Mark HurdMark Hurd's departure from Hewlett-Packard (HPQ) leaves many gossipy questions unanswered. But a look at its financial statements during his tenure as CEO, which began on April Fool's day 2005, raises even more issues about how effective a CEO Hurd really was. While the stock price doubled under his leadership -- from $21 to below $42 -- and his departure sliced off 10% of its value, there seems to be a gap between HP's net income growth and the slide in its cash position while Hurd manned the helm.

The latest twists in the story behind Hurd's departure have gotten even stranger. Jodie Fisher, the outside contractor who originally alleged sexual harassment, now says she's "surprised and saddened" by his quick ouster. She may or may not have any qualifications for a job as a marketing consultant. Fisher appeared in some R-rated movies -- such as Sheer Passion and Intimate Obsession -- and had a stint as a failed reality-show contestant, according to The New York Times.

Both Fisher's lawyer, Gloria Allred, and Hurd claim there was no sexual relationship -- but the phrasing sounds Clintonian to me. Why would Hurd file false expense reports to hide payments to Fisher of between $1,000 and $20,000, according to the Times, if everything was perfectly above-board? We also know Hurd took pains to interview her personally in 2007 for whatever it was she was doing for HP.

Skyrocketing Long-Term Debt

But the real question at hand involves Hurd's performance as CEO. A look at HP's financial statements under him suggests that a doubling of HP's stock price isn't really warranted by the change in HP's financial results during his tenure. In the last five years, HP revenues have grown at a 7.5% compound average rate, while its net income has grown at a more impressive 17% annual rate over five years, from $2.4 billion to $8.5 billion. HP's net margin during that period grew from 2.8% to 7.1%.

This all sounds great, but two things about these numbers are questionable. The first is that during this period, HP's cash position hasn't kept up. Its cash and short-term investments slipped from $13.9 billion to $13.3 billion. During the same period, HP's long-term debt skyrocketed from $3.4 billion to $14 billion.

The second concern is that HP's profitability was weaker than the industry under Hurd. HP's five-year average net profit margin of 6.2% was substantially below the diversified computer systems industry average of 9.4%. And HP's five-year average return on equity was 16.6%, a bit more than half the 30.9% industry average.

Interestingly, Hurd's reputation as an efficiency expert isn't really borne out by these numbers or by a basic productivity statistic -- income per employee. Here, HP underperformed the industry by 15.2% -- generating income per employee of $28,069, compared to $32,331 for the industry.

A Hefty Severance Package

What do we really know about Hurd's reign at HP? We know the stock price doubled and that net income was up tremendously. We know Hurd made many acquisitions, including EDS, 3Com and Palm. But he nearly quadrupled HP's debt load while cutting its cash.

We also know that he left HP with about $28 million in severance pay, but we really don't know why -- yet.

Sunday's revelation about the identity of the marketing consultant on whose behalf Hurd faked expense accounts raises more questions about what really happened here. And a look at HP's financial statements raises other questions about whether a doubling in HP's stock price while Hurd ran HP was really justified.

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This is a shallow analysis comared with the market that serves as a better index of performance over a number of years.

August 09 2010 at 5:10 PM Report abuse +1 rate up rate down Reply

Is Mark Hurd married??

CEO's charging personal expense on co's expense sheet is not new--
In my time as an engineer, I have seen vp's charge cab ride of their spouse to ball game(where co's client were entertained),this 1 vp filled out house maid expense on regular basis--regularly reported high mileage to pay for bar tab with his personal friends--he eventually was asked to leave for different reason--

America needs transparency in public as well as pvt corp--because people work everywhere--laws need to protect all workers--
In pvt org. high salaries and bonus are given to family members who have no experience or are mediocre and some times they do not even show up for work--
So in the interest of self examining(that's what US does best in time of crisis), we can say that we have lot of phonyness in good claims that industry leaders make--
on going public internet forum on this subject will do us a lot of good for working Americans who really produce--

August 09 2010 at 3:12 PM Report abuse rate up rate down Reply

I am just stating a fact. In Hurds case, in the 6o's,70's the woman he messed with, was called a Hippie *****. Now there in realty T.V. Go figure.

August 09 2010 at 11:12 AM Report abuse +1 rate up rate down Reply

Without the "hurd mentality," HP will grow into a sloven monster,unable to maneuver iself with Dell and Apple. Unless I myself, were to step in and run operations, it's doubtful that this comapnhy will survuvie. They waited to long to extend their offer and now, I am previously committeled. Oh if HP could have had us both, at the time... too late, now.

Michael Sanders

August 09 2010 at 9:36 AM Report abuse rate up rate down Reply

I wonder if any of this has to do with all the problems people are having with HP computers? I have HP Laptops and Desk tops that just stopped working. With no extended warranty I am up the creek. I own 3 desk and 2 Laptops all of them just sitting around not working as for my new LapTop it has been in for repairs 3 times . I just want to know if he some how is involved with the poor way HP was built since he has been on board??????

August 09 2010 at 9:25 AM Report abuse -1 rate up rate down Reply

Very shallow commentary especially from the head of a company that promotes acquisitions. How else does a company finance this type of growth except by long term debt and cash? Far nore important would be the value of the acuisitions in terms of revenue growth, market share and earnings growth (not margin which in the case of HP is pretty healthy anyway)
Piece is off the hip and does not reflect well on the writer or his company. The market evidently thinks that Hurd has done a good job.

August 09 2010 at 8:52 AM Report abuse +1 rate up rate down Reply
2 replies to vitopiper's comment

Well said, Vitopiper. My thoughts exactly. In addition, HP is in the process of recreating itself into a much stronger and greater depth company. Comparison to industry standards at this stage is invalid. The industry, with a higher return of equity, may well reflect greater risk with low internal equity and higher outside debt.

August 09 2010 at 11:21 AM Report abuse +1 rate up rate down Reply

I agree. The comments were to entertain rather than analize. The people who invest in the company do the best analysis.

August 09 2010 at 5:09 PM Report abuse rate up rate down Reply