Hewlett-Packard Co. (HPQ) finally found a replacement for its previous chief executive officer (CEO) Mark Hurd. The company recently announced the appointment of former SAP AG (SAP) chief Leo Apothekar as its CEO and president. The appointment will be effective from November 1.
The former CEO left the company after some controversy. However, the dismissal of HP’s most capable CEO may not have been so wise. Hurd was the major driving force behind the company’s successful transformation from a basic computer and printer maker to a well diversified technology giant with a huge product portfolio of hardware and business solutions.
According to HP, Apothekar will be a competent successor given his twenty years of experience in SAP. Under his guidance, SAP was transformed into a worldwide leader of business software applications. Moreover, during Apothekar’s tenure, SAP saw 18 consecutive quarters of double-digit software revenue improvement between 2004 and 2009.
According to a regulatory filing, HP will pay Apothekar an annual base salary of $1.2 million with performance incentives ranging from 200% to 500% of basic salary. Moreover, Apothekar will receive $4 million as signing bonus, as well as $4.6 million as relocation compensation. Apothekar will also receive an annual incentive of 38,000 shares.
Investors appear somewhat concerned, as Apothekar has no material experience in hardware technology. Moreover, SAP experienced a sequential revenue decline in the first quarter of 2010, the first time since 2003.
We believe HP will be able to capitalize on Apothekar’s extensive software experience and diversify into the software business. However, we would like to take a wait and see approach until there is more clarity regarding the new CEO’s strategies.
We currently have a short-term ‘Hold’ recommendation on HP shares, as indicated by the Zacks #3 Rank.
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