July 8, 2012

How Tim Cook is changing Apple - Fortune Tech


FORTUNE -- In February of this year, a group of investors visited Apple as part of a "bus tour" led by a research analyst for Citibank. The session started with a 45-minute presentation by Peter Oppenheimer, Apple's chief financial officer, and the 15 or so investors who attended the session were treated to Apple's unique brand of hospitality: They met in a threadbare conference room in Apple's Town Hall public conference center at the 4 Infinite Loop building in Cupertino, Calif., where the refreshments consisted of "three stale cookies and two Diet Cokes," in the words of one participant.

All that, save the meager refreshments, is routine for big public companies in Silicon Valley, which use the check-ins as opportunities to communicate with large owners of their stock. What shocked the Apple (AAPL) investors that day was that CEO Tim Cook popped into the room about 20 minutes into Oppenheimer's talk, quietly sat down in the back of the room, and did something unusual for a CEO of Apple: He listened. He didn't check his e-mail once. He didn't interrupt.

After the CFO finished, Cook, at that point chief executive of Apple for all of five months, stood to offer his remarks. He strode confidently to the front of the room and held court in the no-nonsense style that has become his trademark. "He was in complete control and knew exactly who he was and where he wanted to go," says one of the investors. "He answered every question head-on and didn't skirt any issue." Cook even offered some color that went beyond expanding on Apple's already disclosed performance data. Asked his opinion of Facebook (FB), Cook called the neighboring upstart "the one company that is closest to being like Apple," adding that he had huge respect for Facebook, with which Apple could work more closely. (More recently Cook doled out guarded praise for another competitor/partner, saying on a financial results conference call that Amazon (AMZN) is "a different kind of competitor" that has "different strengths" from Apple and that "will sell a lot" of Kindles, the gadget that is increasingly competitive to Apple's iPad.)

Here's what's most remarkable about Cook's appearance that day last winter: Steve Jobs wouldn't have bothered. The legendary company co-founder, who stepped down as Apple's CEO last Aug. 24, six weeks before his death, rarely deigned to meet with investors. That was one of Tim Cook's tasks as chief operating officer. It's a subtle but significant change -- investors now have the CEO's ear for the first time in years -- and it's one of many Cook has instituted at Apple as he approaches his one-year mark at the helm. Taken together -- his rapport with Wall Street as well as government officials, his decision to grant a dividend to shareholders, the creation of a program to match employee gifts to charity -- Tim Cook's stewardship of Apple is beginning to come into focus.

A 14-year veteran of the company, Cook is maintaining, by words and actions, most of Apple's unique corporate culture. But shifts of behavior and tone are absolutely apparent; some of them affect the core of Apple's critical product-development process. In general, Apple has become slightly more open and considerably more corporate. In some cases Cook is taking action that Apple sorely needed and employees badly wanted. It's almost as if he is working his way through a to-do list of long-overdue repairs the previous occupant (Jobs) refused to address for no reason other than obstinacy.

What's clear is that Cook is behaving like his own man, putting his stamp on Apple -- including some moves that will court controversy with the Apple faithful, watchful as they are for the slightest deviation from their perception of the Steve Jobs playbook. Cook consistently pays homage to the legacy of Jobs, but he doesn't apologize for charting a new course. He seems, at the end of the day, to be honoring one of Jobs' dying requests: that Apple's management not ask "What would Steve do?" and instead do what's best for Apple.

Considering the widespread handwringing over how rudderless Apple would be without Jobs, it is remarkable how steadily the company has sailed along without him. Wall Street in particular has good reasons -- billions of them, actually -- to love the Cook regime. "The numbers speak for themselves," says Katy Huberty, Morgan Stanley's Apple analyst. The company's market value, for example, is up some $140 billion since Cook took over. At a market cap of about $500 billion, Apple is more valuable than Exxon Mobil (XOM) by $100 billion -- despite Apple's shares being down 15% from their peak. In the three quarters since Cook become CEO, Apple has reported $31 billion in profits and shipped 89 million iPhones and 38 million iPads, all exceeding Wall Street's expectations and continuing, by and large, to delight an adoring customer base. "By any quantitative measure, so far his performance is phenomenal," says Bill Shope, a Goldman Sachs research analyst.

Cook can't take all the credit for those results. He took over a company with the momentum of a rocket ship in midflight. What's more, Cook hasn't yet unveiled a significantly new product, the key measure of sustained innovation that observers are intensely watching for. The only major product introductions so far: The iPhone 4S, which features the Siri voice-activated assistant, and an iPad with better screen resolution, both iterations of previous devices.

Yet behind the scenes there are indications of where Cook is leading Apple. Typically these changes play to the new CEO's background and strengths. Cook is the master of operational efficiency, having joined Apple in 1998 to revamp its badly broken system of factories, warehouses, and suppliers. Notably, he strengthened Apple's cooperation with its contract manufacturers in China.

So it was a personal blow to Cook when the New York Times ran a prominent article in January critical of the working conditions in China at Foxconn, the Taiwanese contract manufacturer that assembles most of Apple's products. Though the criticism wasn't new, the exposé painted a bleak portrait of the lives of workers in the factories. Cook's response marked a distinct change in tone from Jobs, who had been dismissive of the severity of the problem. The new CEO not only visited Foxconn personally, he also allowed himself to be photographed doing so. Apple also joined the Fair Labor Association, an industry-financed third-party monitoring group that has the ability to visit factories and report its findings independently. (Apple says its membership in the group had been in the works for a year.)

Nevertheless, Cook's Apple appears to be doubling down on its manufacturing in China. Late last year Apple disclosed for the first time the dollar value of its assets there: $2.6 billion. Given that Apple had just six retail stores in China at the time, the number spoke to the value of the material and equipment Apple has bought on behalf of its suppliers. Apple risks its own capital -- with $110 billion in cash at last count, it has plenty to risk -- as a way of financing massive upgrades in its manufacturing capabilities in Asia, even though its partners will operate the equipment.

Apple generally is mum on what the investments are for, but with disclosed projected capital expenditures of $7 billion in 2012, Apple is gearing up for big growth, analysts assume. "That's got to be for volume," says David Eiswert, a portfolio manager at T. Rowe Price, which owns 24 million shares of Apple. He notes that Apple suppliers like Pegatron and Jabil (JBL)have been buying sophisticated machine tools and that Japanese drill-bit manufacturers say they are moving into consumer electronics. Eiswert says he assumes it is all on Apple's behalf. "The Apple supply chain is doing things no one else can," given its abundance of cash and manufacturing know-how, Eiswert notes. The moves, he and other observers say, have Cook's fingerprints all over them.

Such operational efficiencies have been an underappreciated factor in Apple's success for the past decade; all the attention has been on its beautiful designs and snazzy marketing overseen by Jobs. If anything, Apple under Tim Cook will embrace efficiency to an even greater degree, especially as the company grows bigger and more complex -- to the dismay of those who think techies should rule the roost. "It looks like it has become a more conservative execution engine rather than a pushing-the-envelope engineering engine," says Max Paley, a former engineering vice president who worked at Apple for 14 years until late 2011. "I've been told that any meeting of significance is now always populated by project management and global-supply management," he says. "When I was there, engineering decided what we wanted, and it was the job of product management and supply management to go get it. It shows a shift in priority."

Indeed, allowing anyone to interfere with the creative-genius engineers is anathema to the Steve Jobs ethos at Apple. Sniffs one engineer: "This leads to more sharing of resources, which leads inevitably to fighting, which leads to weaselly excuses." They are normal corporate concerns, in other words, and very un-Apple-like.
It is treacherous to attempt to read too much into potentially isolated changes at Apple in the short time that Steve Jobs has been gone. Yet the scrutiny on the world's most watched company is enormous. As an example, in another much discussed critique, the New York Times used Apple's multinational tax-mitigation policy as a case study of the lengths to which U.S.-based corporations will go to lighten their tax burdens.

