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Meteorite needed

21 March 2013 By Richard Beales

Hewlett-Packard’s boardroom needs a revolution. After Chairman Ray Lane and two other directors squeaked back into office with less than 60 percent support, Ralph Whitworth, a fellow board member, said shareholders should expect “evolution.” A more radical shake-up of both directors and strategy is called for.

Criticism centering on HP’s massively overpriced $11 billion acquisition of UK software group Autonomy led governance advocates to advise shareholders to vote against several directors at Wednesday’s annual meeting. They did – but not in numbers quite large enough to unseat anyone. All the same, the level of dissatisfaction was clear, with Lane achieving less than 59 percent support and two other directors, McKesson Chief Executive John Hammergren and former Wachovia CEO Kennedy Thompson, garnering even less backing.

Meg Whitman, the former eBay CEO who has run HP for the past 18 months, may have rallied the long-dysfunctional board. The company’s shares are also up more than 50 percent so far this year after slumping in 2012. But the Silicon Valley icon is still worth more in pieces, according to a Breakingviews analysis.

Part of the run-up in the stock also looks related to hints that HP could sell off some assets. That suggestion, contained in the annual report filed in late December, marked the start of a 2013 surge in the share price that has far outstripped rivals, even including buyout target Dell. Yet although possibilities discussed in private are presumably bolder than public pronouncements, there’s no sign that a more comprehensive breakup is on the cards. At the very least, it’s a viable strategy against which to compare other, less certain, turnaround options.

Past abortive CEO choices and the Autonomy mess alone justify changes on the board. It’s especially hard now for HP to argue that Lane has broad enough shareholder support to continue as chairman, even though he secured re-election. A new figurehead open to a breakup of the company would be a start.


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