HP today announced that Mark Hurd, the corporation's Chairman, CEO and President, has decided with the Board of Directors to resign his positions, effective immediately. HP also announced, in the same press release issued after the US stock markets closed, estimates of increased sales and profits for the quarter just ended.
HP appointed CFO Cathie Lesjak, 51 and a 24-year veteran, as CEO on an interim basis. She oversees all company financial matters and will retain her CFO responsibilities during the interim period. Lesjak is a frequent official resource during HP's quarterly analyst conference calls. HP reported these facts in a press release on its website this afternoon.
Hurd’s decision was made following an investigation by outside legal counsel and the General Counsel’s Office, overseen by the Board, of the facts and circumstances surrounding a claim of sexual harassment against Hurd and HP by a former contractor to HP. The investigation determined there was no violation of HP’s sexual harassment policy, but did find violations of HP’s Standards of Business Conduct.
Hurd said: “As the investigation progressed, I realized there were instances in which I did not live up to the standards and principles of trust, respect and integrity that I have espoused at HP and which have guided me throughout my career. After a number of discussions with members of the board, I will move aside and the board will search for new leadership. This is a painful decision for me to make after five years at HP, but I believe it would be difficult for me to continue as an effective leader at HP and I believe this is the only decision the board and I could make at this time. I want to stress that this in no way reflects on the operating performance or financial integrity of HP.”
“The corporation is exceptionally well positioned strategically,” Hurd continued. “HP has an extremely talented executive team supported by a dedicated and customer focused work force. I expect that the company will continue to be successful in the future.”
HP filed a document with the Securities and Exchange Commission that reports Hurd will receive $12.2 million in severance. He also has the right to sell his fully-vested stock options during the company's next trading window, Aug. 23-Sept. 7. Hurd is also entitled to performance-based restricted shares granted to him Jan. 2008, and time-based restricted shares handed out Dec. 2009. Some calculations put his exit package at as much as $50 million.
HP's shares took a 10 percent hit in after-hours trading once the resignation was announced.
Robert Ryan, lead independent director of the Board, said Hurd "has worked tirelessly to improve the value of HP, and we greatly appreciate his efforts. He is leaving this company in the hands of a very talented team of executives. This departure was not related in any way to the company’s operational performance or financial condition, both of which remain strong. The board recognizes that this change in leadership is unexpected news for everyone associated with HP, but we have strong leaders driving our businesses, and strong teams of employees driving performance."Lesjak has taken herself out of consideration as the permanent CEO but will serve as interim CEO until the selection process is complete. Candidates from both inside and outside the company will be considered. The selection of a new chairman will occur in conjunction with the CEO decision.
The company does not expect to make any additional structural changes or executive leadership changes in the near future.
In the same press release, HP announces preliminary third quarter results and raisesed its full-year outlook for revenue and earnings. Revenue will be approximately $30.7 billion, up 11 percent compared with the prior-year period.
In the third quarter, preliminary earnings per share were approximately $0.75. HP said the earnings were "negatively impacted by $0.02 pertaining to one-time charges relating to the previously announced U.S. Department of Justice settlement. Non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.33 per share, related primarily to restructuring, amortization of purchased intangible assets and acquisition-related charges."
For the fourth fiscal quarter of 2010, HP estimates revenue of approximately $32.5 billion to $32.7 billion, GAAP diluted EPS in the range of $1.03 to $1.05 and non-GAAP diluted EPS in the range of $1.25 to $1.27. Non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.22 per share, related primarily to restructuring, amortization of purchased intangible assets and acquisition-related charges.
For the full year, HP now expects revenue in the range of $125.3 billion to $125.5 billion. FY10 GAAP diluted EPS is expected to be in the range of $3.62 to $3.64 and non-GAAP diluted EPS in the ranged of $4.49 to $4.51. FY10 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.87 per share, related primarily to restructuring, amortization of purchased intangibles and acquisition-related charges.
HP plans to release its final results for the third fiscal quarter on Thursday, Aug. 19, with a conference call at 6 p.m. ET/3 p.m. PT to provide additional details.