No action goes unnoticed when it comes to Apple, no matter how small. A former Apple employee recounts, for instance, a recent lunch with a current Apple engineer. At the end of the meal the ex-Apple worker, now at a Silicon Valley startup, assumed his buddy immediately needed to get back to work. "He said, 'Eh, I have time for coffee if you like.' " The outsider's conclusion: "I think people are breathing now." It's not necessarily a compliment.

Elsewhere there are signs of Apple becoming a more normal company. When Adrian Perica, a former Goldman Sachs (GS) banker, joined Apple several years ago, he was the only executive whose sole remit was dealmaking. Steve Jobs basically ran M&A for Apple. Today Perica heads a department with three corporate-development professionals under him and a staff supporting them, so that Apple can work on three deals simultaneously. Indeed, the vibe, in the words of a former employee, is of an Apple that is becoming "far more traditional," meaning more MBAs, more process, and more structure. (In point of fact, 2,153 Apple employees reference the term "MBA" in their LinkedIn profiles out of a nonretail workforce of nearly 28,000. More than half the employees who reference "MBA" have been at Apple less than two years.)

The ultimate "tell" of tectonic changes at Apple will be the quality of its products. Those looking for deficiencies have found them in Siri, a less-than-perfect product that Apple released with the rare beta label in late 2011, a signal that the service shouldn't be viewed as fully baked. Siri's response time has been slow, meaning the servers and software powering it are inadequate. "People are embarrassed by Siri," says one former insider. "Steve would have lost his mind over Siri."

Obviously, no one can say for sure how Steve Jobs would have reacted to anything that's going on at Apple, and Cook seems increasingly comfortable leading the company where he thinks it should be going. Jobs was opposed to dividends and stock buybacks, for example. Yet Cook repeatedly prepared investors for a coming dividend by stating publicly that he had no "religious" opinion about them. Apple announced on March 19 that it would begin paying a quarterly dividend of $2.65 a share and buy back $10 billion worth of stock.

In many ways, though, Cook's unspoken message is that life goes on and that Apple is still Apple. In mid-April the company took over the Carmel Valley Ranch hotel complex for its first ultra-secretive "Top 100" meeting since Jobs died. The hush-hush conclave is a rare opportunity for top managers -- not necessarily chosen by rank, but rather by the CEO's assessment of who are the most valuable contributors at any given time -- to learn what products and services are on tap for the next year and a half or so. Following tradition, Cook required his executives to travel the 80 miles from Cupertino to the resort on chartered buses so that their comings and goings could be controlled. He also asked several executives to make presentations to the group -- just as Jobs had done.

A difference, according to multiple secondhand reports of the retreat, is that the spirit of the meeting was upbeat and even fun. Cook was said to be in a jovial, joke-cracking mood -- a stark contrast to the grim and fearful tone Jobs engendered at the meetings. Participants left the Top 100 energized about Apple's near-term outlook, presumably having seen Apple's next iPhone and perhaps its long-awaited television product too. One veteran executive was "blown away" by what he had seen, says someone this executive spoke to afterward. Reports another person with access to top-level Apple executives: "People came away totally comfortable with where the company is headed."

Apple CEO Tim Cook

Cook also has assumed Jobs' role of outward-facing schmoozer. An influential tech company CEO who met recently with Cook found him to be "down to earth, noncorporate, detail-oriented, and disarming," the latter being a frequent refrain about Cook. "He's casual, grounded, and easy to talk to," says this executive. "I forgot he's the CEO of Apple. And that was not my experience with Jobs." Other signs of a CEO-level glasnost abound. Cook has indicated a willingness to resolve patent litigation with Samsung, an important Apple supplier as well as a competitor. He even made the rounds in Washington, D.C., in mid-May, telling congressional leaders that he intended to be personally accessible to them.

As operations chief, Cook flew so far under the radar that he was practically invisible outside the company. Apple, after all, was a company dominated by one personality, whose persona was tightly wound up with Apple's public and private image. As CEO, Cook has begun to sprinkle his narrative into his comments. In a February appearance at an investor conference hosted by Goldman Sachs, for example, he mentioned that he had worked at a paper mill in Alabama and an aluminum plant in Virginia -- new facts in Cook's story.

The personal tidbits serve to humanize Cook, who is intensely private, with few hobbies other than fitness and spectator sports. He vacations at the Canyon Ranch resort in Arizona, where guests who have seen him there say he keeps to himself, often dining alone, reading on his iPad. He said during the appearance at the Goldman Sachs conference that he couldn't live without his Apple TV -- raising the question of what he's watching, given that a year earlier Cook told a shareholder at Apple's annual meeting that if it wasn't on CNBC or ESPN, he hadn't seen it. (Historical trivia of note: The shareholder had asked Cook whether he had seen Mike Daisey's now notorious one-man act The Agony and Ecstasy of Steve Jobs when it was playing in Berkeley. He had not.) Cook also has been showing his dry wit of late, telling investors before the dividend announcement that Apple wouldn't "go have a toga party or do something outlandish" with its cash.

For all his new demonstrations of extroversion as CEO, Cook has kept the news media at arm's length. He has granted few interviews, and Apple declined to make him available for this article. Indeed, Apple seems intent on doling out its new CEO in carefully scripted morsels. Writing in Time's list of the 100 most influential people of 2012, Apple board member Al Gore praised Cook for leading Apple to new heights "while implementing major policy changes smoothly and brilliantly." When queried by Fortune, neither Apple nor Gore would explain precisely what policy changes the former vice president of the United States was referring to.

Even as he tweaks the Apple operating manual, Cook goes to great pains to pledge allegiance to the corporate culture Steve Jobs created. Asked at the Goldman investor forum how his leadership might change Apple and what of its culture he intended to maintain, Cook ignored the first part of the question and focused only on the latter. "Steve grilled in all of us over many years that the company should revolve around great products and that we should stay extremely focused on few things rather than try to do so many that we did nothing well." He called Apple a "magical place" where employees could do "their life's best work."

For their part, most Apple employees seem more than satisfied with Cook. He often sits down randomly with employees in the cafeteria at lunchtime, whereas Jobs typically dined with design chief Jonathan Ive. It is a small difference that speaks volumes about how employees can expect to interact with their CEO. At Apple, Jobs was simultaneously revered, loved, and feared. Cook clearly is a demanding boss, but he's not scary. He's well-respected, but not worshiped. As Apple enters a complex new phase of its corporate history, perhaps it doesn't need a god as CEO but a mere mortal who understands how to get the job done.

By Adam Lashinsky CNNMoney.com May 24, 2012


How Tim Cook is changing Apple - Fortune Tech

How Amazon learned to love veterans - Fortune Tech

FORTUNE -- In a world where the typical preparation for becoming a junior executive at a Fortune 500 company is to go to college, sign on to some big corporation's management-training program, and perhaps pick up an MBA, Dennis Clancey stands out. The fresh-faced 29-year-old is an operations manager at an Amazon.com warehouse in Phoenix, one of the 34 Amazon runs across the U.S. He oversees scores of workers who make sure products are accurately picked, packaged, and routed for delivery to Amazon's millions of customers.

Clancey's training, however, didn't involve earning a degree in the business of logistics management. Instead, the West Point graduate served as an infantry platoon leader in Iraq and then as an operations officer with the U.S. Army Space and Missile Defense Command in Colorado Springs. There he scanned the digital horizon for incoming intercontinental ballistic missiles aimed at the United States. (If he'd detected one, he would have had less than 30 minutes to advise the lieutenant colonel whose job it was to initiate the missile defense system to try to save the world as we know it.)

Why would someone who'd been trained to protect America against incoming missiles want to work at a company whose more pedestrian mission is to relentlessly drive down retail prices on goods large and small? "I was attracted to peak season," says Clancey, referring to the chaotic, all-hands-on-deck period at Amazon that merchandising civilians would call the pre-Christmas shopping rush. Having joined Amazon in September 2010, just before "peak" began, Clancey says he needed to "train up" in a short period of time, military-speak not quite having exited his system. "That excited me to come here," he says. "I stayed because of the leadership and the relationships we have with associates."

