HP Condemns Ex-CEO for Stifling Innovation at the Company

HP: We Are Paying for Mark Hurd's Mistakes

by Anton Shilov
07/27/2011 | 11:37 PM

The recent quarters were not exactly impressive for Hewlett-Packard, the world's top PC maker, as its sales forecasts were reduced, something that caused analysts question whether the new chief executive can run the company successfully. But HP's chairman of the board claims that at present the company is paying for mistakes made by the previous CEO, who reduced spending and stifled innovation.


"It is not a three-month job [to transform HP and enable long-term growth]. Mark Hurd did not invest, he burned the furniture to please Wall Street. Leo is not that," said Ray Lane, the chairman of HP's board of directors, in an interview with Reuters news-agency.

This is by far not the first time when Mark Hurd, who was ousted from the position of HP's CEO with a scandal last year, is criticized for cutting costs and reducing HP's ability to innovate. Samuel Palmisano, chief executive of IBM, last year said that HP was forced to make large acquisitions because of inability to innovate itself due to reduced research and development (R&D) funding.

"HP used to be a very inventive company. IBM would never have paid what HP did to buy data-storage provider 3Par. HP had no choice: Hurd cut out all the research and development," said Mr. Palmisano.

Mark Hurd cut HP's R&D budget to $2.8 billion, or 2.5% of HP's revenue, in its last fiscal year from $3.5 billion, or 4% of earnings, in 2005, when he took over as CEO. Under Mr. Palmisano, IBM has continued to invest about 6% of its revenue in R&D, including $5.8 billion last year. Leo Apotheker increased R&D funds to $815 million (2.57% of revenue) for the quarter ended April 30, 2011, which was up from $722 million (2.34% of revenue) for the same period in 2010.

Since Leo  Apotheker became chief exec eight months ago, the stock is down 11%, compared with a 13% rise in the Nasdaq composite, due to the fact that investors and analysts were not sure whether Mr. Apother can spark growth of the company by embracing cloud computing and mobile eco-system strategies.