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On the HP: Drama, spying, cliffhangers

By ASSOCIATED PRESS
Published September 21, 2006

Hewlett-Packard Co. may be the world's largest technology company, but the superlative that better suits it these days is Provider of the World's Strangest Corporate Drama.

For two weeks, almost every day has brought revelations of questionable tactics that HP investigators used this year and last to root out who had been describing boardroom deliberations to the media. Corporate intelligence is an old and frequently practiced art, but HP's efforts feel more Watergate than Wall Street.

Not only did investigators impersonate board members, employees and journalists to obtain their phone records, but according to multiple reports, they also secretly watched an HP director and a reporter for CNet Networks Inc. They sent monitoring spyware in an e-mail to that reporter by concocting a phony story tip.

They even snooped on the phone records of former CEO and chairwoman Carly Fiorina, who had launched the quest to identify media sources in the first place.

And in a twist that might seem preposterous if it happened in a movie, the New York Times reported that HP consultants considered hiring spies to pose as clerical or custodial workers at CNet and the Wall Street Journal.

"It betrays a type of corporate culture that is so self-obsessed, (that) really considers itself not only above the law, but above I think ethical decency, that you have to ask yourself, where did the shame come in?" said Charles King, an analyst with Pund-IT Research.

Jeffrey Sonnenfeld, senior associate dean at the Yale School of Management, said the HP affair stands out even against similar episodes from the past, such as the 1991 incident in which Procter & Gamble Co. persuaded authorities to mine 803,000 phone bills to track leaks to a Wall Street Journal reporter.

"This sort of investigators-gone-wild behavior is in a novel realm," Sonnenfeld said.

Investors have shrugged off the scandal, with HP stock up slightly since the story broke. But there will be repercussions. The almost certain illegality of posing as someone to obtain phone records has sparked state and federal probes into the computer and printer maker.

HP chairwoman Patricia Dunn and the company's general counsel are testifying to a congressional committee next week about why they approved the investigations. Attorney Larry Sonsini, a Silicon Valley power broker who advised HP's board, is also being called on the carpet.

Dunn has agreed to step down as chairwoman and be replaced by HP's chief executive, Mark Hurd, in January, but she plans to remain on the board. Fortunately for her but perhaps disappointing for those entranced by this drama, her two biggest enemies are gone: Director Thomas Perkins quit in protest of the investigation tactics, while director George Keyworth resigned after being outed as a leaker.

King, the analyst, said it could take a while to tell if HP's brand is diminished.

"If I'm a consumer, do I want to buy products from a company that has committed what looks to be felonious behavior? I don't know the answer to that," King said.

If nothing else, Hewlett-Packard will have aired in dramatic fashion the kind of corporate dirty work - often aimed at rivals rather than insiders - that "probably goes on more than we know of," said Eric Abrahamson, a professor of management at Columbia University.

"This is a particularly egregious example of it."

[Last modified September 20, 2006, 22:14:23]