"Associates" are Amazon's hourly workers, the workaday world's equivalent of the military's enlisted personnel. If Clancey's aw-shucks fealty to his employer and his subordinates seems a little too good to be true, well, that's just one of the many benefits a company like Amazon (No. 56 on the Fortune 500) gets for placing its talent bets on those who cut their teeth in uniform.

In fact, Amazon is one of a growing number of U.S. companies that is taking advantage of a bumper crop of well-trained officers and enlisted people transitioning out of the services. These corporations are filling a need too, in part because the Pentagon typically excels more at fighting wars than helping its personnel find civilian jobs. In 2011, unemployment among the 2.4 million veterans who have served since the 9/11 attacks -- a cohort the U.S. Department of Labor categorizes as "Gulf War-era II veterans" -- was 12.1%, compared with a rate of 8.7% for all nonveterans in the U.S. Male veterans ages 18 to 24 were out of work at a rate of 29.1%, compared with 17.6% for male nonveterans of the same age.

Amazon's fulfillment centers, like this one in Phoenix, are largely run by veterans. Pictured from left: Josh Teeter, manager of the center and a former Arabic linguist in the Army; Dennis Clancey, an operations manager who was an Army infantry platoon leader; Kathleen Carroll, a Marine logistics officer who now helps run Amazon's military outreach program; David Ogle, a Navy machinist's mate on a submarine turned facilities manager; and Joe Velasquez, another former Army platoon leader turned operations manager.

Few, if any, Fortune 500 companies have embraced veterans more enthusiastically than Amazon. In 2011, 25% of new salaried employees hired by the online retailer at its fulfillment centers were ex-military. That appetite for vets landed Amazon in the No. 1 position for 2012 in the annual ranking of the top 100 military-friendly employers compiled by G.I. Jobs magazine. It's somewhat counterintuitive to think of the technology industry picking up the hiring slack for soldiers, sailors, and the like. But Amazon is really a logistics company as much as a tech company.

"We actively seek leaders who can invent, think big, have a bias for action, and deliver results on behalf of our customers," says Amazon CEO Jeff Bezos, alluding to some of the company's oft-repeated leadership precepts. "These principles look very familiar to men and women who have served our country in the armed forces, and we find that their experience leading people is invaluable in our fast-paced work environment."

At Amazon (AMZN) the ex-military men and women have formed something of a clique, at least in the fulfillment-center operations. Philip Dana, the company's talent acquisition manager for North America, served in the Navy, both as an enlisted man and an officer. (He persuaded Clancey to join Amazon.) Clancey's boss, Dan Fay, is another West Point grad. Josh Teeter, general manager of one of Amazon's pair of 1-million-square-foot facilities in Phoenix, was an Arabic linguist in the Army before joining Amazon.

It's easy to see what hiring managers see in veterans, particularly the young former junior officers who literally are battle-tested in addition to being well educated. "They have a standard of leadership that is different from someone right out of college," says Teeter, 37, who rejected a position as a contractor with the Central Intelligence Agency in favor of the Amazon assignment of boosting the intelligence of e-commerce. "They understand that it's not about them. They have a huge running start. They're smart. And they've already met a certain bar."

As for what the vets see in Amazon, they profess a higher -- albeit safer -- calling, just as they did when they joined up to become warriors. "The sense of purpose is similar," says Teeter, referring to Amazon's service-oriented mentality. Plus, he adds, "once a year you get to deliver Christmas."

The sizable ex-military force within Amazon emerged organically rather than as some kind of grand patriotic plan. Without consciously targeting them, Amazon found in its early days in the mid- to late 1990s that it had hired multiple former officers to run its warehouses, where logistics skills readily translated. The distribution organization became a magnet for vets. They included leaders like David Niekerk, a West Point graduate and early Amazon executive who today is vice president of human resources for global customer fulfillment. Every time Amazon added a new warehouse in a state like Delaware, Kansas, or Virginia, it needed a general manager for the building. Each GM, some of whom were veterans themselves, needed responsible people to man their new installations. Says Niekerk: "They were specifically asking for junior military officers to staff up their buildings."

Over time it dawned on the corporate brass that the military hiring was no coincidence. By 2010 there was sufficient critical mass that the company decided to formalize its military-hiring program. In true Amazon cut-out-the-middleman fashion, this also was an opportunity to conduct its own military recruiting rather than rely on the services of a handful of agencies that maintain networks of exiting service people.
Amazon so thoroughly ramped up its military hiring that it came to the attention of G.I. Jobs, which for 10 years has been ranking the most military-friendly employers in the U.S. with at least $500 million in annual sales. Among the criteria for judging military friendliness are various measures that show that a company tries to make veterans feel welcome, such as having a dedicated military recruiting website, as Amazon does, and the percentage of new hires from service members in transition, as well as the track record in retaining them. "What put Amazon on top was consistency," says Sean Collins, an executive with G.I. Jobs, whose parent company, Victory Media, was founded by veterans. "Amazon wasn't No. 1 in any one category. They are just consistent on every measure."

Kathleen Carroll says Amazon's 14 leadership principles mesh well with military training.

Emblematic of Amazon's recent hires is Kathleen Carroll, a former Marine Corps logistics officer -- she helped operate an airport in Iraq for a spell -- who now helps run the military-relations program. The 35-year-old Carroll says she abandoned a cushy suburban Chicago existence for the Marines because she thought it would be interesting. Her job effectively is to be a liaison between the corporate and military worlds, and she echoes Bezos in saying that Amazon's 14 leadership principles mesh with those of the services. "Military leaders are comfortable with ambiguity," says Carroll, likening a nonspecific order to "take the hill" or "build a bridge" to an imperative to fix a glitch on the pick-and-sort line in the chaos of the Christmas rush. "We always start with the customer and work backwards," says Niekerk, the top ex-military man in the operations wing of the company. "That rings so true with many of these former military officers in terms of starting with the mission and figuring out how to accomplish it. It resonates very well."

As a Marine logistics officer, Carroll helped operate an airport in Iraq.

By capitalizing on what arguably is a good fit anyway -- airlines similarly have long hired ex-military pilots -- Amazon is leading where equally well-meaning companies have trouble following. "Most HR professionals simply don't know how to read a military résumé," says Mary Santiago, director of veteran employment services for the U.S. Department of Veterans Affairs. Her office is developing a series of best practices to share with employers.

With ex-military men and women in a disproportionate number of leadership positions in Amazon's fulfillment centers, the tone is unapologetically martial. Conference rooms at one fulfillment center in Phoenix have names like Mess Hall and Bunker. Amazon has minted a "service coin" similar to the medallions military commanders hand out as tokens of appreciation for jobs well done. The Amazon coin has the logos of all five U.S. services on one side and the Amazon logo on the other.

But military hiring isn't just about former officers. David Ogle, a machinist's mate -- an enlisted position -- on a submarine in the 1990s, is a facilities manager in Phoenix. ("If it's not breathing, a computer, or a product, I'm responsible for it," says Ogle, who is 39.) He joined Amazon in 2010 after working in a similar role for a semiconductor manufacturer, and he manages 60 people, half of whom are veterans.
While proud of the areas of overlap, Amazon's veterans generally don't overdo the military-to-Amazon comparisons. "Delivering Christmas," after all, simply isn't the same as taking the hill. If anything, the vets seem joyfully aware of how much cushier corporate life can be than life on the firing line: no months-long deployments in harsh conditions, a glass of wine at home with a spouse after work rather than an MRE in the field, and so on. Mistakes, while to be avoided, mean a loss of money -- Amazon estimates that each misdirected item in the picking process costs the company $10 -- not the difference between life and death.

