HP names SAP ex-chief as its new CEO

San Francisco: Hewlett-Packard Co named Leo Apotheker, the former head of German software company SAP, its new chief executive in a surprise appointment.

Hewlett-Packard's shares dropped 3 percent in after-hours trading.

The recruitment of the long-time software industry veteran and Silicon Valley outsider - who left SAP abruptly after just seven months at the helm amid a wave of customer complaints - disappointed some who worried about his ability to steer a diverse, $130 billion hardware and services company.

Apotheker, a multi-lingual salesman schooled in economics and international relations, succeeds Mark Hurd, who quit amid a scandal involving a female contractor. Apotheker also was named to HP's board.

Ray Lane, a well-known venture capitalist and former top executive at software giant Oracle Corp, will fill the chairman's post that Hurd also had occupied.

The top job at HP offers a unique opportunity to lead a technology icon but comes with big challenges and expectations. Unlike in 2005, when Hurd took over an HP in disarray, Apotheker will be at the helm of a well-run company whose investors will not be sated with another round of cost cuts.

HP said Apotheker helped transform research and development at SAP, while driving expansion.

In an interview with Reuters, Apotheker said he would focus on innovation and growth. He acknowledged the challenge of HP's size and complexity, but underscored the company's "deep and talented" management team.

Apotheker - who helped steer the first major round of job cuts at SAP - said under his stewardship HP would not relent in its efforts to drive efficiency.

"You're never done with efficiency, and at HP we'll continue to drive efficiency," he said. "However, we will also want to continue to have a real focus on growth. So we'll do both."

But Fort Pitt Capital analyst Kim Caughey expressed doubt about Apotheker moving from a software company to HP, a behemoth with more than 300,000 employees and a commanding presence in the personal computer, server, IT services and printer markets.

"SAP is a very different sort of company than HP, and that is my biggest concern," Caughey said. "The scope of SAP is very different, as are the customers. What does he know about hardware? That's the question."

Wedbush Securities analyst Kaushik Roy said, "He can be an agent of change. Investors were focused on 'how do you bring back R&D, how do you bring back innovation?'"

Going outside

The appointment of an outsider - the third straight external hire after Carly Fiorina and Hurd - surprised some observers who had bet on a promotion from within.

Many had expected Todd Bradley, PC division chief, or Ann Livermore, who heads its enterprise arm, to take on the role. Cathie Lesjak, who had served as interim CEO, remains CFO.

However, a source familiar with the matter has said some on the board were concerned about Bradley's strategic vision and that Hurd had been a major supporter of his.

HP's board cast a wide net in search of a new CEO, reaching out to two senior IBM executives, who quickly declined to pursue the position, according to two sources.

Apotheker had spent more than two decades at SAP. He was named SAP co-chief executive in April 2008, and became its sole leader in July 2009.

His tenure was marked by criticism of SAP's lack of direction, and customers raged when SAP instituted its first maintenance fee increases in a decade. During his term, SAP made its first-ever major round of job cuts.

"Leo is a very bright guy. He has a bad rap because he got handed the wheel of the Titanic five minutes after it hit the iceberg," said Peter Goldmacher at Cowen and Co.

HP's board named Lane as non-executive chairman - marking the separation of the chairman and CEO roles. Lane is managing partner at venture capital firm Kleiner Perkins Caufield & Byers, and previously served as president and chief operating officer at Oracle.

Both appointments are effective Nov. 1, and come nearly two months after the controversial Aug. 6 departure of Hurd, which sent shock waves through Silicon Valley and upset investors who credited him with turning the company around.

Hurd may be a tough act to follow. He transformed the company into a diversified IT powerhouse, the largest technology company in the world on a revenue basis.

"The investment community wanted an outsider to be named CEO," said Gleacher & Co analyst Brian Marshall. "They view HP internally as a little bit dysfunctional in terms of all the issues they had in senior management in the last couple of years."

Analysts said Apotheker and Lane could serve to deepen its growing rivalry with Oracle, which is a bitter rival of SAP's.

Oracle CEO Larry Ellison lashed out at HP over Hurd's departure, and then hired him as president, drawing HP's wrath. The companies have publicly reconciled.

SAP co-CEO Bill McDermott called Apotheker's hiring "great news. ... This move only sets the stage for an even deeper relationship between our two companies."

HP shares fell 3 percent to $ 40.80 in extended trading, after closing at $ 42.07 on the New York Stock Exchange.