Hewlett-Packard Co.'s board shakeup, including Ray Lane's exitas chairman, gives Chief Executive Officer Meg Whitman a clearerpath to revive growth and shake off years of tumult at the world'slargest computer maker.

A former president of Oracle Corp., Lane failed to use hisextensive experience in enterprise computing to helpHewlett-Packard's turnaround, and his public gaffes — includingbeing photographed using an Apple Inc. computer — also sometimesserved as an embarrassment to the company.

Lane, 66, instead bore the stain of the disastrous 11-monthtenure of former CEO Leo Apotheker and the company's acquisition ofsoftware maker Autonomy Corp., which led to an $8.8 billionwritedown and accusations of accounting fraud. To build on themomentum that Whitman has begun to show, the board is seeking a newchairman with global experience and who can devote more time andenergy to revival efforts, Pat Russo, a company director, said inan e-mailed statement. Until then, Ralph Whitworth will serve asinterim chairman.

“Somebody has to be symbolically accountable,” said JeffreySonnenfeld, a management professor at Yale University in New Haven,Connecticut. “The hope is that it puts this behind them so itdoesn't become a governance sideshow.”

In addition to Lane's exit, directors G. Kennedy Thompson andJohn Hammergren are departing, Palo Alto, California-basedHewlett-Packard said yesterday in a statement. Lane “decided tostep down,” Whitworth wrote in a blog posting.

Lane and Whitworth didn't respond to requests via telephone ande-mail for comment.

Lane, a distinguished-looking, gray-haired elder statesman ofSilicon Valley, is known as something of enterprise computing's Mr.Fixit. He helped repair Oracle's relationships with its customersin the early '90s and disciplined the company's freewheeling salesculture during his seven-year tenure there. He then stepped inalongside Apotheker after the departure of CEO Mark Hurd, who leftin August 2010 after the board said Hurd violated Hewlett-Packard'scode of business ethics.

Lane and Apotheker weren't able to make a transition from thelower-profit personal computers and other hardware the companytraditionally sold, to more lucrative software, despite a mandateto expand in that area.

Lane is giving up his chairmanship two weeks after investorsre-elected him in a narrow majority of votes, issuing a rebuke ofhis oversight of the botched Autonomy acquisition.

“It's not typical to get a withhold vote, and if you do you'dusually resign,” said Charles Elson, director of the John L.Weinberg Center for Corporate Governance at the University ofDelaware. “Lane deserves credit for stepping down. If he'd stayedon he'd become the issue.”

Stepping Down

After the March 20 vote, during the company's annual shareholdermeeting at the Computer History Museum in Silicon Valley, Lanebelieved he wasn't given sufficient credit for remaking thecompany's board and ousting Apotheker, a person familiar with histhinking said. Shareholder unrest was also making it difficult forHewlett-Packard to attract additional, high-quality directors toits board, this person said.

The second board overhaul in two years underscores shareholders'dissatisfaction with the company's performance and the takeover ofAutonomy. The writedown of Autonomy in November capped three yearsof management upheaval, strategy shifts and slowing growth thathammered the shares and complicated Whitman's turnaroundefforts.

“Lane is clearly the fall guy for the botched Autonomyacquisition,” said Bill Kreher, an analyst at Edward Jones &Co. who rates Hewlett-Packard a sell. “When he was announced as thechairman, we were pleased with that decision, but at this time it'sin the best interest of the company to move on.”

Hewlett-Packard and its investors looked to Lane — a former No.2 at Oracle with deep roots in enterprise technology and venturecapital — to bring stability and help navigate a transformationaway from personal computers into products and services forcorporate customers.

His reign instead came to be associated with the ill-fatedtenure of Apotheker, who was ousted after 11 months on the job;strategy shifts, such as a flip-flop over whether to sell the PCdivision; and acquisitions, including Autonomy, that did little torevamp Hewlett-Packard.

“It's the right thing, even if a little late,” said Erik Gordon,a professor at the Ross School of Business at the University ofMichigan. Lane “was just barely re-elected to the board and waschairman during HP's most horrible years. His legendary statusdidn't do anything for HP.”

Dismay with Lane came to a head in March when he, along withThompson and Hammergren, were re-elected in slim majorities atHewlett-Packard's annual shareholder meeting.

Board 'Evolution'

Lane, who will remain on the board, received significantly morecompensation in Hewlett-Packard shares than other directors duringhis tenure. In fiscal 2011, Lane received a special equity award of1 million shares in connection with his appointment as executivechairman, in lieu of the equity retainer of $175,000 that otherdirectors received.

Hammergren and Thompson's tenure will end after a board meetingscheduled for May, and the board has begun a search for newdirectors, Hewlett-Packard said.

“In the coming months you will see further evolution of ourboard,” Whitworth wrote in the blog entry posted on the “HP Next” website set up to chronicleturnaround efforts. “We will recruit a world-class chairman to takemy place as soon as possible, and we also hope to recruit at leasttwo other outstanding directors before the end of this year. Whilesooner is better, rest assured we will not allow the rush of timeto compromise our focus on recruiting the best of the best.”

In the run-up to the annual meeting, shareholder advisers hadsaid that board failed to properly vet the acquisition of Autonomy,and recommended that investors vote against Lane and some othermembers of the 11-person body. Lane garnered 59 percent of votescast, while director Thompson received 55 percent support andHammergren received 54 percent. Last year, all three were backed byat least 80 percent of the vote.

“Each one of our directors considered the results of our recentshareholder meeting and made the personal decision to do what theyfelt was best for HP,” Whitworth wrote. “They, like all of us, arepassionate about moving beyond the challenges of the past few yearsso we can focus solely on supporting the HP team as Meg leads usthrough this Herculean turnaround.”

Revival Efforts

Institutional Shareholder Services Inc. and Glass Lewis &Co. had faulted the board for the Autonomy writedown, whichfollowed the discovery of accounting improprieties, and fordepleting the stock's value through years of mismanagement. ISS hadrecommended investors vote against Chairman Lane and long- servingdirectors Hammergren and Thompson.

Glass Lewis also urged shareholders to remove Hammergren andThompson, as well as venture-capital investor Marc Andreessen andlead independent director Rajiv Gupta.

With Lane stepping down as chairman, Hewlett-Packard said therole of lead independent director is no longer necessary. Gupta,who held that position, will remain on the board and succeedThompson as the chairman of the audit committee, the companysaid.

Director Gary Reiner will replace Gupta as chairman of thenominating and governance committee. After Hammergren's departure,Whitworth will chair the finance and investment committee.

While Hewlett-Packard shares have rallied 56 percent this yearamid tentative signs that Whitman is making headway in her effortsto reignite growth, the stock has nevertheless lost half its valuesince the departure of Hurd. Hewlett-Packard rose 1.8 percent to$22.30 at yesterday's close in New York.

The company has shown progress under Whitman, Hewlett-Packard'sfourth CEO in three years. It forecast fiscal second-quarter profitin February that topped analysts' estimates amid cost cutting andrebounding demand for enterprise services.

“The company is on a great track,” Sonnenfeld said. “Meg has avery good plan.”

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