One analyst thinks the appointment of the ex-SAP-CEO to Hewlett-Packard could either spell success for the company

Apotheker as HP CEO: smart or stupid move?

The choice to appoint Leo Apotheker to the role of CEO at Hewlett-Packard Co. could go both ways: it could be a very dumb move or it could turn out to be a healthy move that will help the company’s software business, said one analyst.

“I think this whole thing is going to prove that the board was incredibly brilliant or stupid,” said Rick Sturm, founder & CEO with Enterprise Management Associates Inc. “I wasn’t surprised. I was shocked.”

The Palo Alto, Calif.-based vendor recently saw the exit of then-CEO Mark Hurd following expense account irregularities and claims of sexual harassment by a female contractor.

Sturm thinks, on the one hand, Apotheker might not be capable of doing anything more than what he did at SAP. But on the other hand, he just might bring his much-valued software business expertise to HP. “He could also come in and really lead them down the software path. Really they need to do that. They have neglected software,” said Sturm.

The choice of Apotheker as CEO is one sign that HP is gearing up to put heavy emphasis on software. Another sign is new board member Ray Lane of Kleiner Perkins Caufield and Byers who is, according to Sturm, known for “competing effectively against Oracle.”

HP has never exploited the opportunities it had to bolster its software business which currently stands at a single-digit percentage of revenue, said Sturm. Comparatively, Armonk, New York-based IBM Corp.’s software business accounts for a large portion of its bottom line, he said.

Under Hurd’s leadership, HP made some poor moves aimed solely at boosting top-line numbers, said Sturm, citing the decision to buy 3com for US$2.7-billion late 2009 as one such bad move.

While HP has not made much investment in its software business, the growth and high margin area for the company is in hardware and services, thinks Andy Woyzbun, lead research analyst with London, Ont.-based Info-Tech Research Group Ltd. Yet, Apotheker doesn’t bring to the table much knowledge in either of those areas, said Woyzbun: “I don’t know if he is the visionary in the services area that’s going to put HP on the top.”

But the positive, said Woyzbun, is Apotheker brings a different view to HP given his European roots. However, Woyzbun warns that Apotheker’s supposed reputation for being “arrogant” may not jive particularly well with Californian sensitivities.

Apotheker resigned SAP AG suddenly last February amid a flurry of executive moves at the Germany-based software vendor. The company has since returned to a co-CEO structure consisting of Jim Hagemann Snabe and Bill McDermott.

Apotheker’s departure from SAP coincided with the company’s decision to steer in a new direction in terms of rebuilding customer and employee confidence and rebranding itself as more than just an enterprise resource planning technology vendor that caters to large customers.

Given that SAP has been mum on the reasons behind Apotheker’s departure from SAP, analysts speculated that he was perhaps not the technologist SAP needed while also taking the fall for customer backlash for a maintenance price hike and poor quarterly results.

But now with Apotheker at the helm of HP, the industry is speculating that HP will renew a past consideration to acquire SAP. Woyzbun said he would find it very surprising if HP actually purchased SAP given enterprise resource planning (ERP) is not really a long-term exciting area. “I think the ERP space is pretty saturated already,” said Woyzbun.

Sturm said Apotheker has the rocky road ahead to improve employee morale at HP as well as try to retain the internal executives who have been passed up for the CEO gig. Sturm said he had expected the board to appoint executive vice-presidents Todd Bradley and David Donatelli to CEO. “I think that’s going to be interesting to see how that plays out,” he said.

Follow Kathleen Lau on Twitter: @KathleenLau

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