Hewlett-Packard Co. (NYSE: HPQ) just made an announcement that many will be shocked about.  Chairman and CEO Mark Hurd has decided to resign his positions from H-P effective immediately.  The reason cited is after an investigation by outside legal counsel and the General Counsel’s Office after a claim of sexual harassment against Hurd and HP by a former contractor to H-P.  H-P also raised its 2010 guidance.  Guess which story is taking precedent?  Hurd has been credited with the major turnaround of H-P.

The company said that the investigation determined there was no violation of HP’s sexual harassment policy, but did find violations of HP’s Standards of Business Conduct.

HP’s board of directors has already appointed 24-year veteran and 51-year old CFO Cathie Lesjak as CEO on an interim basis. Lesjak will retain her CFO responsibilities during the interim period.

Hurd was quoted as follows:

• “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.  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.”

The guidance is as follows, with Thomson Reuters estimates after the guidance:

• Q3 earnings are being put at $1.08 EPS on an adjusted basis on revenue of $30.7 billion; estimates are $1.07 EPS on $30.01 billion.
• Q4 adjusted EPS is expected to be $1.25 to $1.27 EPS on $32.5 to $32.7 billion in revenues; estimates are $1.26 EPS on $32.63 billion.
• FY10 Adj EPS $4.49 to $4.51 EPS on revenues of $125.3 to $125.5 billion; net is being put at $3.62 to $3.64 EPS; estimates are $4.49 EPS and $124.52 billion.

This is unfortunate to see for such a great career to end in such a dark cloud.  Reports are coming out that Hurd had “expense-related issues” tied to a relationship with a contractor.  Lesjak has already removed herself from taking the CEO role permanently.  At a time that much of the market has died or been static, H-P shares have more than doubled under Hurd’s leadership.

JON C. OGG

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