The news muddies HP’s already unclear cloud situation, although Singh’s departure is not all that surprising. He was recruited out of IBM two years ago by HP’s then-CEO Leo Apotheker. Apotheker himself was axed by HP less than a year into his tenure, replaced by current CEO Meg Whitman.

Last September, citing an internal memo, CRN reported that HP had formed a Converged Cloud business unit under the leadership of SVP Saar Gillai, who reported to Singh. Last week, AllThingsD re-reported  the formation of that group, but said Gillai reported to HP COO Bill Veghte. There was no mention of Singh.

Updated at 6:52 a.m. January 17: An HP spokeswoman emailed this statement:

“HP remains committed to our Converged Cloud portfolio. In particular, HP Cloud Services is critical to HP’s efforts to deliver superior public cloud infrastructure, services and solutions to our customers. Roger Levy, vice president, Technology and Customer Operations of HP Cloud Services, will serve as the interim leader for HP Cloud Services. The company thanks Zorawar ‘Biri’ Singh for his passion and commitment to drive our public cloud vision and wish him well.”

She also confirmed the AllThingsD report, saying that HP  announced the formation of a “pan-HP organization dedicated to overseeing the company’s full range of HP Converged Cloud offerings” last week and promoted Saar Gillai to Senior Vice President and General Manager of HP Converged Cloud.

HP, which could not be reached for comment, has been hindered by bigger issues around its costly Autonomy acquisition and plateauing PC-and-server business, and has struggled to make its vision of enterprise-class cloud heard above the competition. In an interview last year, Singh told me the company could differentiate itself from other public and private cloud providers by offering the types of high-level and specific service level agreements (SLAs) that Amazon Web Services and other cloud providers do not.

It’s easy to write HP off after all its management chaos and poorly handled acquisitions. In its proxy statement last month, the company reopened the possibility of selling off business units. Since then, speculation has amped up that it might even sell off Autonomy – which it bought in 2011 for more than $11 billion — and Enterprise Services unit, which grew out of its 2008 $13.9 billion buyout of EDS. But, the company still has many, many large, enterprise accounts, many of which have barely tested the cloud computing scenario. If it gets its act together any time soon, those companies may stay with the program. If not … well that’s the multi-billion-dollar question.

This story was updated at 6:52 a.m. with comments from HP.

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But the fall, when it came, was fast and relentless.

Less than a month after the deal was struck, its architect, HP boss Leo Apotheker, was on his way out, replaced by Meg Whitman. A few months later, Autonomy CEO Mike Lynch walked the plank too. And this week things exploded as Whitman announced an $8.8 billion writedown of the deal amid claims of fraud and misleading accounting that the SEC and FBI are investigating.

Whatever the realities of the deal — and Lynch vigorously denies Whitman’s claims — the damage has already been done. And it’s not just to Autonomy and HP, either.

Transatlantic tough times

Here’s one deep, abiding result of this debacle that shouldn’t be ignored: it’s likely to sour any future dealings between America’s technology giants and their European counterparts. What Silicon Valley CEO, faced with a potential acquisition of a British company, is not going to remember Meg Whitman’s claims? And what acquirer will not let the fear of being undone — just like Apotheker was — color their decisions?

For anyone skeptically minded, Autonomy underscores an unhappy trend for transatlantic technology deals. So many of the biggest European tech exits have ended in ignominy, or at the very least obscurity. MySQL was bought by Sun for $1 billion shortly before it went supernova and got snapped up by Oracle. In 2008, Microsoft spent $1.2 billion buying Norwegian search company Fast; a few months later the company was charged with fraud for violating accounting rules.

And then there’s Skype. Rightly paraded as one of the great European software success stories, it has a checkered history. Before it was bought by Microsoft for $8.5 billion, of course, it had been acquired and then jettisoned by eBay, which wrote its original bumper purchase price down by $1.4 billion.

Negative patterns are hard to shake, and in meeting rooms from San Jose up to San Francisco, you can bet anyone talking to a British entrepreneur about a possible buyout is going to think of Autonomy and this mess.

And yet, and yet. The story is so much more complex. After all, eBay’s troubled purchase of Skype happened under the leadership of… Meg Whitman. Sound familiar?