Life at Amazon isn't without its stresses, especially for its hourly workers. Not unlike the military, Amazon is known as a demanding employer. Last year the company settled a federal lawsuit in Pennsylvania tied to a worker's allegation that he had been instructed to lie about the nature of a workplace injury. Intense heat and unforgiving hours have been other criticisms about the conditions in its fulfillment centers lodged against Amazon, whose federal safety record nonetheless is equal to or better than other warehouse operators.

While its fulfillment centers are meticulous -- conveyor belts whiz packages from shelves to shrink-wrap machines to the loading dock -- the look and feel is anything but military. Casual dress is the norm for line workers and managers alike. Kaizen suggestion boxes, referring to the Japanese term for continual improvement, dot the walls of Amazon's facilities. Amazon, you see, values the input of its lowest-level employees, whereas Army brass isn't known for soliciting opinions from grunts. Amazon has less hierarchy than the military too.

Indeed, corporate existence requires a whole different vocabulary from the military. Joe Velasquez, a 33-year-old operations manager in Phoenix, had been an infantry officer in Iraq and joined Amazon in 2007 after returning to his native Arizona. "It was a culture shock," says Velasquez. "I could speak to enlisted people more directly [in the Army]. Here you stress teamwork. You need to take time to explain."

In multiple discussions with Amazon's management and "front line" leaders, not one mentioned the company's military employment program as a function of corporate patriotism or even as good PR -- though Amazon surely appreciates the side benefits of being recognized for assisting vets.

The company has plans to do even more military-related hiring. It is duplicating its U.S. efforts in the U.K., where Amazon has a large presence, by targeting British veterans. It also has launched a program to hire spouses of active-duty personnel as "virtual" customer-service representatives and is considering a similar effort built around disabled veterans.
Military spouses in particular are prized employees. Once trained, the fact that they move frequently won't diminish their value to Amazon, and their need for unconventional hours lines up with customer-service work. Shannon Wilson, for example, joined Amazon late last year, shortly after giving birth to her daughter. (Her husband, Rob, is deployed on the nuclear submarine USS Pennsylvania.)

There is also an added bonus with military spouses: They're natural Amazon customers. "I personally use Amazon for all kinds of things," says Wilson, in an e-mail exchange from Bremerton, Wash., where her family is currently based. "Since the military has brought us to places farther away from our family, it's great for birthday and Christmas gifts because I can have them sent directly to family and friends instead of having to go to the post office." Seems like Amazon has this one figured out: It is winning hearts, minds -- and pocketbooks.

By Adam Lashinsky CNNMoney.com May 7, 2012


How Amazon learned to love veterans - Fortune Tech

How Hewlett-Packard lost its way - Fortune Tech

FORTUNE -- A few months after she took over as the CEO of Hewlett-Packard (HPQ) last September, Meg Whitman held one in a series of get-to-know-you meetings with employees. To say the audience, a group of software engineers and managers, was sullen would be an understatement. As Whitman spoke, many of them glared at her. Others weren't making eye contact with their new boss. Their heads were down, and they were tapping furiously on handheld devices.

"Your comments are being live-blogged," one employee told her defiantly. Whitman challenged the man. "You all have taken leaking to a new art form," she said. "It's a sign of an unhappy company. You wish HP ill." The tapping suddenly stopped, and as the room fell silent, the mobile devices were lowered.

The employees' open contempt for the head of the company and Whitman's acknowledgment of their misery were signs of just how dire things had gotten inside the technology titan after a humiliating series of epic stumbles last year. Just in the few months before Whitman became CEO, there was the costly failed launch of a tablet computer, a mortifying public waffling over whether to spin off the company's giant personal computer business, and then the drumming-out of its third CEO in less than seven years.

If only HP's troubles were confined to a few months in 2011. For a decade now the company has sometimes seemed more like a tawdry reality show than one of the world's great enterprises. The public dysfunction started with the vicious infighting over HP's merger with Compaq in 2002, which reached its nadir when the company's high-profile CEO, Carly Fiorina, pilloried Walter Hewlett, a board member and son of a company founder, for daring to voice his opposition. There was a board riven by feuds -- so out of control that some directors were leaking secrets to the press while the chairman of the board was hiring private investigators to obtain their phone records (and those of reporters) to uncover the perpetrators. That bit of skullduggery ended with the company's chairman and its CEO both dragged before Congress to explain themselves under oath. Then came the ouster of the company's putative savior, CEO Mark Hurd, after allegations relating to his interactions with a marketing consultant who had been an actress in risqué movies; both parties absolutely, positively, categorically denied that there was any hanky-panky.

Dr. Phil could fill a month's worth of shows just examining HP's board, whose dynamics have resembled those of rival junior high school cliques more than what is supposed to be a sage guiding force. At times, as we'll see, HP directors have refused to be in the same room with one another and have accused each other of lying, leaking, and betrayal. Time and again they've failed in their choice of CEO -- their most important task -- selecting a new leader whose most salient trait is that he or she is the opposite of the last one.

All of this has impeded the company from tackling the fundamental problem it faces: Simply put, Hewlett-Packard has lost its way. The company is in the midst of an existential crisis. It remains a behemoth, No. 10 on the Fortune 500, with $127 billion in sales last year and $7 billion in earnings. But the trajectory is ominous. Those profits, for example, were 19% lower in 2011 than in the previous year. HP's business is under siege on almost every front, losing market share and facing declining margins.
It was a combustible mixture: long-term threats to the business combined with an impaired board and an ill-chosen CEO in Léo Apotheker (LAY-o AH-po-teck-er). The three ignited disastrously during the 11 months that the 58-year-old European software executive ran HP. Indeed, there's no better way to understand the company's plight today than to examine his tumultuous tenure. A Fortune investigation reveals that the turmoil of Apotheker's reign was even more intense (hard as that is to believe) than previously reported. From the slapdash hiring of a man with no experience in HP's biggest lines of business, to the half-baked ways in which the company tackled major strategic decisions; from the never-before-reported internal challenges to Apotheker by top executives, to the fact that HP chairman Ray Lane was a major force in the company's strategic decisions -- which he has since blamed on Apotheker -- the full story of HP's convulsive year has never been told. This article is based on interviews with more than 70 current and former directors, executives, and employees of HP, SAP (where Apotheker once worked), and other companies in the industry, as well as hundreds of pages of company and legal documents, many of them never before made public. (Citing a confidentiality agreement with HP, Apotheker declined to meet with Fortune in Paris, where he now lives.)

With Whitman, 55, now in place, the acrimony at HP seems to have eased. So far her strategy amounts to this: Let's execute better while we figure out our long-term plan. That's fine, as far as it goes. But the company will never come close to reclaiming its former glory unless she and the board can find a way to function together and, most important, until she can answer the real question: What is HP?
The saga of HP's 11 months under Léo Apotheker begins in November 2010. To understand it, you need to appreciate what he found and how HP got to that point. The company seemed strong at that moment, its swagger restored during the five years Mark Hurd had been in charge. Earnings per share had quadrupled. The stock price had doubled. HP was No. 1 in PC shipments, No. 1 in printers, No. 1 in servers.

But just under the surface was a very different reality: HP was traumatized, its employees disengaged. Internal "voice of the company" surveys revealed that morale had cratered. One top executive told Apotheker she felt "maimed" by Hurd's hard-charging style. A company hailed for its vaunted "HP way" -- which emphasized employee autonomy -- had stifled creativity to the point where workers now had a rueful phrase to describe the way they tuned out and pretended to be clueless when executives asked them to do something: "flipping the bozo bit."

HP was barely innovating. The company didn't boast a single hit consumer product even as 67% of its revenue stemmed from hardware. Apple (AAPL) had shown the riches awaiting those who invent hit devices. But there were no iPhones or iPads in HP's bland array of products. And Apple was only one rival for HP, whose diverse businesses meant it also competed with enterprise hardware and software companies such as IBM (IBM) and Oracle (ORCL) and consultants such as Accenture (ACN).
Faced with pressures on every side, HP had seen its numbers begin to slide. After nearly doubling in Hurd's first three years, for example, free cash flow sank from $12 billion in 2008 to $8.4 billion in 2010, his last year.

