HP suffers 8-billion-dollar fallout from Hurd affair (News Feature)

By Andy Goldberg Aug 9, 2010, 20:15 GMT

San Francisco - It might be one of the costliest affairs, or if you believe the participants, non-affairs, in corporate history.

Shares in technology giant Hewlett-Packard Co slid some 7 per cent in morning trading Monday, knocking about 8 billion dollars off the company's valuation following Friday afternoon's shock resignation of CEO Mark Hurd.

One of the superstars of American business and Silicon Valley, Hurd was forced to resign after an internal company probe into allegations of sexual harassment cleared him of those charges, but found that he had fiddled his expenses to conceal his personal relationship with a woman employed by the company as an executive marketing consultant.

The woman, who identified herself over the weekend as a former actress named Jodie Fisher, insisted through her celebrity lawyer Gloria Allred, that she and Hurd did not have a sexual or intimate relationship, and that she was sorry that he had lost his job over the issue.

So were HP's employees and stockholders. The world's largest computer maker said it would find a replacement for Hurd in a swift and seamless transition.

But the ouster of the man who had turned a once-staid technology pioneer into a lean-mean leader of world business cast a pall of uncertainty over the company's prospects.

'I was surprised and saddened that Mark Hurd lost his job over this,' said Fisher, who in the 1990s starred in such soft porn movies as Sheer Passion, Body of Influence, and Intimate Obsession. 'That was never my intention.'

More recently she featured in the NBC reality series Age of Love, in which a group of middle-aged women competed with a bunch of younger women for the affections of tennis hunk Mark Philippoussis.

Fisher worked for HP from 2005-07, primarily as a hostess at executive summits where the company's top managers would woo big clients. 'At HP I was under contract to work at high-level customer and executive summit events, worked very hard and enjoyed working for HP,' Fisher said.

She declined to detail the sexual harassment allegations, which according to reports over the weekend led to a private settlement between her and Hurd.

But there was no such swift resolution of the business impact of the imbroglio. During his five years atop HP, Hurd, 53, had instituted a regime of aggressive cost-cutting and strategic moves into new markets that were widely credited with revitalizing a company that had been in danger of becoming moribund.

HP is now both the world's largest computer maker and the world's largest tech company by revenue. Analysts were divided over how deeply Hurd's involuntary departure would impact the company's future.

Some credited him with putting the company on a firm long-term footing and recommended clients to take advantage of the uncertainy and snap up HP's suddenly undervalued shares.

'Hurd's initiatives during the past five years leave the company in very solid shape,' said Citigroup analyst Richard Gardner in a note to investors.

Others said his ouster has left the company floundering. Hurd's resignation 'substantially increases the company's operational risk and will create a period of uncertainty; therefore, we believe it is appropriate to reflect this risk in a lower valuation,' said analyst Jeffrey Fidacaro.

Michael Cuggino, manager of the Permanent Portfolio and Permanent Aggressive Growth Portfolio funds, took a more balanced view.

'There is a tone at the top that was set by Hurd and I think that driving force was a large part of the success over the past five years,' Cuggino told CNN. 'My hope is there's a team he's trained underneath him to continue that, but owners of the stock are facing a period of uncertainty.'