had something to lose by joining another big hardware company.

62 Nell Minow, co-founder of The

Corporate Library, a corporate governance research firm, added her own thoughts. She said that the
HP board had "a worse record than a stopped clock/53

A Quick Settlement
On September 20, HP and Oracle announced that they had reached an agreement and HP
dropped the lawsuit. The parties declined to reveal details about the settlement but said Mr. Hurd
would protect HP 5 confidential information/'54 However, the media was skeptical, saying that Hurd
had spent the last five years "eating, drinking, and sleeping HP. (Well, except when he was eating
and drinking with Ms. Fisher.) HP is in his bones.65

As part of the agreement between HP and Oracle, Hurd modified his HP separation contract. He
relinquished 330,117 performance-based restricted stock units and 15,853 time-based restricted stock
units that he was originally owed.66 Cathie Lesjak, the interim HP CEO, said in a press release, Hurd
will adhere to his obligations to protect HPs confidential information while fulfilling his
responsibilities at Oracle. HP and Oracle have been important partners for more than 20 years and
are committedto working togetherto provide exceptionalproductsand servicesto our customers."67
(See Exhibit 9 for HP and Oracle's stock market performance between August 2010 and October
2010.)

New Leadership at HP

Then, on September 30, 2010, after an eight-week search, the board announced that Léo
Apotheker, former CEO of SAP, would succeed Hurd. This was the third consecutive time that the
HP board had chosen an external candidate over internal executives.68Apotheker, born and raised in
Germany and Belgium, had joined SAP in 1988. He was elected co-CEO of the company in 2008, and
became the sole CEO in May 2009. SAP, a German-based company, made software for managing
business processes. (See Exhibit 10 for other CEO candidates considered by the board, as reported by
the Wall Street journal.) After less than a year as CEO at SAP, however, Apotheker had stepped down
after employees and customers expressed dissatisfaction with his leadership. The SAP Supervisory
Board had decided not to renew his contract, which would expire at the end of 2010.69While he was
CEO, SAP recorded its first decrease in revenues since 2003. Its revenues dropped by approximately
12% between 2008 and 2009. Apotheker had cut costs and attempted to raise the prices of the
company 5 support services, which caused an outcry from customers and the eventual reduction of
prices.
 Apotheker would begin at HP on November 1, after moving from Paris, France, to Palo Alto,
California. This would be his first permanent stay in the United States. The media speculated that HP
chose Apotheker in order to revitalize the companys lackluster software business? It reported
that "HP needed to beef up its software business if it wanted to compete against IBM, Oracle, and
Cisco Systems as a one-stop IT shop/71 In addition, his background was primarily in sales, so he
could use his existing buyer relationships to benefit HP.- Apotheker, fluent in five languages, was
also brought on board to expand HPs global reach. In a conference call with analysts, he described
"
himself as a global citizen/'73

According to Apothekers compensation agreement, he would receive $1.2 million as a base

salary, a $4 million signing bonus, $4.6 million in relocation benefits, a one-year bonus of up to $6
million, approximately $6.3 million worth of restricted stock, and 728,000 performance-restricted
awards that would vest in three years.1 Apothekers pay package was much more generous than the
one previously awarded to Hurd.75

Ray Lane was elected non-executive chairman of the board when Apotheker was elected CEO.
Lane was a venture capitalist at Kleiner Perkins Caufield & Byers, and he had previously spent eight
years at Oracle, between 1992 and 2000, as president and chief operating officer.76 The press reported
that Lane had left Oracle because he had a poor working relationship with Ellison.77 Lanes Silicon
Valley experience would fill the notable gap in Apothekers resume.8 Analysts expected that HP
would continue to make acquisitions in order to transform itself into an IT services and software
provider,79 and with
Lanes experience, HP would be able to identify the most valuable start-up
technology companies.80

Once again, Ellison reacted publicly to HPs announcement by saying, Im speechless. HP had
several good internal candidates, but instead they picked a guy who was recently fired because he
did such a bad job of running SAP, which is an Oracle competitor in its businessapplication
programs. Ellison added, The HP board needs to resign en masse, right away. This madness must
stop.81
 Oracle and SAP