Meanwhile, the Autonomy buy wasn’t just Apotheker’s deal: it also took place on the watch of HP’s board — a hyper-connected, super-smart group of the Valley’s best and brightest. I’m not just talking about Whitman herself, but also Marc Andreessen, the man worshipped by many as the new leader of the pack. Then there’s Ray Lane of KPCB, once a bright star now having his role reduced, and Alcatel-Lucent’s Patricia Russo — who, as the head of a French-American firm, has particular experience of the European-American situation. Let’s hope pressure continues on those individuals to see why they got things so very wrong.

Truth is, attempting to draw lessons from HP-Autonomy doesn’t get you far. The British company may be tarnished by the accusations, but HP is a mess, switching from one disastrous strategy to another without understanding what is happening to it. And because it’s impossible to separate the misinformed decisions from the bad ones, coming to a broader conclusion about how fit European technology companies really are would be terrible. Each deal should be looked at on its own merits, not in some gigantic cultural context stuffed with lies, fraud and unproven accusations.

Yet we know human nature, and we know it is a fickle, arbitrary thing. What a shame for everyone.

Meg Whitman photo courtesy of Shutterstock user drserg

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Update: In an interview with The Wall Street Journal, Lynch said he’d been “ambushed” by the charges, which he called “utterly wrong.”

“We were audited on a quarterly basis. It was Deloitte, who knew the company well. We had 10 years as a listed company; during that time Deloitte would have had their work reviewed by the various boards. Of course H-P did what its senior management called “a meticulous due diligence” involving hundreds of people that was highly intense, involving KPMG Barclays well. They threw everything at it.”

And in another statement obtained by Reuters:

“The former management team of Autonomy was shocked to see this statement today, and flatly rejects these allegations, which are false … HP’s due diligence review was intensive, overseen on behalf of HP by KPMG, Barclays and Perella Weinberg. HP’s senior management has also been closely involved with running Autonomy for the past year.”

 

On Tuesday morning’s HP fourth-quarter earnings call, CEO Meg Whitman leveled the allegations that Autonomy management had misrepresented the company’s performance and failed to disclose information that HP should have had prior to closing its acquisition. “These efforts appear to have been a willful effort to mislead investors and potential buyers, and severely impacted HP management’s ability to fairly value Autonomy at the time of the deal,” according to an HP statement.

Whitman’s predecessor Leo Apotheker had launched a $10.3 billion bid for Autonomy in the summer of 2010. The purchase price ended up being $11.1 billion when it closed a few months later. Lynch (pictured above) left HP suddenly in May 2011, as the company reported disappointing Autonomy sales.

The Autonomy acquisition has been controversial from the get-go. News of it leaked in advance and even at the time of the announcement most onlookers felt that the offer price was very high for the U.K.-based company.

For her part, Whitman has laid the blame on HP’s side of the equation on Apotheker and former Chief Strategy Officer Shane Robison, who left within weeks of Apotheker’s ouster in September 2011.

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The massive charge basically indicates that the enterprise IT giant overpaid for Electronic Data Systems (EDS), the IT services company it bought for $14 billion four years ago. That purchase, negotiated on the watch of former HP CEO Mark Hurd, struck some observers even at the time as very expensive. (The Register’s headline was HP buys EDS: What are they thinking?)

HP CEO Meg Whitman

HP also said John Visentin, who had run enterprise services, is leaving and will be replaced by Mike Nefkens, VP and GM of enterprise services for EMEA.

The company has struggled to find focus and cut costs over the past few years and is not new to big, expensive deals, It took heat when then-CEO Carly Fiorina paid $25 billion for Compaq in 2002. That deal probably contributed to her ouster. And in 2010, Leo Apotheker, decided to buy Autonomy for $10.2 billion. He was out in less than a year. All that turmoil has led one Wall Street analyst to call for HP to break up its consumer and enterprise businesses.

Meg Whitman, who stepped in for Apotheker, is trying to turn the ship around by cutting 27,000 jobs, or 8 percent of HP’s workforce  –  a process that the company said is proceeding apace. It also revised upwards the pre-tax charge it expected to pay to cover the early retirement program for its third quarter. It now estimates a charge of $1.5 billion to $1.7 billion, up from approximately $1 billion, citing a higher-than-expected acceptance rate.

Excluding these charges, HP expects to report earnings of $1 per share, up from a previous range of 94 cents to 97 cents, for its third quarter. It’s earnings call will be August 22.

Feature photo courtesy of Flickr user Images_of_Money

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UBS Analyst Steven Milunovich initiated his coverage on HP with a sell rating and a strong recommendation that it remake itself. He wrote:

HP has made the case it can succeed as both a corporate and consumer computing company. We question whether HP is “better together” and that it might be “smart to be apart,” specifically spinning off printers and PCs. HP lacks the pure enterprise focus of IBM and EMC yet will have trouble competing for consumers without strong tablet and phone businesses like Apple and Samsung.

