HP investors poised to reprimand lane for autonomy
Hewlett-Packard Co. (HPQ) investors will get the chance to voice dismay over the $8.8 billion writedown of Autonomy Corp. when they’re asked to re-elect Chairman Ray Lane and other directors at an annual meeting today.
Shareholder advisers have said that the board failed to properly vet the acquisition of software maker Autonomy, and are recommending that investors vote against Lane and some other members of the 11-person body. Institutional Shareholder Services Inc. and Glass Lewis & Co. faulted the board for the writedown due to “serious accounting improprieties,” and for depleting the stock’s value through years of mismanagement.
The specter of shareholder activism is the latest challenge facing HewlettPackard’s corporate management as it struggles to revitalize the troubled company. Chief Executive
Even if the recommendations don’t lead to the ouster of directors, they underscore dissatisfaction with oversight of a company beset by slowing growth and upheaval in executive ranks.
“What the shareholders and proxy advisers are suggesting is accountability,” said Brent Bracelin, an analyst at Pacific Crest Securities LLC in Portland, Oregon. He has a sector perform rating on the shares, the equivalent of a neutral recommendation. “When you have tech companies that are struggling, people want a scapegoat.” The annual meeting takes place at the Computer History Museum in Mountain View, California, at 2 p.m. local time.
The company has shown early signs of progress under Whitman, HewlettPackard’s fourth CEO in three years. It forecast fiscal second-quarter profit that topped analysts’ estimates last month amid cost cutting and rebounding demand for enterprise services.
“Meg’s doing a great job with the hand she’s been dealt,” Bracelin said.
Whitman’s turnaround effort suffered a setback in November, when HewlettPackard disclosed that it had discovered accounting irregularities at Autonomy.
Lane is the former president and chief operating officer of Oracle Corp. (ORCL), the largest maker of database software. He brings to Hewlett-Packard decades of experience in business computing, an area it’s counting on to reignite growth. Given his position and closeness to former Hewlett-Packard CEO Leo Apotheker, who orchestrated the Autonomy deal, Lane should have been more vigilant in assessing the purchase, according to ISS.
“Shareholders reasonably expected Lane to exercise good judgment and oversight; in that respect he may bear the most responsibility in the boardroom with respect to the Autonomy failure,” the advisers said in a March 4 report.
The group published a list of five suggested questions to investors that call for Hewlett-Packard’s board to provide evidence of its claims and details about how it calculated the impairment charge from the acquisition. Lynch and his team have consistently denied that they mishandled the company’s finances and point to audit reports from Deloitte LLC that found no irregularities.
“The problem with the Autonomy acquisition by HP lies in the mismanagement of that business by HP under its ownership, making it impossible for Autonomy to deliver on HP’s expectations,” the team said in the letter. “We refuse to be a scapegoat for HP’s own failings.”
Hewlett-Packard declined to make Lane available for comment. Michael Thacker, a spokesman for the Palo Alto, California-based company, said in an emailed statement that, “we feel we have the right board in place to turn HP around.”