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As new chairman, Ray Lane brings changes to HP [San Jose Mercury News, Calif.]
[February 13, 2011]

As new chairman, Ray Lane brings changes to HP [San Jose Mercury News, Calif.]


(San Jose Mercury News (CA) Via Acquire Media NewsEdge) Feb. 13--In just four months since Ray Lane joined the Hewlett-Packard board of directors, the longtime Silicon Valley insider has carved out a much bigger role than his official title of "non-executive chairman" might imply.



Lane, who helped steer the giant software-maker Oracle out of a financial crisis in the 1990s, has already presided over a major shake-up of HP directors, in the wake of last summer's controversial ouster of former CEO Mark Hurd.

And in an interview last week, Lane said he intends further changes to help Palo Alto-based HP move ahead, as the world's largest tech company enters what investors hope will be a new era after a series of scandals that rocked HP over the past 10 years.


"This was my job. I have to take full responsibility for leading this," Lane said of the board changes announced last month, although he stressed that directors agreed unanimously to bring on a majority of new members, after hiring European software executive Leo Apotheker as the company's new CEO last fall.

Among his goals, Lane said, are improving HP's ability to groom future CEOs within its own ranks, while avoiding the kind of boardroom drama that marked Hurd's departure. He also said he wants the board to provide Apotheker with "the right resources" to confront rapidly changing tech markets around the world.

Analysts say they are not surprised Lane wants to make changes.

"For all that Leo is the CEO, I think Ray will be very active," said Kaushik Roy, an analyst at Wedbush Securities. "Now he has to prove that the changes he's making can help take HP to the next level." The 64-year-old Lane is known both for his plain-spoken demeanor and a vast network of industry contacts. A former manager at IBM and EDS, he was working for the Booz Allen consulting firm when Oracle founder Larry Ellison hired him in 1992, after financial problems prompted that company's stock to plunge.

Though he's widely credited with reorganizing a chaotic operation, rebuilding credibility and overseeing significant growth, Lane resigned as Oracle's president when he and Ellison had a falling-out in 2000. He is now a managing partner at one of the valley's best-known venture capital firms, Kleiner Perkins Caufield & Byers, where he focuses on green tech and other startups.

In a lengthy conversation with the Mercury News, Lane stressed that Apotheker is responsible for developing and executing HP's business strategy, while describing his own role as an adviser to the CEO.

Apotheker, whose appointment was announced at the same time as Lane's, has kept a relatively low profile while meeting with customers and employees in his first months on the job. Apotheker has scheduled a "summit" with reporters and analysts next month, when he is expected to lay out his plans for the company.

But Lane described several things he wants to accomplish at the board level. They include avoiding the kind of anonymous leaks that made headlines last summer, after HP directors forced Hurd to resign over his relationship with a female marketing contractor.

"I do believe we could have managed that better," he said. "We're happy to talk to the media and investors, but we're not going to show how the sausage is made." In addition, while Apotheker's hiring marks the third time in a dozen years that HP has chosen a CEO from outside the company, Lane said he wants the company to do a better job of grooming its own executives and planning for succession from within.

HP has talented senior managers, Lane said, but Hurd and the board had not done enough to prepare a potential successor. "That will change, and Leo agrees." Several observers said Lane is having an impact.

"Ray has already taken a giant step in transforming the board," said Tom Perkins, a former HP director and veteran tech investor who cofounded Kleiner Perkins.

"I think it will help to smooth the troubled waters down there," added Perkins, who was an HP director during an earlier period of turmoil. "That board has been pretty emotional for a long time." Hurd's sudden departure came after earlier controversies -- including a bitter public feud over HP's 2001 acquisition of Compaq, the ouster of former CEO Carly Fiorina in 2005, and a separate scandal over a misguided effort to stop board leaks in 2006 -- left many outsiders questioning the competence of HP's board.

After replacing Fiorina, Hurd recruited new directors to replace several who served during previous scandals. Hurd and Fiorina each served simultaneously as CEO and board chairman for most of their tenures.

But after Hurd's departure, directors opted to divide those jobs. Although many large corporations combine the two roles, governance experts say an independent chairman can provide better oversight over a CEO.

"I think separating the roles is healthy," Lane said. "The shareholders are better off when they're not dependent on a single personality." Even so, he described a close working relationship with Apotheker, whom he has known since Lane hired Apotheker as an Oracle consultant in the 1990s.

In the shake-up announced two weeks ago, Lane said he and Apotheker personally reached out to the candidates they wanted to join HP's board. Five new directors, including former candidate for governor and eBay chief executive Meg Whitman, are replacing four who will leave next month. All told, seven of 13 directors will have joined in recent months.

Lane said the new directors will provide fresh perspectives and a range of expertise in consumer and business technology, as well as overseas markets. Other sources said the departing directors included two who supported Hurd and two who oversaw the investigation that led to his ouster.

While some critics questioned whether the new members will be sufficiently independent, Wall Street generally welcomed the shake-up. "The composition of the new board brings a stronger balance of operations and visionary-focused executives," JP Morgan analyst Mark Moskowitz told investors.

Lane said the board's top priority will be supporting Apotheker, a former chief of the German software company SAP, in developing a strategy for HP to compete around the world.

While it is best known as the world's biggest seller of PCs and printers, HP draws more than half its revenue from selling tech products and services to big business customers. But it faces new challenges from rival giants, such as IBM, Oracle and Cisco, along with smaller companies that are developing new technology.

In comments that evoked a change from recent years, when Hurd was known for cutting HP's spending, Lane said the new board will give Apotheker "the right resources," including funding for both acquisitions and internal research and development.

Several analysts, citing Lane's experience at Oracle and Kleiner Perkins, said his knowledge of both the software industry and the fast-moving startup world should help HP expand in new tech markets.

But Lane said he won't meddle in HP's daily operations. "That's why we call it 'non-executive chairman,' " he said, vowing to spend most of his time at Kleiner Perkins. "I want to keep my day job." Contact Brandon Bailey at 408-920-5022; follow him at Twitter.com/BrandonBailey.

To see more of the San Jose Mercury News, or to subscribe to the newspaper, go to http://www.mercurynews.com.

Copyright (c) 2011, San Jose Mercury News, Calif.

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