HP CEO Mark Hurd resigns after sexual-harassment probe

Hewlett-Packard said Friday that CEO Mark Hurd is stepping down following a sexual-harassment probe that found other violations of company standards.

The abrupt resignation shocked Silicon Valley and could sidetrack the tech powerhouse's recent resurgence.

HP, the world's No. 1 PC maker and printer company, says Hurd, 53, resigned after the investigation into a sexual-harassment claim against him and the company by a former HP contractor. The probe concluded the company's sexual-harassment policy was not violated, but its standards of business conduct were.

During the investigation, Hurd said he "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," according to a statement released by HP after the markets closed. Hurd said he believed it would be "difficult to continue as an effective leader at HP."

Hurd submitted inaccurate expense reports connected to the contractor, according to HP.

Chief Financial Officer Cathie Lesjack, 51, was named interim CEO. Lesjak, a 24-year HP veteran, will continue as CFO.

An HP board committee, which includes Netscape co-founder Marc Andreessen, will search for a new CEO. Lesjak decided not to be considered for the job permanently, the company said.

The disclosure stunned HP followers, who lauded Hurd for his strong leadership since he replaced Carly Fiorina in 2005. It could also further tarnish the once-sterling reputation of HP (HPQ), which raked in $114.6 billion in revenue in its last fiscal year and employs 300,000 people worldwide.

Hurd's departure is the latest scandal to rock one of Silicon Valley's venerable companies — one whose upstanding manner of business was known as "The HP Way."

In recent years, however, it endured a public shareholder battle over its controversial acquisition of Compaq Computer. Fiorina, now a candidate for U.S. Senate from California, was ousted by the board in 2005. And the company was caught spying on reporters and board members — a lapse in judgment that sparked a Congressional investigation.

Hurd, a low-profile executive hired to right the company, earned kudos for his strong leadership succeeding Fiorina. During his tenure, the company's stock more than doubled, to $46.30. HP shares tumbled 10% in after-hours trading Friday, to $41.70.

But some analysts now wonder if Hurd's personal conduct not only tarnishes HP's once-stellar reputation but sidetracks its turnaround and calls into question some of Hurd's business decisions.

"HP needed this like a hole in the head," says technology consultant Lou Mazzucchelli. "The real losers are HP's employees, customers and shareholders. These groups always pay a price for shenanigans at the top."

Whether that punctures HP's bottom line is another matter, says Martin Reynolds, an analyst at market researcher Gartner. "Customers care more about the quality of a company's products than the personal behavior of its executives," he says. In a conference call with analysts Friday, HP insisted Hurd's departure had nothing to do with the company's financial health.

Indeed, the company on Friday issued preliminary results for its fiscal third quarter, which came in slightly above analyst expectations. The company is scheduled to announce third-quarter results Aug. 19.

"I've never been more confident in the company's future," Lesjak said in a conference call Friday. "We have a solid, long-term strategy that is unchanged."

"HP is not about any one person," Andreessen said on the same call.

In reporting its preliminary financial results, HP said Friday that it earned 75 cents a share during the period, compared with 67 cents a share in the quarter a year ago. When excluding one-time items, the company earned $1.08 a share. Analysts polled by Thomson Reuters expected adjusted earnings of $1.07 a share.

HP said its revenue rose 11% from last year to $30.7 billion; analysts were looking for $30 billion in revenue.

HP gave outlook for its fiscal fourth quarter as well. The company forecast earnings of $1.03 to $1.05 per share, or $1.25 to $1.27 per share after excluding one-time items. Analysts were hoping for adjusted earnings of $1.26 per share. HP expects $32.5 billion to $32.7 billion in revenue, in line with analysts' expectations of $32.6 billion.

Woman in HP scandal ‘surprised and saddened’
Says intention of sexual harassment claim wasn't to cost CEO

The woman at the center of the sexual harassment claim that forced the resignation of Hewlett-Packard Co. CEO Mark Hurd revealed her identity over the weekend and said she is "surprised and saddened" that Hurd lost his job.

Jodie Fisher, 50, an actress and businesswoman, knew Hurd through her contract jobs with HP's marketing department from 2007 to 2009. HP paid her up to $5,000 per event to greet people and make introductions among executives attending HP events that she helped organize.

Fisher echoed Hurd's statement that the two never had a sexual relationship, but neither she nor her lawyer, celebrity attorney Gloria Allred, would discuss details of the harassment claim.

That claim set off the chain of events that led to the discovery of allegedly falsified expense reports for dinners Hurd had with Fisher and ended in Hurd's forced resignation Friday from the world's largest technology company.

Fisher acknowledged that she and Hurd have settled the matter. A person familiar with the case told The Associated Press that Hurd agreed to pay Fisher but would not reveal the size of the payment.

"I was surprised and saddened that Mark Hurd lost his job over this," Fisher said in a statement. "That was never my intention."

Allred, said Fisher is a single mother who is "focused on raising her young son."

Fisher has also worked as a saleswoman, an executive at a commercial real estate company, and as an actress. She appeared in some racy R-rated movies in her 30s and most recently was on a dating show called "Age of Love," in which women competed for the attention of tennis star Mark Philippoussis.

Hurd settled with Fisher on Thursday, a day before he resigned. The settlement did not involve a payment from HP, the person close to the case said.

This person, who spoke on a condition of anonymity, was not authorized to speak publicly about the issue.

The investigation by HP's board of directors found that Hurd listed other people as his dinner partners on expense reports when he'd been out with Fisher. HP also claimed Hurd arranged for her to be paid for work she didn't do.

There was only one instance in which that occurred, the person close to the case said, but it was for an event that was canceled at the last minute and that Fisher's contract required that she would be paid unless an event was canceled 30 days in advance.

The amount of money in question wasn't known.

Hurd, 53, insists they were legitimate business expenses. Hurd says the errors in the reports may have been entered unwittingly by an assistant, according to the person close to the case.

The company determined Hurd didn't violate its sexual harassment policy but broke its rules of conduct and irreparably harmed his credibility and integrity.

Interim CEO Cathie Lesjak said during a conference call with reporters Sunday that investors and big customers she has spoken with have been "extremely supportive."

"They respect how we dealt with the situation with transparency and speed. The bottom line is, the HP brand is strong," she said. Under Hurd, HP spent more than $20 billion on acquisitions to transform itself from a computer and printer maker dependent on ink sales for profits to a well-rounded seller of hardware and lucrative business services.

Hurd, who spent 25 years at ATM maker NCR Corp. before coming to HP in April 2005, became a Wall Street darling. HP's market value nearly doubled during his five years.

HP’s share price fell sharply Monday from its NYSE close of $46.30 on Friday. The company’s shares had fallen 10 percent in extended trade on Friday after HP said an investigation found that Hurd had falsified expense reports to conceal a relationship with a female contractor.