope he has sense enough to stay away.

chuck said...

I wasn't looking to be uncharitable, in fact I was groping a bit to be upbeat. Pfeiffer certainly lent a certain air to the idea of coming stateside; Chuck Phillips did something similar, just cross country.

That must be rarified air they breathe

Swanmotion said...

I read somewhere that Leo likes to be on the road and this might be his saving grace with the HP employees.

Hurd was rarely seen in Europe, Carly only did election style rallies (practicing perhaps ?). I remember seeing her at tech@work in Holland or Germany (I forget which). She flew in did 45 minutes of presentation and flew out again. Someone commented that it was like a Chinese meal, very tasty, but 20 minutes later you felt hungry again.

If Leo is seen and with the bonus he can speak in native tongues, he may well endear himself to the HP people in a way that Hurd and Carly didn't.

chuck said...

Endear himself more to HP folk than did Carly or Hurd. Gawd, I hope so. Hard to imagine it being less!

It's always a bit amusing to think about these things from a historical context. One of the jokes about Packard always was "what's the difference between God and Dave" and the answer was "Dave is never around". Different and better joke than the one about Ellison and God -- there the difference is said to be "God doesn't think he is Larry Ellison"