SAN FRANCISCO (Reuters) – Hewlett-Packard Co named Leo Apotheker, the former head of German software company SAP, its new chief executive in a surprise appointment.
Hewlett-Packard's shares dropped 3 percent in after-hours trading.
The recruitment of the long-time software industry veteran and Silicon Valley outsider -- who left SAP abruptly after just seven months at the helm amid a wave of customer complaints -- disappointed some who worried about his ability to steer a diverse, $130 billion hardware and services company.
Apotheker, a multi-lingual salesman schooled in economics and international relations, succeeds Mark Hurd, who quit amid a scandal involving a female contractor. Apotheker also was named to HP's board.
Ray Lane, a well-known venture capitalist and former top executive at software giant Oracle Corp, will fill the chairman's post that Hurd also had occupied.
The top job at HP offers a unique opportunity to lead a technology icon but comes with big challenges and expectations. Unlike in 2005, when Hurd took over an HP in disarray, Apotheker will be at the helm of a well-run company whose investors will not be sated with another round of cost cuts.
HP said Apotheker helped transform research and development at SAP, while driving expansion.
In an interview with Reuters, Apotheker said he would focus on innovation and growth. He acknowledged the challenge of HP's size and complexity, but underscored the company's "deep and talented" management team.
Apotheker -- who helped steer the first major round of job cuts at SAP -- said under his stewardship HP would not relent in its efforts to drive efficiency.
"You're never done with efficiency, and at HP we'll continue to drive efficiency," he said. "However, we will also want to continue to have a real focus on growth. So we'll do both." For a closer look at Apotheker:
But Fort Pitt Capital analyst Kim Caughey expressed doubt about Apotheker moving from a software company to HP, a behemoth with more than 300,000 employees and a commanding presence in the personal computer, server, IT services and printer markets.
"SAP is a very different sort of company than HP, and that is my biggest concern," Caughey said. "The scope of SAP is very different, as are the customers. What does he know about hardware? That's the question."
Wedbush Securities analyst Kaushik Roy said, "He can be an agent of change. Investors were focused on 'how do you bring back R&D, how do you bring back innovation?'"
The appointment of an outsider -- the third straight external hire after Carly Fiorina and Hurd -- surprised some observers who had bet on a promotion from within.
Many had expected Todd Bradley, PC division chief, or Ann Livermore, who heads its enterprise arm, to take on the role. Cathie Lesjak, who had served as interim CEO, remains CFO.
However, a source familiar with the matter has said some on the board were concerned about Bradley's strategic vision and that Hurd had been a major supporter of his.
HP's board cast a wide net in search of a new CEO, reaching out to two senior IBM executives, who quickly declined to pursue the position, according to two sources.
Apotheker had spent more than two decades at SAP. He was named SAP co-chief executive in April 2008, and became its sole leader in July 2009.
His tenure was marked by criticism of SAP's lack of direction, and customers raged when SAP instituted its first maintenance fee increases in a decade. During his term, SAP made its first-ever major round of job cuts.
"Leo is a very bright guy. He has a bad rap because he got handed the wheel of the Titanic five minutes after it hit the iceberg," said Peter Goldmacher at Cowen and Co.
HP's board named Lane as non-executive chairman -- marking the separation of the chairman and CEO roles. Lane is managing partner at venture capital firm Kleiner Perkins Caufield & Byers, and previously served as president and chief operating officer at Oracle.
Both appointments are effective November 1, and come nearly two months after the controversial August 6 departure of Hurd, which sent shock waves through Silicon Valley and upset investors who credited him with turning the company around.
Hurd may be a tough act to follow. He transformed the company into a diversified IT powerhouse, the largest technology company in the world on a revenue basis.
"The investment community wanted an outsider to be named CEO," said Gleacher & Co analyst Brian Marshall. "They view HP internally as a little bit dysfunctional in terms of all the issues they had in senior management in the last couple of years."
Analysts said Apotheker and Lane could serve to deepen its growing rivalry with Oracle, which is a bitter rival of SAP's.
Oracle CEO Larry Ellison lashed out at HP over Hurd's departure, and then hired him as president, drawing HP's wrath. The companies have publicly reconciled.
SAP co-CEO Bill McDermott called Apotheker's hiring "great news. ... This move only sets the stage for an even deeper relationship between our two companies."
HP shares fell 3 percent to $40.80 in extended trading, after closing at $42.07 on the New York Stock Exchange.
(Editing by Edwin Chan, Robert MacMillan, Steve Orlofsky, Richard Chang and Carol Bishopric)
NEW YORK (Reuters) – The economic recovery remains disappointingly slow with unemployment too high, two top Federal Reserve officials said on Thursday, as they discussed the role of the U.S. central bank in spurring a stronger economy.
