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New H-P Chief Experienced With Board Feuds

By John Letzing SAN FRANCISCO--Leo Apotheker knows something about tumultuous relationships with corporate boards, which may serve him well at his new job in the top slot at Hewlett-Packard. Late last year, a private letter from then-SAP (SAP) AG Chief Executive Apotheker to the chief executive of rival Oracle Corp. was leaked to the press. The letter noted Oracle's difficulties in clearing its purchase of Sun Microsystems with European antitrust regulators, while renewing an invitation to resolve unrelated, "open issues" between the companies. Many saw the letter as a bid to settle an ongoing lawsuit filed by Oracle (ORCL) against SAP years earlier alleging corporate theft, in exchange for assistance clearing the Sun deal. SAP strongly denied those suggestions, though the episode proved thoroughly embarrassing. Roughly three months later, SAP surprised investors and analysts by announcing the departure of Apotheker, a more than 20-year veteran of the company, after its board declined to renew his contract. "It was a total mess," said Cowen & Co. analyst Peter Goldmacher. Now Apotheker is in a prime position to take on Oracle once again, as the newly-appointed chief executive at Hewlett-Packard Co. (HPQ) H-P announced Apotheker's hiring after the market's close on Thursday. The appointment of a career man from a German software firm to run a Silicon Valley icon has raised some eyebrows. But Apotheker's makeup may be a solid match for a company in need of bolstering its presence in the market for complex technology needed by businesses to process data, experts say. Apotheker's ugly departure from SAP was likely the result of differences with company co-founder and Supervisory Board Chairman Hasso Plattner, said Goldmacher. That, the analyst said, resulted from contrasting visions over how best to right the wavering software giant. Apotheker had been appointed sole chief executive of the company only about seven months before he stepped aside. "You've got a guy who was basically given the steering wheel when the car was already in the air, heading into a ditch," Goldmacher said. "The strategy and direction of the company were still very much run by Hasso." SAP was in the midst of trying to alter its strategy, with a new focus on small and medium-sized firms. The Walldorf, Germany-based company was struggling to release its "Business ByDesign" software, designed to be hosted and delivered via the Internet; and while Oracle was gaining ground through a series of large acquisitions, SAP was drawing some criticism for mostly relying on internal growth. An SAP spokesman declined to comment on Apotheker's relationship with Plattner. But the spokesman did provide a statement from current SAP co-Chief Executive Bill McDermott: "I personally congratulate Leo on this tremendous appointment," McDermott said, "H-P is a great SAP customer, and this move only sets the stage for an even deeper relationship." Though Apotheker did not take the helm as sole chief executive at SAP until 2008, he'd long been seen as a potential top executive. He had reportedly been a finalist for the top job at software maker CA Inc. (CA), for example, before International Business Machines Corp.'s (IBM) John Swainson was named to the position in 2004. Targeting Oracle For H-P, Apotheker's appointment as chief executive means the company now has a "hard-driving" executive at its helm, who is well-equipped to drive H-P's business in competition with traditional SAP rival Oracle, Goldmacher said. Oracle has become more of a threat to H-P of late, as it has expanded beyond database and applications software, and moved into developing both the software and hardware needed to run large businesses. "This is critical, because Oracle continues to make H-P less and less relevant," Goldmacher said of Apotheker's appointment. One way that Apotheker may make his mark at H-P would be by pursuing a more aggressive and fine-tuned acquisition strategy, experts say. "H-P needs to make acquisitions in software to take it to the next level," said Altimeter Group LLC analyst Ray Wang. "Despite Leo's acerbic style and approach, he may be the right person to kick H-P up a notch and gain the software and services footing it sorely needs." One immediate possible acquisition target for H-P, according to Wang: on-demand customer-relationship management software provider Inc. (CRM). Past feud Apotheker comes from a sales background at SAP, which he first joined in 1988. In addition to chief executive, he had served as co-chief executive, head of North American operations, and chief executive of SAP France. His leaked letter to Oracle Chief Executive Larry Ellison came at a point late last year when Oracle's purchase of Sun was being held up by the European Commission, due to concerns about the future of Sun's MySQL database software. Oracle's ultimately successful purchase of Sun put it on track to better compete with giants including IBM and H-P. It also came after years of competition and feuding between SAP and Oracle. In 2007, Oracle filed a high-profile lawsuit against SAP, alleging massive theft by SAP unit TomorrowNow of Oracle's customer support materials. Last month, SAP accepted liability in the TomorrowNow case, though it also said it will "continue to present arguments and evidence demonstrating that Oracle's damages claims in this matter are vastly overstated." -John Letzing; 415-439-6400;

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