HP CEO Meg Whitman

This is ironic given that one big reason HP’s board tossed former CEO Leo Apotheker last year was that he talked openly of selling off or spinning off the company’s $40 billion PC business.  Up to that point, Apotheker’s predecessor Mark Hurd had argued that keeping the margin-challenged PC business meant that HP got the best possible prices on various components not only for PCs, but for servers as well. It was hard for HP watchers to see how that dynamic had changed in a matter of months.

HP has a big enterprise services business — courtesy of its acquisition of EDS — and big enterprise technology plays in servers, storage, and networking. It also makes PCs and printers for consumers. It’s pretty much dumped the tablet and smart phone business it bought with Palm Computing and open sourced the underlying WebOS, although it will likely make Windows 8 tablets. That profusion of products, to some, means a lack of focus.

This call comes as HP while trying to sustain its traditional hardware business  is also  building out massive cloud infrastructure with which it hopes to compete with Amazon Web Services and struggles to make its $10.2 billion acquisition of Autonomy,  executed under Apotheker, pay off.

Whether whole or in parts, HP has its work cut out for it.

Feature photo courtesy of Flickr user marianodm

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But he’s starting to resurface again. He’s apparently been talking with private-equity firms in Silicon Valley about investing in mature and distressed companies, according to a venture-capital source. He was spotted earlier this week in downtown Menlo Park, Calif.  Last week, he turned up on a conference call,  hosted by Nomura Securities’ analyst Rick Sherlund. The timing was curious: it coincided with HP’s first quarter earnings call.

Apotheker was run out of HP in large part because of where he wanted to take the business and how he communicated (or didn’t communicate) those plans internally.  Ironically, some of what he was advocating has turned out to be more right than wrong.

One strong takeaway from HP’s results last week was that enterprise software — an Apotheker priority — was a bright spot in an otherwise bleak quarter. HP’s enterprise software grew 30 percent year over year. While at HP, Apotheker had championed the $10-plus billion buyout of Autonomy — outraging Wall Street and lopping $3 billion off of HP’s market cap within a day of the news leaking. If this past year’s results are any indication, that purchase might pay off after all.

The other key takeaway from HP’s earnings was that the company’s Personal Systems Group — the PC business that Apotheker explored selling — is struggling big time. Overall revenue for the unit fell 15 percent year over year, with revenue from consumer PCs off 25 percent.

Apotheker didn’t specifically address HP on the Nomura call.  But he did talk about how hard it is for legacy software players to transition into the cloud game, citing Oracle’s and SAP’s experience. (Apotheker was the CEO at SAP before joining HP.) Those two companies are both buying up cloud companies, to help make that transition. Most recently, Oracle bought Taleo and SAP bought SuccessFactors. Both Taleo and SuccessFactors offer human-resource management software as as service. According to Forbes, Apotheker told Sherlund:

There’s a real cultural issue at the big companies. The DNA isn’t there. The temptation for them is to port existing technology into the cloud. That’s impossible. So that’s why you see Oracle and SAP doing these acquisitions. They realized they have to buy and then build on the platforms they are buying.

When HP brought in Apotheker, it was criticized for recruiting a software guy to lead a hardware company — and he was out of the job in 11 months. Now that he’s making the rounds in Silicon Valley, it’s worth asking: What would be the main appeal of a twice-fired CEO? According to our source, it’s his operations experience, which (again, according to our source) is very rare.  Apotheker could be setting himself up as a consultant for software companies or private-equity firms.

Photo courtesy of Flickr user Tom Raftery

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Hewlett-Packard continues to be rocked (disproportionately, according to one analyst) by a flood-induced hard drive shortage; its go-to printing business is sputtering; and the company as a whole continues to spend too much on too many products. On the plus side, HP’s high-stakes bets on 3Par “cloud” storage and enterprise software player Autonomy are starting to be felt, just not enough to overcome all the bad stuff.

HP was once the model of a well run if conservative IT behemoth. For the past three years, it has been anything but. That is why all eyes are on HP now. Industry watchers want to know if Meg Whitman, now eight months on the job, can right the ship. Whitman is HP’s third CEO in as many years.

Here are my top takeaways from Wednesday night’s first-quarter earnings call.