By contrast, the company HP dreamed of being, IBM, had soared by taking a different tack: It dumped its PC business and focused on high-margin software and services. That prompted what is probably an apocryphal, but telling, anecdote among enterprise techies: Two visiting consultants are waiting for the elevator at a big company's headquarters. One is from HP, the other from IBM. The consultant from Big Blue pushes the up button to visit the CEO on the top floor. The HP man, by contrast, hits the down button to see the IT guy in the basement. The message was clear: IBM was consorting with kings while HP was on hands and knees, fixing the plumbing. It wasn't just a metaphor either: IBM's pretax profit margins, just under 20%, were more than double the 8.7% HP achieved in Hurd's last year.

HP had been operated with an eye toward the short term. Hurd emphasized financial management. Revenues grew largely because of acquisitions -- including the Compaq deal, HP bought 86 companies under Carly Fiorina and Hurd -- and profits multiplied mostly because of Hurd's ferocious cost-cutting and growth in the PC business.

Hurd's early initiatives to pare spending were valuable and necessary. But as time went on it became harder to find waste, and the results became extreme. Employees practically needed an act of Congress to get approval to buy a piece of software. The headquarters of the tech company did not have Wi-Fi. And some minions took Hurd's edicts to self-defeating lengths. At HP's office in Fort Collins, Colo., for example, the lights shut off automatically at 6 p.m. every day, effectively forcing workers to go home. An intrepid few brought their own lamps to the office, only to be scolded by facilities managers, who told them to remove the lights.

Decay had begun to show in some HP offices. Mice skittered in the corridors. Spiders fell from cracked ceilings. As the company cut back on trash pickups, detritus piled up, and in one location workers took garbage home in their cars. Upon arrival, Apotheker was informed that HP was missing 85,000 chairs. The figure was so farcical that he had to check to make sure it was right. It was. Hurd might not actually have "burned the furniture to please Wall Street," as HP's chairman, Ray Lane, would later disparagingly put it. But the Hurd era's external success had concealed internal deterioration.

Before Apotheker ever came to HP, the company was known for its fractious board. Individual directors would cycle in and out, yet somehow the group seemed constantly divided by personal rivalries, bickering, and leaks to the press.

In one HP office, the lights went off at 6 p.m. to save money. Workers were scolded for bringing in their own lamps.

With his forceful personality and a rising stock price, Hurd, 55, managed to suppress the worst contentiousness. But his departure brought out the sharpest antagonisms in the board. Directors argued for an intense week before announcing Hurd's resignation on Aug. 6, 2010. Technically Hurd was pushed out for false explanations on expense accounts relating to interactions with contractor/actress Jodie Fisher. Despite a letter from Fisher's lawyer charging sexual harassment, the company found no evidence that Hurd had harassed Fisher. What doomed him was the board's view that he had misled them when he initially denied any relationship with Fisher. (A spokesman for Hurd declined to comment on the record; the ex-CEO has previously denied any impropriety, financial or otherwise.) Hurd was replaced on an interim basis by CFO Cathie Lesjak, a two-decade HP stalwart who made it clear she wasn't a candidate for the permanent CEO position.

The board's tensions did not abate when Hurd left. One of the ex-CEO's staunchest allies on the board was Joel Hyatt, the founder of a chain of legal clinics and later the co-founder of Current TV. Hyatt was prickly. He didn't hide his contempt for the two directors who had led the investigation of Hurd, Robert Ryan, an ex-CFO of Medtronic (MDT), and Lucille Salhany, the former chairman of Fox Broadcasting. He claimed they had railroaded the former CEO. For their part, Ryan and Salhany couldn't believe how long it had taken their fellow directors to recognize the gravity of what they viewed as Hurd's lies.

There was an almost dizzying array of ambitions and gripes among the directors. Lawrence Babbio, the former vice chairman of Verizon (VZ), hoped to be named HP's chairman. John Joyce, a former CFO of IBM, was vying to be president of HP. Several complained that Hyatt had been -- and was still -- channeling board discussions to Hurd. (Hyatt says his conversations with Hurd were proper and fully disclosed to the board.)

Hoping to mollify Hyatt, the directors named him co-chairman of the committee to pick a new CEO and lead the transition. But Hyatt wasn't placated for long. He was furious to learn that two directors had addressed employees about Hurd's departure without inviting him. "My colleagues aren't interested in my help," he seethed, resigning his title as co-chairman, though he stayed on the committee. When an article detailing the sexual harassment allegations against Hurd appeared, Hyatt accused his fellow directors of leaking. "We took a blood oath" to keep board matters private, he fumed, "and it didn't last 24 hours."

Despite the rancor, the search committee members tried to focus on finding a new CEO. They picked Spencer Stuart's James Citrin to run the search. (Citrin declined to be interviewed for this article.) Smooth, gregarious, wired into the C-suites of the world's biggest companies, Citrin had a network that few could match. He embarked on a two-track search, examining both internal and external candidates.
Four internal aspirants stepped forward. The strongest was Todd Bradley, the head of HP's personal computer group. His group generated $41 billion in annual revenue and had tripled its profitability during his tenure. But Bradley had shortcomings. His critics said he tended to mumble in presentations and was perhaps a bit too cozy with the press. His record as an infighter had made him enemies. Several top executives said they would resign if he were named CEO. For various reasons the other three internal contenders -- Ann Livermore, Tom Hogan, and David Donatelli -- were also ruled out.

Hurd certainly hadn't made the board's mission easy. At various times when he was CEO he had told three of the internal candidates they were his heir, according to people familiar with the matter. Hurd then turned around and told the board that none of them was ready to be CEO. Needless to say, that left bruised feelings that would ultimately sour relations with the next CEO.

Citrin was keen on Ray Lane, a managing partner of the venture capital firm Kleiner Perkins. Lane had a track record in enterprise software and one of the biggest Rolodexes in the Valley. After a successful turn as Oracle's president in the 1990s, Lane was pushed out by CEO Larry Ellison in 2000. He left an extremely wealthy man but bearing a grudge against his former boss. Lane was tempted by the HP job. But at age 65, he had young kids and other business commitments. He didn't want to work CEO hours and he preferred not to travel much. Lane withdrew after it was made clear that being chief of a $127 billion corporation is all-consuming.

If not Lane, then whom? Citrin was enthusiastic about a former enterprise software CEO, whose career he'd been tracking. But hiring him would take courage. He'd been fired after a short, rocky tenure. HP directors were skeptical. But the more they learned, the more impressed they became.

The man had expertise in enterprise software, an area the board thought HP needed to move deeper into. He spoke five languages and had worked on three continents, a major plus considering that more than 60% of HP's business was now overseas. He was a bold choice, Citrin told the search committee, and if they picked him, they would be remembered for making "one of the best CEO picks ever."

Apotheker's rise had been impressive. He was born in 1953 to Polish refugees who settled in Germany after World War II. His father acquired a textile factory with help from the Marshall Plan. Apotheker spent his first eight years in Aachen, Germany, and then moved to Belgium. He studied international relations and economics in Israel.

In 1988, Apotheker joined SAP (SAP), then a small German business software concern, and launched its operations in France and Belgium. Apotheker was a master salesman, deploying cold logic rather than charm. "He could sell ice cream to an Eskimo," says one former deputy. "But he wouldn't just sell ice cream. The customers loved the insights they were getting out of this guy." Apotheker's brilliance and his astute push for key acquisitions such as BusinessObjects helped SAP become an international force. By 2005 he was a contender to become SAP's CEO.

