Hewlett-Packard (HPQ) Shareholders Push Back
Over the past few weeks, Hewlett-Packard (HPQ) shareholders, led by activist investor Ralph Whitworth, have been revolting against the beleaguered company's board. Chairman Ray Lane, who narrowly won reelection at the company's annual shareholders meeting with 60% of the vote, stepped down last week as the latest casualty of the company's botched $11 billion acquisition of Autonomy. "After reflecting on the stockholder vote last month, I've decided to step down as executive chairman to reduce any distraction from HP's ongoing turnaround," Lane stated. Daily Chart
Just last year, Lane was re-elected with an overwhelming 96% of the vote. Although Lane will stay on as a director of the company, Whitworth will serve as interim chairman until a replacement can be found. Two other directors who also narrowly survived the shareholder vote, G. Kennedy Thompson and John Hammergren, also resigned. 55% and 54% of shareholders had respectively supported Thompson and Hammergren. Ever since the departure of former CEO Mark Hurd in 2010, four other directors of the board have left HP. Hurd's firing, over the misappropriation of funds related to an extramarital affair, was controversial for two reasons. First, Hurd had been regarded as the leader of a successful turnaround effort at HP. Second, Hurd was immediately hired by HP's rival in the servers business, Oracle (ORCL
). Shares of HP have lost more than half of their value since Hurd's departure. Although CEO Meg Whitman has repeatedly dodged the blame for the Autonomy mess, which caused a multi-billion dollar writedown last quarter, Whitman was an approving member of the HP board during former CEO Leo Apotheker's controversial decision. After Whitman was appointed CEO, Whitworth, who leads activist hedge fund Relational Investors LLC, joined the board. Whitworth had told investors to prepare for an "evolution" of HP's board. Major proxy firms such as ISS and Glass Lewis also recommended that investors vote against the entire board of directors at HP. CtW Investment Group, a major shareholder, also highlighted the necessity of a change, stating, "The board needs to embrace long-term shareholders in the selection of directors who can restore confidence in the audit process, lend the necessary skepticism to quick-fix acquisitions, and bring experience that can help HP nurture its workplace culture of innovation." HP investors are hoping that the board shakeup will bring change at HP, which has been ridiculed for its poor investments in Palm, EDS and Autonomy, as well as its endless changes in leadership. Although a shakeup for the board might push Whitman to speed up her turnaround efforts, nothing fundamentally about the company has changed. HP is still ceding market share to tablet and hybrid computers, and is still struggling in its server business against Oracle and IBM (IBM
). HP can also no longer rely on its printing and imaging business, which was once its bread and butter in the 1990s. The stock trades at 6.2 times forward earnings with a 5-year PEG ratio of 26.88, signifying a bleak outlook for growth ahead. Other News About HPQ HP Chairman Lane Resigns, Whitworth Takes Over for Now
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Published on Apr 12, 2013
By Leo Sun