Hewlett-Packard: One Chief Gone, Another Tries to Hang On

Hewlett-Packard CEO and newly named chairman Mark Hurd is hoping to keep his name off the growing list of corporate casualties in Silicon Valley's worsening spy scandal. At an unusual press conference last Friday in which the chief declined to take questions, Hurd announced the resignation of company chairwoman Patricia Dunn, who spearheaded the controversial investigation into boardroom leaks to the media. (Two key employees who managed the investigation are also reportedly leaving.) Hurd claimed that while he knew an inquiry into leaks was underway, "I could have and I should have"--but didn't--read a report that documented the possibly illegal methods HP investigators were using.

That report, the capstone to a five-month HP investigation, detailed a host of unsavory tactics, including hiring outside detectives to acquire personal phone records of reporters and board members, and sending a traceable e-mail from an invented employee to a CNET.com journalist, in the hope she would forward it to her secret source. The report also fingered the apparent source of the leaks, board member George Keyworth, who resigned after NEWSWEEK.com three weeks ago revealed long-simmering boardroom tensions over leaks and the resulting investigation. (Keyworth denies leaking confidential information.)

Hurd isn't out of trouble yet; he'll testify Thursday in front of the House Oversight and Investigations Subcommittee, whose chairman, Edward Whitfield, mentioned HP in the same breath as Enron and Worldcom last week. Congressional investigators, the SEC and California Attorney General Bill Lockyer are also awaiting more evidence. Congress has received 4,000 pages of internal HP documents, and on Monday it's expecting an additional 6,000. If anything definitively shows that Hurd knew of or approved the most contentious aspects of the investigation, "that's when independent directors will begin to feel the heat ... to remove him and clean up the company," says Boston University professor of management James Post.

For now, Hurd has the support of Wall Street. Since he joined HP 18 months ago after the tumultuous reign of former CEO Carly Fiorina, the stock is up 64 percent. "Investors think Mark Hurd walks on water," says tech analyst Rob Enderle of the Enderle Group. "There is little momentum to remove the CEO." Late last week former board members Tom Perkins, who quit in protest over the investigation last May, and Keyworth each issued statements in support of Hurd. His strongest source of strength is the consensus that without him at the helm, the 67-year-old American blue-chip firm would start springing leaks of a much more serious kind.