Still, it sometimes seemed as if there were two Apothekers. There was the awkward, self-deprecating version who kept a statue of a clown on his desk, a gift from his children, to remind himself to be humble. And there was the imperious tyrant who could be so overbearing that his enemies dubbed him the Sonnenkönig, the Sun King.
The stories of his nastiness flew around SAP. One poor fellow was only a few sentences into a presentation when Apotheker began bombarding him with questions, according to two people who were present. After several minutes under this fusillade the man sank to the floor, whimpering, "What do you want me to do? What do you want me to do?" Apotheker was capable of absurd flights of invective. "Bring me the liver of that asshole," he raged on one occasion to a stunned deputy, who didn't know whether to laugh or to cry. "I will eat it for breakfast."

An SAP presentation, part of a campaign Apotheker led to "disrupt" Oracle, portrayed Larry Ellison as a fly.

Apotheker thought of himself as an honorable man, according to colleagues. But he viewed the world as a place filled with retribution and betrayal, so he was willing to throw an occasional elbow if need be. After all -- at least, in his mind -- that's what everybody else was doing. Some of the seeds for Apotheker's downfall at HP were planted in precisely that sort of thinking.

It began with a feud between Apotheker's prior company, SAP, and Oracle. As SAP saw it, Larry Ellison's company had barged into its turf -- back-office software -- in 2004, buying PeopleSoft, and later Siebel and others. Ellison, who seems to revel in psychological warfare, gleefully trashed his rival in public. (An Oracle spokeswoman declined to comment.)

In response, Apotheker led a campaign called Project Apollo. The secret operation was rolled out at SAP's summer sales meeting in July 2005. The goal was to motivate the troops by "highlighting the falsehoods Oracle tells about SAP" and to "demonize Larry Ellison to the field," according to a memo prepared for the event.

The presentation included a video that depicted Ellison's head on a fly's body. It was time, Apotheker said as the fly buzzed above him, to "treat Oracle like the pesky, annoying bug it is." At that point, a can of bug spray was aimed at the fly. "And that is how we intend to treat the annoying lies," Apotheker intoned, "by swatting them away with facts."

But Project Apollo wasn't just a truth squad. It became an expensive and ultimately self-defeating attack strategy. The plans, outlined in SAP documents that emerged in subsequent litigation, included a "disinformation campaign" against Oracle and efforts to "disrupt" its rival.

Apotheker ordered SAP to "exploit" the opportunities "to the hilt." One part of the campaign involved a then-newly acquired software company called TomorrowNow, which provided service for users of PeopleSoft and Oracle software, among others. SAP hoped to use TomorrowNow to lure customers from those companies. The problem was that, as even SAP would later admit, TomorrowNow was able to provide cheap service because it was secretly and illegally downloading software from Oracle.

In 2007, Oracle sued. Apotheker was grilled for eight hours by Oracle's lawyers. He dodged and weaved. He insisted SAP shut down TomorrowNow after it learned of its unethical practices. Apotheker remained bland and vague throughout the deposition. Only when the lawyers read him SAP's "attack plan" to "seek and trash Oracle" did Apotheker flash a rare grin. He shouldn't have been smiling. Within three years the suit would blow up in his face.

In June 2009, Apotheker was promoted from co-CEO to CEO. The world economy remained fragile, and like most companies, SAP was suffering. The company was forced into global layoffs for the first time, infuriating its unions.

Apotheker made things worse for himself. When he was co-CEO, SAP had raised the lucrative fees that it charged to maintain its software. Customers resisted, but even as the economy tumbled into recession, Apotheker wouldn't yield. For months he refused to roll back the increase and squabbled in public with his customers. Only after clients had fled did Apotheker finally relent.

It was too late. In February 2010, SAP's executive chairman and co-founder, Hasso Plattner, called him. After all the hard things that had transpired, Plattner told him over the phone, SAP needed a "new face, a happy face." Apotheker was instructed to leave that day. Stunned, he retreated to his home in Paris and sank into a deep funk. Six months later, Apotheker got a second chance. It was Jim Citrin calling about the CEO job at HP.

Citrin's report on Apotheker largely defended his performance. It quoted insiders saying that the CEO fell victim to a perfect storm of circumstances while trying to make bold strategic changes. The report did mention the botched maintenance hike, but it failed to explain the leadership deficits that undid Apotheker at SAP -- faults that would undermine him at HP: his negativity, his nastiness, and his unwillingness to be coached.

The announcement that Apotheker had been named CEO and Lane would be chairman came on Sept. 30, 2010. The Apotheker appointment shocked the tech world. Media reports had predicted the new CEO would be Todd Bradley or Ann Livermore. Within HP, jaws dropped. Léo who? SAP had one-eighth its revenue. For crying out loud, there were HP senior vice presidents who ran units bigger than all of SAP.

For the board, no other candidate had come close. Apotheker had struck just the right notes: He understood the strengths and weaknesses of HP and of key executives; he spoke of the need to restore innovation. True, he was an outsider, but he acknowledged his lack of experience and the board had a solution: Lane, a Silicon Valley blueblood, would guide him. As part of being hired as chairman, Lane had asked who the new CEO would be; he had enthusiastically endorsed Apotheker.

The full board never met Apotheker and Lane before hiring them. As one director told New York Times columnist James Stewart, many were too exhausted by the fighting. Board members did discuss the consequences of hiring two men without hardware backgrounds, but they felt that Bradley and the other HP executives could coach them. They briefly discussed Oracle's litigation against SAP and were assured there was little likelihood Apotheker would become ensnared in it. It was no big deal.

Still, Oracle was emerging as a potential plague for other reasons. Larry Ellison was friends with Mark Hurd and livid at HP's decision to fire him. Ellison publicly accused the board of making "the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago." Only one month after Hurd resigned from HP, Oracle hired him as co-president.

The news exploded inside HP, which had a complex relationship with Oracle. The two companies were competitors -- but also partners, sharing some 140,000 customers. Within 24 hours of the news, HP filed suit against Hurd, claiming he had put the company's most valuable trade secrets in peril. (Even that move had unintended consequences inside HP. Its general counsel, Michael Holston, filed the suit without consulting the full board. Director Hyatt was furious. "You did what?" he bellowed at Holston. Hyatt thought it would jeopardize HP's relationship with Oracle.)

When Ellison learned that HP had hired two Oracle antagonists, he swung back into action. The timing of Apotheker's appointment was fortuitous. His first day of work, Nov. 1, coincided with the start of Oracle v. SAP, the trial to assess the size of damages for the theft of Oracle software by SAP's unit, TomorrowNow. Oracle's lawyers announced they planned to subpoena Apotheker if he came within 100 miles of Oakland, where the trial was being held.

Apotheker had just taken the reins of America's largest tech company. Many a new leader would fantasize about riding in on a white stallion, flags flying, to take charge. But Apotheker was advised not to testify. So instead of making a dramatic entrance at HP's Palo Alto headquarters, Apotheker was forced to stay away. He took off on what the company dubbed a "listening tour" of its global empire, visiting offices around the world: the U.K., Germany, France, Brazil, Singapore, New York, and Houston.

It was a PR fiasco. Apotheker was mocked. Bloomberg TV sent a reporter to look for him just outside the 100-mile subpoena service limits. WHERE IN THE WORLD IS LÉO? sneered the crawl at the bottom of the screen. It only got worse when Oracle was awarded $1.3 billion in its suit against SAP. (It was later reduced to $272 million; Oracle rejected the judgment and the suit is going back to trial.) Ellison's company had succeeded in making Apotheker look weak and defensive before he even set foot in Palo Alto.

More: HP's cast of characters

Despite the turmoil, there were fleeting moments when it appeared Apotheker might enjoy a honeymoon at HP. Investors seemed heartened by his first moves. He wanted the personal computer and printer groups to focus more on business-to-business sales, and he sought to move the services operation into higher-margin areas. He planned to focus HP's software on big data analytics, a goal he said could be achieved without expensive acquisitions.

