HP Names Activist Whitworth to Board

By Jeffrey McCracken - Nov 18, 2011 5:16 AM GMT+0700
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Hewlett-Packard Co., the largest computer maker, appointed activist shareholder Ralph Whitworth to its board after he accumulated an almost 1 percent stake, two people with knowledge of the matter said. Photographer: Adam Berry/Bloomberg

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Ralph Whitworth, principal of Relational Investors. Photographer: Jay Mallin/Bloomberg

Hewlett-Packard Co. (HPQ), the largest computer maker, appointed activist shareholder Ralph Whitworth to its board to help shore up investor confidence shaken by strategy shifts and slashed sales forecasts.

Whitworth’s Relational Investors LLC held about 17.5 million Hewlett-Packard shares as of Sept. 30, regulatory filings show. Whitworth is joining the board’s compensation committee and its finance and investment committee, Hewlett- Packard said today in a statement.

Hewlett-Packard is bolstering oversight to assuage shareholders who unloaded stock amid a growth slowdown in the months before Chief Executive Officer Meg Whitman was named successor to Leo Apotheker. Whitworth, whose firm oversees $6.5 billion, 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)

“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 $27.65 in late trading after Bloomberg reported Whitworth’s appointment. It had slipped 64 cents to $27.29 as of 4 p.m. New York time.

Buybacks, Dividends

Relational, based in San Diego, began accumulating its stake in late August, according to a person with knowledge of the transactions. That came after Hewlett-Packard announced plans to buy Autonomy Corp. for $10.3 billion and said it may 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. While Whitworth did not threaten a proxy contest aimed at gaining a board seat, he told the company he’d bring credibility and focus Hewlett-Packard on using its cash to buy back shares, increase its dividend or put more money into research and development, this 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 unraveling 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

Whitworth’s 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 on 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