Federal Reserve Chairman Ben Bernanke, in remarks at a town hall event held by the Fed, commented on the pain still felt by many Americans, but spoke only in generalities about the Fed's commitment to stimulate growth.
The president of the Cleveland Fed, Sandra Pianalto, said growth is currently too slow to significantly reduce the "stubbornly high" unemployment rate. She said she is currently assessing the effectiveness of the tools that the central bank could employ if the Fed were to decide the economic recovery needs an extra boost.
"Even though our economy is stabilized and growing, clearly it is still a very difficult time for many Americans," Bernanke said.
"The unemployment rate is still almost 10 percent, inflation is quite low, and the Federal Reserve has the responsibility ... to do our part to help the economy recover and make sure that jobs come back to the United States," he said.
Pianalto, who addressed an event in New York, in addition to highlighting the high unemployment rate, said inflation was "too low."
She said inflation is below the 2 percent level that she sees as consistent with the Fed's longer-term objective of price stability, and said it is likely to stay low through 2011.
Low inflation is considered a concern, because it could run the risk of tipping into deflation, a vicious cycle of downward prices and slowing economic activity.
Pianalto said the Fed has options if it decides a further boost to the economy is needed.
Pianalto, who is a voter on the Fed's policy-setting panel this year, said that because a stronger economy is a solution to the unemployment problem, policies should aim to support growth. But growth is currently too slow to make much progress in reducing the jobless rate, she said.
The Fed, which has kept interest rates near zero percent since December 2008. recently said it stands ready to help the recovery if necessary. It has promised to keep interest rates exceptionally low for an extended period and has pumped $1.7 trillion into the financial system through purchases of longer-term Treasury securities and mortgage-related debt.
With economic growth expected to be weak in the second half of 2010 and unemployment high, most analysts expect the Fed to start a new round of bond purchases, or quantitative easing, when it meets in early November.
Fed officials in recent days, however, have offered divided views over what should be the catalyst for the U.S. central bank to provide more support to the economy and over the likely impact more asset purchases could have.
Pianalto said she was currently assessing the effectiveness of the tools available to the Fed, which apart from buying more longer-term bonds include strengthening its commitment to easy policy in its policy statement and lowering the interest it pays on excess reserves.
"Because we have less experience in using these unconventional tools, we have to look at the cost and benefits ... at the effectiveness," she told the Women's Economic Round Table.
"That's what I am in the process of doing with my staff. We are trying to get more information on the effectiveness of these tools."
Bernanke fielded questions by video from teachers in each of the Fed's 12 districts. While he did not go into detail about the outlook for the economy or Fed policy, his remarks conveyed concern for the sluggish pace of recovery and a sense the Fed should be active.
Bernanke said it was not uncommon for a recovery following a financial crisis to be slow. Consumers may pull back from spending as they cope with lost wealth or to reduce debt, but growth may come from business investments and exports, he said.
"The economy is moving, perhaps not as quickly as we would like, and we want to make sure that progress continues," he said.
(Additional reporting by Mark Felsenthal in Washington; Editing by Leslie Adler)
TREVOSE, Pa. – General Electric Co. is launching a mobile device aimed at helping natural gas drillers recycle water used in a controversial gas drilling process known as hydraulic fracturing. The truck-sized, transportable device would cut down on both the amount of fresh water used and wastewater currently trucked long distances for disposal.
The company's mobile evaporator would allow natural gas producers to reuse some of the millions of gallons of water used to extract natural gas from dense shale deposits deep underground through the so-called "fracking" process. Water is mixed with chemicals and sand and pumped at high pressure thousands of feet below the surface to create fissures in the rock and release the gas.
Fracking uses a large amount of fresh water and produces billions of gallons of wastewater annually, GE said. The company says its mobile evaporator will cut the volume of wastewater and fresh water needed by between 50 percent and 90 percent by recycling water directly at the well site. That will also lower producers' transportation and disposal costs.
The machine boils the used water, turning it into steam which then condenses into distilled water. That water can be reused for fracking and results in a much smaller volume of contaminated water for disposal.
GE's mobile evaporator, which will be available early next year, is expected to be used in regions such as North America, Europe, China and Indonesia. One of the first markets expected to use the device is the gas-rich Marcellus Shale, located in the Northeast U.S. The company's competitor in the market is Aquatech International Corp., based in Canonsburg, Pa.
The emergence of shale gas as a dependable, long-term source of natural gas has sparked a drilling frenzy in many U.S. states. But many people are concerned that their water wells are being contaminated by the process. Lawsuits have been filed and the Department of Environmental Protection has asked nine natural gas companies to voluntarily disclose the chemical components used in fracking as it studies whether the drilling practice affects drinking water and the public health.
The oil and gas industry maintains that hydraulic fracturing has been used safely for decades and that there has never been a proven case of groundwater contamination caused by fracking.
Shares of Fairfield, Conn.-based GE fell 11 cents to close at $16.25.