Employee morale started to improve. Apotheker undid salary cuts that had occurred under Hurd. He held a series of town halls and breakfasts. He brought in a European youth orchestra to play for the troops at headquarters. He toured HP's labs and vowed to bring innovation back.

But events quickly turned against Apotheker. In February 2011, just three months after he took over, HP missed its quarterly revenue estimate. Both the PC and services divisions had underperformed. Apotheker directed his ire at himself, to some extent, and even more at HP's CFO, Lesjak. Now the stock was being pounded -- down 10% in a day -- because the company hadn't delivered.

Then, in March, came a disturbing flare-up in what was starting to look like a long-term conflict with Oracle. HP's frenemy announced it was discontinuing software development for servers that used Itanium chips made by Intel. It was a stick in the eye of HP, the biggest manufacturer of such equipment (which competed with Oracle's servers). The servers generated more than $1 billion in profits for HP. Now the business was imperiled.

Furious, HP filed suit, claiming Oracle's move violated the settlement in the Hurd case, in which the two companies promised to conduct business as usual. The suit brought more bad press, exposing embarrassing documents, which revealed that Intel had tried to discontinue Itanium because the chips were losing money. The reason the company hadn't done so was because it received $690 million in subsidies from HP to keep manufacturing the chips until 2014.

The threat to the Itanium business underscored HP's vulnerability, and it affected Apotheker's thinking. As he pondered the company's strategic direction, he began to see the need for a more fundamental change. In his mind, the company simply couldn't continue with its strategy of being the most cost-effective hardware supplier and making modest incremental investments in software.

Apotheker started to believe that what HP needed was a transformation on an IBM scale, but conducted in a much shorter time frame. HP should spin off its massive but stagnant PC division. And HP needed to really commit to the software business by buying a big data analytics company.

There was also a third major initiative, this one a holdover from the Hurd era. Apotheker's predecessor had purchased Palm Inc. in July 2010 for $1.8 billion -- one of his main attempts to fashion a growth strategy. (Hurd also recruited venture capitalist and onetime Internet wunderkind Marc Andreessen to join the board and inject some fresh thinking.) Palm was planning to launch a tablet computer -- a product sorely lacking in HP's stable -- and it would use a new operating system called webOS. Technology denizens praised the operating system, which raised the prospect that HP could make giant profits on software (rather than letting the big money go to Microsoft (MSFT)). And the buzz on Palm's tablet was good. Maybe, just maybe, HP would have a new hit -- a quick infusion of profits and prestige.

But before Apotheker hatched his strategy, he and Lane reshuffled the board. The process was messy and contentious. The media would portray the changes as evidence that Apotheker had taken control of the board. In truth, it was Lane who would consolidate his grip.

HP directors were asked for a show of hands: Which were willing to resign?
In November 2010, the same month Apotheker took over as CEO, the usually silent director Ken Thompson, the former chief of Wachovia, declared at a board meeting that every director should tender his or her resignation. That way Lane could pick which directors to keep. The suggestion shocked some board members, but before they could even respond, general counsel Holston jumped in: Letters of resignation aren't feasible, he told them, since securities laws would require them to be publicly disclosed. So Thompson asked for a show of hands: Who would offer to quit? Most directors raised their arms.

Lane quickly established a committee -- Apotheker, Babbio, McKesson CEO John Hammergren, and himself -- to decide which heads to lop off. The jockeying began almost instantly. Hammergren wanted to oust Salhany; in return, she viewed him as arrogant and egotistical. Most of the directors couldn't stand Hyatt and pushed for him to be dumped. Three had refused to sit on committees with him; Andreessen had gone so far as to skip an entire board meeting so he wouldn't have to be in the same room with Hyatt.

In late December, Lane asked the two directors seen as Hurd's main defenders, Hyatt and former IBM CFO John Joyce, to step down. Then, "as a matter of balance," Lane told the two directors who had led the Hurd probe, Ryan and Salhany, that they needed to depart also. Ryan and Salhany were upset. They'd invested significant effort in the investigation and felt their work had been vindicated. Why did they have to go? In the end, rather than cause yet another fight, Ryan and Salhany agreed to leave, signing prepared resignation letters.

Once that was accomplished, Lane set about restocking the board. In January 2011, the company announced five new directors. One, Dominique Senequier, CEO of AXA Private Equity, was seen as an ally of Apotheker's. The rest were Lane's picks. The most notable was Meg Whitman. She and Lane had forged a friendship years earlier; as Oracle president he had helped save the day after eBay (EBAY) experienced a major server crash. Lane later supported Whitman's campaign to be governor of California and, after she lost, helped her get a job at Kleiner Perkins.

Whitman talked to Andreessen, another friend. He told her he thought she'd be an excellent addition to the technology committee and he praised Apotheker as a strategic thinker. To Whitman, the venture sounded interesting and fun. "This is probably a well-run company," she thought. "It's 12 minutes from my house. What could go wrong?"

Plenty was still going wrong at HP in the spring of 2011. On May 4, Apotheker composed a grim e-mail to his top executives. The third quarter was going to be "another tough" one, he wrote. "We must watch every penny and minimize all hiring." Two weeks later the memo turned up in a Bloomberg News article. The memo's grim tone contradicted the sunny message that Apotheker was conveying to Wall Street. The leak forced HP to accelerate its quarterly earnings release, which included news of another pullback of revenue projections. HP shares plummeted. Apotheker was incensed by the leak.

He had wandered into a snake pit. Hurd had fed the rivalries of top executives, claiming that competition and "dynamic tension" inspired better performance. Sometimes Hurd gave multiple executives the same assignment. Everyone knew who was in Hurd's doghouse and pounced on them. He had ridden Vyomesh Joshi, the head of the printer group, particularly hard.

Perhaps because they were used to being dominated by Hurd, few in HP's senior ranks would challenge the CEO directly. Consider Apotheker's attempt, earlier that year, to find a catchy phrase that could define HP. He settled on a head-scratcher: "Everybody on." Instead of opposing the idea, almost every executive told Apotheker it was a great slogan (with at least one whispering behind his back that it was horrible). Only Joshi was willing to speak up. "I don't get this," he told Apotheker when the slogan was unveiled at a meeting. Joshi earned the CEO's wrath. The campaign launched -- and promptly bombed. As one tech blog headline described the debut, HP'S "EVERYBODY ON" AD GOES TO THE GRAMMYS, CAUSES NATIONWIDE CRINGING.

It didn't help that HP's divisions were run as separate entities, each with its own marketing, public relations, and finance teams, and each was held responsible for its own performance. There was little incentive to cooperate. It sometimes seemed as if the printer and computer teams were from separate companies. (This could lead to ludicrous consequences. Some HP PCs didn't even have software that would automatically allow them to "talk" to an HP printer.)

Hurd had managed to hold it together. He had an encyclopedic mastery of numbers and details; he knew which functionary to call deep inside the organization to make things happen. He was an energetic and forceful commander -- somewhere between Gen. George Patton and the Robert Duvall character in Apocalypse Now. You may not have liked the guy, but by God, you were going to follow his orders.

Apotheker, by contrast, was an outsider with a foreign accent. He carried himself more like a professor of German philosophy. He lacked Hurd's stamina, nodding off the first time he met HP's senior executive team as CEO. Apothecker chuckled at his own droll putdowns of California wines, but nobody else seemed to laugh. And he had a distinctive blend of arrogance -- a certainty that the board applauded his every move -- combined with a fear that some executives were trying to undermine him.

Apotheker seemed not to trust longstanding HP executives such as Lesjak, Holston, and Bradley, who he had allowed to stay on. They returned the sentiment. And Apotheker alienated some HP veterans by bringing in a coterie of SAP executives who, one HP source says, were "abnormally deferential." One of them, Marty Homlish, who had been SAP's marketing chief and Apotheker's right hand in the Oracle fight, took over marketing at HP. Homlish routinely addressed the CEO as "my lord." It was meant to be funny, but colleagues were taken aback. The practice only accentuated Apotheker's outsider aura.

