Hewlett-Packard chief forced to resign over expense reports

The resignation of Hewlett-Packard chief executive Mark Hurd, a 24-year veteran of the computer manufacturer, is a blow to the company as it attempts to reinvent itself to take on the smartphone and tablet computing sector.

HP announced Hurd’s resignation over the weekend, which was prompted by his creation of a series of false expense accounts in order to hide a relationship he was having with a female contractor.

The women in question has now released a statement, saying the two never had an affair or intimate sexual relationship, and that the matter is setlled.

But the development couldn’t have come at a worse time. HP is attempting to leverage its recent acquisition of Palm and the WebOS to take on Apple and Google, and its upcoming tablet computer is expected to be a solid entry into the field.

The announcement sent the company’s shares down over 10%, and overshadowed the announcement of its preliminary results – third quarter revenue was up 11% to $US30.7 billion.

HP said the contractor worked for HP from late 2007 to 2009 and fulfilled a marketing role. She contacted the board and accused Hurd of sexual harassment.

The case is similar to the recent resignation of David Jones chief executive Mark McInnes, who has said he will return to Australia to contest some of the sexual harassment charges brought against him.

An investigation by HP found no violation of the sexual harassment policy by Hurd. However, the company did say he had a “close personal relationship” with the woman, and this was never disclosed.

“The board investigation found that Mark demonstrated a profound lack of judgment that seriously undermined his credibility and damaged his effectiveness in leading HP and Mark agreed,” HP general counsel Mike Holston said in a statement.

The company said he filed “numerous inaccurate expense reports”, which were designed to hide his relationship with the contractor. These expenses were related to travel, means and lodging.

“I realised 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,” Hurd said in a statement.

The contractor’s name is Jodie Fisher. Although she worked as a marketing contractor, she also has experience in sales and real estate, and even recently appeared in a popular reality show titled “Age of Love”.

The Associated Press has reported a settlement has been reached between Fisher and Hurd, although the size of the payment is still unknown.

The development is a massive blow to the company. Hurd is extremely popular in Silicon Valley, and is credited with turning the company around after a particularly troubling period in the late 1990s and first half of the 2000s.

He took over from Carly Fiorina in 2005, after she was criticised for a controversial acquisition plan to merge with Compaq. Hurd’s succession was seen as a stable alternative.

During his tenure, shares have grown by over 40% and the company has pursued a more aggressive strategy to compete with the likes of Google and Apple. Costs have been cut, and HP has pursued a number of large acquisitions, including the recent purchase of handset manufacturer Palm.

This acquisition was to be the start of a new focus for HP, according to some analysts. MG Siegler wrote on TechCrunch the WebOS platform it bought as part of the Palm deal was an opportunity for the company to follow in Apple’s footsteps.

“When you think of HP, what do you think of? For most consumers it’s either printers and sort of crappy, cheap computers that you get at Best Buy. But that’s not what HP aspires to be anymore, sources familiar with HP’s thinking are telling us. They want to be Apple.”

“With a shift towards mobile starting to take place, as well as new products like tablets starting to rise, HP seems smart to get ahead of this trend. With the webOS buy, they’re much closer to Apple. The profits there are in premium products, buoyed by the seamless ecosystem.”

It is unknown how Hurd’s departure will impact this new focus.

Chief financial officer Cathie Lesjak will take over the chief executive role on an interim basis, although she has apparently said she is not a permanent replacement and a search will continue.

“The scale, global reach, broad portfolio, financial strength and, very importantly, the depth and talent of the HP team are sustainable advantages that uniquely position the company for the future,” she said in a statement.

“I accept the position of interim CEO with the clear goal to move the company forward in executing HP’s strategy for profitable growth. We have strong market momentum and our ability to execute is irrefutable as demonstrated by our Q3 preliminary results.”

There is some speculation Jon Rubinstein, former vice president of Apple’s iPod division and current chief executive of Palm, could replace Hurd, but it is unknown how likely this is. Rubinstein helped develop the original iPod, experience which could help HP compete in the highly competitive smartphone sector.

According to the Wall Street Journal, Hurd received a severance payment of $US12.2 million.