By Jeffrey McCracken - Nov 18, 2011 12:01 PM GMT+0700
Hewlett-Packard Co. (HPQ), the largest computer maker, is adding activist shareholder Ralph Whitworth to its board to help shore up investor confidence shaken by strategy shifts and slashed sales forecasts.
Whitworth, whose Relational Investors LLC held about 17.5 million Hewlett-Packard shares as of Sept. 30, is joining the board’s compensation committee and its finance and investment committee, Hewlett-Packard said in a statement yesterday.
Hewlett-Packard aims to assuage investors who sold stock amid a growth slowdown in the months before Meg Whitman replaced Leo Apotheker as chief executive officer. Whitworth, whose firm oversees $6.5 billion, told management his appointment would burnish credibility and that he’d press for share buybacks, higher dividends or more investment in research and development, a person with knowledge of the talks said.
“It’s definitely a positive development for the company,” said Brian Marshall, an analyst at ISI Group in San Francisco. “The board needs help, and Ralph has the background to help them.”
Hewlett-Packard, based in Palo Alto, California, also appointed Rajiv Gupta as lead independent director. Whitworth brings the total number of board members to 14.
Hewlett-Packard climbed to $27.81 in late trading yesterday after Bloomberg reported Whitworth’s appointment. It had slipped 64 cents to $27.29 at 4 p.m. New York time.
Buybacks, Dividends
Whitworth, 56, has used his shareholdings to agitate for change at other companies, including industrial conglomerate ITT Corp. (ITT) and defense contractor L-3 Communications Holdings Inc. (LLL)
Relational, based in San Diego, began accumulating its stake in late August, according to the person with knowledge of the transactions. That came after Hewlett-Packard announced plans to buy Autonomy Corp. for $10.3 billion and said it might spin off the personal-computer division. Investors said Hewlett- Packard overpaid for Autonomy and that the proposed spinoff was ill conceived. The firm kept buying shares through September, this person said. Whitman was appointed on Sept. 22.
Whitworth contacted Whitman and Executive Chairman Ray Lane in early October, the person said. After a few weeks of conversation, the company agreed to put Whitworth on the board, this person said.
Whitman, former CEO of online commerce pioneer EBay Inc. (EBAY), has already begun reversing strategies pursued by her predecessor. Last month, she abandoned a proposal to spin off the company’s market-leading PC unit and she shares management responsibilities with Lane.
ITT, L-3
Relational pushed for changes at industrial products maker ITT and L-3 Communications before those companies announced spinoffs this year. Last year, Whitworth was elected to the board of Genzyme Corp., which in February agreed to a sale to Sanofi-Aventis SA after a nine-month pursuit.
Whitworth served as chairman of Waste Management Inc. (WM) from 1999 to 2004, overseeing a turnaround at the company after it settled lawsuits alleging former executives overstated earnings. He also led an effort at Tyco International Ltd. (TYC) to oust directors who served under former CEO Dennis Kozlowski, and sat on the board of Apria HealthCare Group Inc., which was acquired by Blackstone Group LP (BX) in a 2008 buyout.
Whitworth and David Batchelder founded Relational in 1996 with an initial allocation of $200 million from the California Public Employees’ Retirement System, the nation’s largest public pension fund. The two had previously worked for billionaire oil executive T. Boone Pickens.
To contact the reporter on this story: Jeffrey McCracken in New York at jmccracken3@bloomberg.net
To contact the editors responsible for this story: Jennifer Sondag at jsondag@bloomberg.net; Tom Giles at tgiles5@bloomberg.net
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