In November 2010, Apotheker was to be called as a witness in a lawsuit between Oracle and SAP.
An SAP subsidiary, TomorrowNow, had admitted to stealing Oracle's intellectual property in order
"
to win customers"; therefore, this matter was to settle the damages.82 TomorrowNow had offered
updates and support for some of Oracles products and Was closed by Apotheker in 2008.83

Joe Nocera, a New York Times reporter, criticized the board for having a double standard. He
remarked, Apotheker may not have been directly involved in this brazen theft of intellectual
property, but it defies belief to say he didnt know about it [because he was a member of the
executive board]. And he did nothing to stop it until it was far too late. Apparently, the HP directors
adhere to the highest ethical standards but only when its convenient/84

Meanwhile, Lane spoke out after Apotheker was added to the witness list. In his own letter to the
New York Times, he wrote, "Oracle had been litigating the case for years without offering any
evidence that Apotheker was involved. It didnt even deem him relevant enough to include him on a
List of Witnesses for trial until, that is, Apotheker was named CEO of HP and Oracle had other
motives to try to tie him to the case/35 (See Exhibit 11 for Lanes letter to the New York Times.)
 77 V
. li
Acqulred by HP Nature of Price Completed On
\
"w
, W l"? Services/Products

Electronic Data WW' . .

P rowderof globaltechnology $13mum August 2008
Systems l
1
services: infrastructure services
(networks, servers), software
applications,businessoutsourcing
{r
3Com Provider ofnetworking
switching. billion
$2.7
{ll routing, and solutions
April 201 0
security

Palm '
Providerof smartphonespoweredby $1.2billion July 2010
l the Palm webOS mobile operating
1! system

3Par Providerof systemsand softwarefor $2.35billion To be completed by

data storage and information the end of 2010
I
management
l
AVCSith r A security and compliance $1.5 billion To be completed by
company that provides the end of 2010
management
i an enterprise threat and risk
management solutions platform

Source: HP corporate newsroom

 Exhibit 5 HPs Business Segments in 2010

0 HP Enterprise Business: Services, Enterprise Storage and Servers (£58), and HP Software

0 Services infrastructuretechnologyoutsourcing,application services,business

provides
process outsourcmg, and technology services
. ESS provides industry standard servers, business critical systems, and storage

0 HP IT management
enterprise information
software, and
management
Softwareprovides
busmess intelligence solutions, and communications and media solutions

0 Personal Systems Group (PSG)

o Conunercial PCs, consumer PCs, workstations, handheld computing

0 Imaging and Printing Group (IPG)

o Inlq'etand Web solutions, and

LaserJet enterprisesolutions,
managedenterprisesolutions,
graphics solutions, printer supplies
I HP Financial Services

0 and
utilityprograms,
financing,
Leasing, asset as
services,
recovery wellas asset
financial
managementservicesfor large globaland enterprisecustomers

0 Corporate Investments

0 HP labs and businessincubation projects

Hewlett Packard in 2009

(in millions,exceptemployees)

Sales_ $114,552
NetIncome $7,660

TotalAssets $114,799
Value(10/1/2010)
Market $92,455

Employees 304,053
WWI-m
- r
 Exhibit 6 Larry Ellison's E-Mail to the New York Times, August 9, 2010

To the Editor:

The HP Board just made the worst personnel decision since the idiots on the Apple Board fired
Steve Jobs many years ago. That decision nearly destroyed Apple and would have if Steve hadnt
come back and saved them. HP had a long list of failed CEOs until they hired Mark who has spent
the last five years doing a brilliant job reviving HP to its former greatness.

In losing Mark Hurd, the HP board failed to act in the best interest of HPs employees,
shareholders, customers, and partners. The HP board admits that it fully investigated the sexual
harassment claims against Mark and found them to be utterly false. Nevertheless, the HP board then
voted 6 to 4 to go public with this sexual harassment claim against Mark because six of the directors
believed that full disclosure was good corporate governance. Publishing known false sexual
harassment claims is not good corporate governance; it's cowardly corporate political correctness.
Those six directors caused HP to lose a nearly irreplaceable CEO. Those six directors who voted
against Mark can try hard to hide behind a claim of good corporate governance but their decision
has already cost HP shareholders over $10 billion . . . and my guess [is] its going to cost them a lot
more.

