The Network Hub

Aug 6 2010   4:39PM GMT

HP loses its CEO in a scandal just as networking business is poised for war

Shamus McGillicuddy Shamus McGillicuddy Profile: Shamus McGillicuddy

Yikes, multiple publications, including BusinessWeek, are reporting that HP CEO Mark Hurd has abruptly resigned following an internal investigation into whether he had violated the company’s sexual-harassment policy. Hurd (Update: Hurd’s bio has been scrubbed from HP.com. Now he’s on a page which lists former HP CEOs) was reportedly cleared in the sexual harassment allegation but had violated a personal conduct policy.

HP’s CFO Cathie Lesjak will act as CEO on an interim basis while the company looks for a replacement.

I’m not going to bother looking into the details of what Hurd allegedly did. He’s gone now. And that’s huge. This is one of the biggest technology companies in the world. It is poised to compete for a huge share of the networking market. And suddenly the CEO who is credited with turning HP around after some years of struggle under mediocre leadership (*cough* Carly Fiorina *cough*) is gone.

What happens now?

HP ProCurve has long been a niche, low-cost networking vendor popular among small and midsized businesses and enterprise campus networks. Under Hurd’s leadership, the ProCurve business became the number two enterprise networking vendor, and took an even bigger leap forward earlier this year when it closed a deal to acquire 3Com and its promising H3C networking and TippingPoint network security brands.

Now Hurd is gone. There is no way of knowing what direction a new CEO would take the company. It’s probably safe to say HP’s board of directors will expects a new CEO to maintain a commitment to networking, given the sizable investment HP made in 3Com. HP has a lot of momentum in that area, but will we see some shifts in strategy under new leadership? Who knows?

It will be important to watch how other key HP executives respond to this scandal. Senior Vice President Marius Haas, general manager of HP Networking, has been widely credited with the rise of HP’s networking business. Above him is Executive Vice President Dave Donatelli, general manager of HP’s Enterprise Servers, Storage and Networking. If either of those guys jump ship, take note.

Also, HP is a public company. When a public company has a leadership shakeup in the midst of a run of success, Wall Street balks. If the stock price stumbles badly, HP’s leadership may be forced to make some short-range scrambling in response.

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