1. Shocker: Apotheker may have been right!

Leo Apotheker, Whitman’s much-maligned predecessor at HP, looks pretty smart in retrospect, as Mark Hachman points out over at PC Mag. HP’s venerable PC group spit the bit last quarter (which ended Jan. 31), with overall revenue off 15 percent year-over-year. Revenue from consumer PCs fell 25 percent. The company sold 18 percent fewer units than the comparable period last year. Ouch.

Apotheker looked into selling that PC unit, news of which sparked a firestorm among HP partners and enterprise customers who liked buying servers and desktops from one company. Whitman backed off that plan when she took over.

The argument for keeping the PC group was that the $40-billion-per-year business gave HP supply chain advantages when it came to sourcing components not only for PCs but also for servers and storage. That may have been the case, but it didn’t appear to help the past two quarters when HP was hit — hard — by the lack of hard drives caused by flooding in Thailand. Sanford Bernstein analyst Toni Sacconaghi pointed out that HP seemed to be affected disproportionately by this disaster when compared to its rivals.

Things on the software side looked rosier. Overall software sales were up 30 percent year over year. Getting HP more into the software game was a big piece of Apotheker’s strategy.

Going forward, Whitman said that for HP to succeed, it must “own” three areas: cloud, security and information management. Those three areas align pretty closely to Apotheker’s road map.

2. The printer cash cow is drying up

HP’s Imaging and Printing Group (IPG) has long been its go-to business — Whitman called IPG the “lifeblood” of HP. But things are not going well there. Total revenue fell 7 percent compared to the year-ago quarter. Revenue from commercial printing hardware was off 5 percent, and consumer printer hardware sales were off 15 percent (and IPG sold 15 percent fewer units) from the same period last year.

“There’s no question that in IPG we face challenges,” Whitman said. “We have to look hard at it. Consumers at home are doing less photo printing. I think the analog-to-digital move will still advantage us but we have to compensate for that loss of ink.”

3. HP conundrum: doubling down on R&D while cutting costs

Recently, Whitman vowed to “double down” on R&D spending to get the company back to competitive form. That’s not chump change. Last year, HP spent $3.2 billion on R&D (about 2.5 percent of annual revenue). If “double down” means doubling, that will be a big number at a time when HP very much needs to slice rather than add costs.

On the call, Whitman was vague about how the company could fund this, saying repeatedly that HP has to “save to invest, save to grow.”

“Our current cost base is not sustainable. For years we’ve run the business in silos and there’s much we can do to streamline operations even more by standardizing our processes to scale the business without increasing cost,” she said.

Whitman hinted that the company will wield an axe. “We have an enormous number of SKUs. That adds complexity at launch, complexity in service and support and selling. There’s a number of things we can do there to improve dramatically.”

That really is one thing HP could do easily. There is no reason for any company to field the number of PC and laptop models HP offers. Apple offers a very limited number of Mac models, and no one seems to hold that against it. But SKU control is just the start.

As Sacconaghi pointed out on the call, the HP numbers paint a bleak picture across the board. “This data appears to point to a widespread lack of competitiveness,” he said.

Addressing that sort of problem will take more than cutting SKUs.

Feature photo courtesy of Flickr user whiteafrican

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When Hewlett-Packard CEO Meg Whitman addresses a few thousand HP partners Wednesday there will be a lot on the line.

HP relied on a cadre of retailers, value-added resellers (VARs) and systems integrators to build it into a tech colossus, but the last few years of management turmoil at the company has taken its toll on those partners, not to mention the company itself. Suffice it to say that Whitman will be the third HP CEO to address the HP Americas Partner Conference (APC) in three years. Last year’s CEO keynoter, Leo Apotheker was fired by HP in September, less than a year into the job. His predecessor, Mark Hurd, was shown the door in August 2010.

Whitman is going retro — pushing for “a return to the egalitarian culture that legendary HP founders Bill Hewlett and Dave Packard fostered decades ago, known as ‘The HP Way,’” according to an interview in CRN. There she reiterated that HP, despite its $10.3 billion-plus acquisition of enterprise software company Autonomy – an Apotheker decision  – HP remains first and foremost a hardware company.

Hardware guy Dave Donatelli, kicked off APC Monday, unveiling new energy-efficient HP ProLiant Gen8 servers that come with HP Smart Update software and other automation smarts to boost energy efficiency and reduce the workload of system admins. Compared to the previous Gen7 server, for example, server updates that took hours per rack now take minutes, according to an HP spokeswoman.