The final insult was when the HP board [went] to the press and suggested that Mark Hurd
engaged in expense fraud over a few thousand dollars. This is not credible. Mark Hurd, like most
other CEOs, does not fill out his own expense reports, so even if errors were made Mark didn't make
them. What the expense fraud claims do reveal is an HP board desperately grasping at straws in
trying to publically [sic] explain the unexplainable; how a false sexual harassment claim and some
petty expense report errors led to the loss of one of Silicon Valleys best and most respected leaders.

Since full disclosure seems to be the order of the day, I should disclose that Mark Hurd [is] a close
friend, and I am deeply offended by what just happened to him. If the board is offended by my
comments . . . so be it.

Larry Ellison

CEO, Oracle Corporation

Exhibit 8 Oracles Business Segments in 2010

0 Software

1: New software licenses: database and middleware software, applications software

0 Software license updates and product support

0 Hardware Systems

0 Hardware system products: servers, storage, Solaris operating system and other
hardware-related software, Oracle Exadata, networking

0 Hardware system support

0 Services

0 Consulting

0 On demand

0 Education

Oracle in 2009
(in millions, except employees)

Sales $26,820

Net Income $6,135

Total Assets $61,578

MarketValue(10/1/2010) . _ $136,913

Employees 1 105,200
umm , - .
Exhibit 11 Ray Lanes Letter to the New York Times, October 11, 2010

To the Editor:

Joe Noceras column, A Double Standard at HP (October 9, 2010), grossly mischaracterizes the facts
about why Mark Hurd had to leave HP, why the HP Board hired Leo Apotheker as CEO and the
reason Oracle is trying to draw Mr. Apotheker into its lawsuit over TomorrowNow.

First, the lawsuit on TomorrowNow: Mr. Nocera concedes the suit between Oracle and SAP (and its
now-shuttered subsidiary, TomorrowNow) is old news. Oracle has been litigating this case for years
and has never offered any evidence that Mr. Apotheker was involved. It didnt even deem him
relevant to the case to include him on a list of witnesses for trial - until, that is, Mr.
enough
Apotheker was named CEO of HP and Oracle had other motives to try to tie him to the case.

The facts are: TomorrowN ow was never under Mr. Apothekers supervision. The conduct in question
at TomorrowNow occurred before Mr. Apotheker became CEO at SAP. And, it was Mr. Apotheker
who, as CEO of SAP, shut down TomorrowNow. Mr. Noceras reporting on the case is sharply
contradicted by that of an independent industry analyst - someone with real knowledge of the
industry and the facts - who makes clear that Mr. Apotheker was not involved.

As for the reasons why Mr. Hurd left HP: no Board can retain a CEO who violates the trust and
integrity needed to lead a public company. Even Mr. Hurd publicly acknowledged that he failed to
uphold these necessary standards. In the press release announcing his departure, he said that . . .
there were instances in which I did not live up to the standards and principles of trust, respect, and
integrity that I have espoused at HP . . . I believe it would be difficult for me to continue as an
effective leader at HP and I believe this is the only decision the board and I could make at the time.

The bottom line is: Mr. Hurd violated the trust of the Board by repeatedly lying to them in the course
of an investigation into his conduct. He violated numerous elements of HPs Standards of Business
Conduct and he demonstrated a serious lack of integrity and judgment. The Board was unanimous in
its decision that he must go, including the seven directors Mr. Hurd recruited to the Board. These
directors would not have acted unanimously to remove Mr. Hurd for piddling expense account
problems as Nocera suggests. I was named to the Board after Mr. Hurds departure, but having
carefully reviewed all the facts, it is clear to me the HP Board made the right decision. Had I been on
the Board at the time, theres no question I would have voted the same way. The Board simply had
no alternative.

In hiring Leo Apotheker, HPs Board turned to a principled leader of outstanding personal and
professional integrity. He is an experienced, strategic thinker with the passion, global experience and
operational discipline to realize our companys enormous potential. Those are the qualities HP needs
in a leader to move the company forward, and Mr. Apotheker is ideally suited to do that.

Sincerely,
Ray Lane
Incoming Non-Executive Chairman of the Board of Directors