Loss of HP chief could affect 3Com: Analyst

Greg Meckbach

14 years ago

The recent resignation of Mark Hurd as chief executive officer of Hewlett Packard Development Co. LP could affect the integration of switch and router maker 3Com Corp., an industry analyst said.

Hurd resigned suddenly last week after an internal investigation found inaccurate expense reports and payments to a contractor for work that was not done. The investigation concluded he had not violated HP’s sexual harassment policy.

How this will affect HP’s US$2.7 billion acquisition of Marlborough, Mass.-based 3Com Corp. is unclear.

Rick Sturm, chief executive officer of Enterprise Management Associates Inc., a Boulder, Colo.-based market research firm, said there are people in HP right now working on the integration of 3Com.

“They already have a rough strategy laid out,” Sturm said, but added the integration will depend on who replaces Hurd as permanent CEO.

“If (HP) brings in someone who says, ‘I’m not so sure this was a smart idea,’ they could have a few bumps in road.”

HP has already changed the brands of the networking products made by 3Com and HP.

Before the acquisition, 3Com made switches, routers and voice over Internet Protocol (VoIP) private branch exchanges (PBXs), plus intrusion prevention systems.

The security products were sold using the TippingPoint brand.

Before the acquisition, HP sold switches under the ProCurve brand. Now the networking gear is grouped into the A,E,V and S lines.

Asked to speculate on who might take over as CEO, Sturm said HP would probably hire someone from outside.

“If they were going to promote from within, I think they would have had a front runner right now and named that person as acting CEO,” he said.

The temporary CEO is Cathie Lesjak, the chief financial officer of HP. She will serve as interim CEO while a search committee looks for a permanent replacement for Hurd. She will retain her CFO position and has asked not to be considered for the permanent position.

Hurd’s resignation stemmed from an investigation into sexual harassment complaint from a woman who had worked as a contractor.

The investigation discovered that Hurd had a “close personal relationship” with a marketing contractor that he did not disclose to the board, Mike Holston, HP’s general counsel said. The consultant does not wish to be named, he said.

It also revealed that there were numerous instances where the contractor was paid or reimbursed without performing work. There were also inaccurate expense reports from Hurd, Holston said. That evidence pointed to “a profound lack of judgment” by Hurd, he said.

“Based on all of this, the board concluded and Mark agreed that it was impossible for him to be an effective leader and he has stepped down,” he said.

As for the sexual harassment claim that instigated the matter, Sturm said, “I think there’s more to the story.”

With files from Nancy Gohring