On-board sensors detect fan speeds, power spikes and other data points to identify over-utilized servers based on their power use, workload and temperature data. This “3-D Sea of Sensor” technology will increase compute capacity per watt of energy by 70 percent, according to HP, and automates the entire process of shifting, throttling and de-throttling workloads.

The new servers are being used by a few beta customers now, with general availability slated for March. The servers are sold standalone or can be bundled with various HP storage and networking options as part of a converged infrastructure package.

And that’s not all. The company’s much-anticipated  “Project Moonshot” ARM- and Atom-based servers will be available in the second half of the year, said Donatelli, whose full title is EVP and general manager of enterprise storage, servers and networking (ESSN).

In other server news, IDG News reported that HP will also talk up new mobile apps that will enable system administrators to use their Apple iOS or Android devices to remotely control and configure the new Gen8 servers. There was no mention of an analogous app for WebOS, the mobile operating system that HP decided to open source after jettisoning plans to build its own WebOS-based devices.

Partners at the big show hope that Whitman will turn the page on the recent turmoil. They understand why HP might — as Apotheker said last year — look to offload its big PC business, but universally they said the leak of that plan did huge damage to customer relationships. Many enterprises like to source PCs and servers from the same company, and that uncertainty caused them to look elsewhere — to Dell, to Lenovo, to Apple — as laptop or desktop PC options. Probably worse, it also spurred many to consider IBM, Dell or Cisco as alternative server suppliers.  Once that door is cracked open, it’s hard to slam shut, they said.

Feature photo courtesy of Flickr user marianodm

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Lane, who became executive chairman of HP on September 22, 2011 (he had been non-executive chairman since November 1, 2010, the start of HP’s FY 2011)  logged more than $10 million in total compensation — the bulk of it in stock and options — for the fiscal year, according to the HP proxy.

But check out the numbers for yourself.

Other highlights from the proxy:

Meg Whitman who famously took the HP CEO position in September for $1 in salary, gets $16 million in stock and options. Former CEO Leo Apotheker walked away with $30.4 million when he was fired by HP last September.

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Now the two companies are arch-rivals and are engaged in an increasingly bitter, seemingly personal battle, the latest skirmish of which saw a California Superior Court judge throw out a fraud claim Oracle lodged against HP. He also opened up court documents that don’t show either company in a particularly good light.

How did it all go so bad?

First, Oracle bought Sun for $7.4 billion in a deal completed in January 2010. That meant Oracle, for the first time was in the hardware business and its servers would compete with HP servers. That sealed the fate of the relationship going forward.

The public bad feeling erupted in August 2010 when HP canned Hurd as CEO, then hired former Oracle president Ray Lane (pictured above right) as chairman and Leo Apotheker, former CEO of SAP, as CEO. SAP is a huge rival to Oracle in enterprise apps and Lane left Oracle after a bumping heads with Oracle chairman Larry Ellison (pictured at right.) Things have just deteriorated ever since.

Here are some highlights (low lights) of the slap fight.

In a letter to the New York Times in August 2010, Ellison took aim at HP’s firing of Hurd:

The H.P. 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 hadn’t come back and saved them.

This is a shameless attempt to force customers to spend a lot of money to move to a platform over time that gives customers no benefits  … Oracle made this decision to slow Sun SPARC market losses.

Ray Lane calls out Hurd in his letter to The New York Times in October, 2010.

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 HP’s Standards of Business Conduct and he demonstrated a serious lack of integrity and judgment

After Apotheker announced HP plans to buy Autonomy — another enterprise software company — for $11.7 billion in August, Oracle couldn’t contain itself.

In a statement on September 28, 2011, Oracle said Autonomy had shopped itself to Oracle first and Oracle turned it down. When Autonomy CEO Mike Lynch denied that, Oracle said: “Either Mr. Lynch has a very poor memory or he’s lying.”

When there was further denial, Oracle put out another statement entitled “Another whopper from Autonomy CEO Mike Lynch” and helpfully published the PowerPoint slides it said he and banker Frank Quattrone brought to the meeting.  The presentation is here and here.

According to the statement:

Ably assisting Mike Lynch’s attempt to sell Autonomy to Oracle was Silicon Valley’s most famous shopper/seller of companies, the legendary investment banker Frank Quattrone.  After the sales pitch was over, Oracle refused to make an offer because Autonomy’s current market value of $6 billion was way too high.

The next chapter in this saga may be a trial on HP’s remaining claims against Oracle which should kick off in April, but stay tuned: anything can happen and usually does.

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