HP Doesn't Need This Now

Mark Hurd, CEO of the largest computer company in the world, had to resign last week amid falsified expense reports due to a businesswoman’s claim of sexual harassment. The good news for Mr. Hurd is a severance package of $12.2 Million plus stock benefits. The bad news for HP is that the company lost $7.9 Billion in stock market value the first day of business following his departure. Overall- HP doesn’t need this now.

The HP board says it has put together an executive search committee, and is considering candidates from both inside and outside the company. The consensus emerging in the industry in the aftermath of the news is that there shouldn't be any immediate negative effects--at least operationally. But don’t underestimate the impact this could have, particularly in three key areas:

The first one is in laptops. Although HP still ships the most computers in the world every quarter, the company has to continue to keep an eye on the surging Acer, and others like Samsung and Asus that are making plays for HP's territory of laptops. You can’t discount Moore’s law[1] and the speed of new entrants coming into the market without overhead like HP and being more agile- that’s how Acer did it.

Another area the company has to watch out for is Apple and others in the mobile computing space. The iPhone and iPad have established Apple as a serious force in personal technology, in terms of design and consumer appeal and in terms of the company's ability to maximize profits. It became clear earlier this year that HP was taking aim at Apple. There’s a reason HP spent over $1 Billion for Palm- so it could own and develop further the WebOS operating system for its devices, the way Apple owns iOS, and unlike Google’s Android or Windows Phone 7 operating system. Apple isn’t going to wait for HP to catch up for anything. Neither will Google, Microsoft or RIM for that matter.

The third strike for HP? A company this size can’t afford the revolving door of CEOs the company has had without any impact. In a period of less than 10 years, there have been three major changes at the top- Ms. Fiorina, Ms. Dunn and now Mr. Hurd. Anyone who has worked in large multinationals knows the impact of changes in management to their own business operations and planning and how new strategies can slow things down.

Research Analyst Rick Munarriz[2] recently commented “Outside of Steve Jobs at Apple, it's hard to imagine a CEO that is more important to his company than Mark Hurd to Hewlett-Packard”. Running HP is a big job: the company has more than 300,000 employees and $114 Billion in revenue. From what we see, the company certainly doesn’t need another CEO change right now.

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[1] Moore’s Law states that the number of transistors that can be placed inexpensively on an integrated circuit has doubled approximately every two years. The trend has continued for more than half a century and is not expected to stop in the near term.

[2] Mr. Munarriz works for Motley Fool, a multimedia financial-services company that provides financial solutions for investors through various stock, investing, etc.