Apotheker was failing to unite his executives, but he thought he could count on Lane, who had told Apotheker he would manage the board while the CEO focused on running the business. Apotheker considered Lane a friend. The two men had gotten to know each other decades earlier when, long before either had developed an antipathy for Oracle, Apotheker had taken a hiatus from SAP and consulted for Ellison's company.
There were reasons for optimism. HP had decided to increase its investment in the tablet that had come with the Palm acquisition. It was set to go on sale in July, and the webOS software would be used to launch a new line of smartphones, PCs, and printers. No one expected to dethrone the iPad any time soon. But HP's new tablet would give the company a presence in that market.

In May 2011, Apotheker began in-depth discussions with HP's board on his two other initiatives: a software acquisition and the plan to spin off its PC business. Between May 25 and July 21, he held repeated strategy sessions with the board and various committees. But before they could make any decisions, calamity struck: HP's tablet was an unmitigated disaster. It went on sale only to be panned as ungainly, slow, and burdened with a subpar battery. The webOS software performed well. But Apotheker was galled by the failure of HP's hardware. The tech titan had taken a big swing at the hottest new device in the market and whiffed. The failure was so complete that HP began thinking about pulling the tablet entirely.

The disaster added urgency to Apotheker's strategic plans. He had wanted to go big in software; he had a British data company, Autonomy, he wanted to buy. It would be a perfect complement to HP's portfolio, Apotheker argued, because its software -- a sort of Google (GOOG) for corporations that can search voicemail, texts, and video -- would bolster HP's software and services offerings.

Apotheker appeared before the board and conceded that it was a tricky deal, one that might hurt HP's stock price in the short run. But then the usually formal CEO made an emotional personal appeal. "This company is a burning platform," he told the directors. HP needed a new vision. He concluded: "I cannot do this alone. I need your support. We're going to have to hold hands and go through this together."

It was a stirring presentation, but it was followed by an even more dramatic moment that blindsided Apotheker. He knew that the CFO, Lesjak, opposed the deal. She had told him the price, around 11 times revenue, was too rich. Comparable companies were selling for three times revenue, according to investment bank Software Equity Group. He'd countered that Autonomy's profitability more than justified the price. The two had discussed it privately.

But then, with no warning to Apotheker, Lesjak made an impassioned case against the acquisition before the board. "I can't support it," she told the directors, according to a person who was present. "I don't think it's a good idea. I don't think we're ready. I think it's too expensive. I'm putting a line down. This is not in the best interests of the company." Directors were shaken. Lesjak was considered a voice of sobriety, and here she was on the verge of insubordination, directly resisting a key element of her boss' strategy.

As the debate over Autonomy unfolded, Apotheker and the board tackled an even bigger decision, one that went to the very heart of what HP is all about: Should they jettison the company's $41-billion-in-sales PC division? Unfortunately, the process by which that decision was made would reflect everything wrong with HP in general and the Apotheker/Lane regime in particular. It was rushed and cursory, first dramatically conclusive -- and then uncertain.

In July the board had set up a five-member committee to study the options for the PC division. The committee, which included Babbio, former Lucent CEO Pat Russo, and Ray Lane, held all of two meetings. They didn't even consult Bradley, the head of the division in question. The directors were afraid he would leak the news, so they excluded him.

It was a huge decision, but the board quickly agreed that the spinoff was a good idea. The division's margins were 6% and shrinking. The iPad was eating into the growth of the PC market, raising questions about its future. Apotheker and the directors thought HP could spin off the division and use the cash better elsewhere. Everyone recalled that IBM's sale of its PC division had been a crucial step in its transformation.

But even when the board was decisive, the company couldn't avoid tripping over itself. Lesjak and general counsel Holston argued against announcing definitive plans to unload the division; it might expose HP to shareholder litigation if the plan didn't work out. Because of the fear of leaks, they said, Lane and Babbio's committee hadn't been able to do enough due diligence to assess these impacts. Lesjak and Holston pushed for a weaker statement that HP was considering a spinoff. In part because of the credibility Lesjak had on Wall Street, their voices carried the day.
The activity was frenzied inside HP's executive suites. Apotheker and his top aides were shuttling between groups working on the different initiatives. The CEO himself seemed to be feeling the pressure. After a PR operative told the board that the announcement would be a disaster -- there were too many things being trumpeted at the same time and the mealy-mouthed decision to "explore" a PC spinoff would be badly received -- Apotheker flew into a rage. He stalked back to his office, violently shoving a chair out of his way, and pounded his desk.

But for all the tension, and the challenges to Apotheker's plans, Lane had marshaled support on the board. The directors were unanimous. On Aug. 18, they approved the Autonomy deal and the plans to explore a PC spinoff. With an investor's call scheduled for later that day, Lane e-mailed Apotheker some tweaks to the final script, which the chairman pronounced "good."

HP'S announcement on Aug. 18, 2011, rocked the tech world. It contained three big pieces of news: the Autonomy deal, the possible PC spinoff, and word that HP was officially ending its multibillion-dollar tablet initiative. For good measure, the company lowered its earnings projections for the year. Apotheker told Wall Street analysts on a conference call that he felt investors' pain, "but as CEO, I believe in transparency about what we are facing and [the need to] be clear on the decisive things we are doing now about it." He and his lieutenants used variations of the word "transformation" 20 times.

After the call, Lane received a congratulatory e-mail from Kleiner Perkins partner John Doerr, praising the big, bold moves. Replied Lane in a reference to HP's founders, "I actually think Bill and Dave would be proud." Inside HP's headquarters, champagne corks were popped.

Outside, the reaction was dire. Customers, investors, employees, and the financial press were all aghast. HP, it seemed, had gone mad. Shares plunged 20% the following day.

Apotheker learned of his firing in the press -- then was told he'd lost the confidence of the board and his top lieutenants.

At first Lane stood beside Apotheker. "I don't know a single technology company that has succeeded without changing its strategy," he told journalists. But Lane (who declined to be interviewed) quickly began backing away. PC customers were bailing out. Investors were furious that HP was making a major acquisition after Apotheker had said they wouldn't. Behind the scenes, Lane began maneuvering. In mid-September, the CEO failed to appear as scheduled at a tech conference. Lane showed up instead. Apotheker was about to be toppled.

Not for the first time, the news reached the press before the official announcement. On Sept. 22, Apotheker read that he was being fired and replaced by Whitman. He was flabbergasted. In a meeting that morning, Lane told him that he had lost the support of the board and every single member of the executive team -- including former SAP loyalists such as Homlish. Before the board, Apotheker was subdued, dignified and resigned. But he was incensed. He had fully consulted with the board on everything, he told friends. He'd trusted Lane to make the board a functioning one, but instead Lane had turned it against him.

Lane distanced himself from the disaster, blaming Apotheker. The man who'd been proud of HP's bold moves was now running as fast as he could from the word "transformation." It had, Lane said in a conference call with investors, "been stricken from our language." Asked in a CNBC interview whether the board bore responsibility for HP's chaos, Lane reacted defensively. "I'm going to give you an answer right from my heart, okay? In January, I added five board members to this board. This is not the board that was around for pretexting. This is not the board that fired Mark Hurd. It's just like open season to write about this board. It's not this board. This board did not select Léo, okay?"

If Meg Whitman had any illusions about the challenges she faces, they were eliminated before she even made it inside HP's office. Driving her Ford Escape to HP's headquarters, she was directed to a special executive committee parking lot that was blocked by a gate and an imposing green fence topped with barbed wire. Whitman stared in disbelief. In her mind there shouldn't have even been an executive parking lot at HP, much less one with concertina wire befitting a military installation or jail.
The fence was a stark reminder of the gulf that had grown between senior leaders and employees. Whitman had it torn out. She also eliminated the executive committee suites and moved the top brass to cubicles. Now, even Whitman has to compete for parking spots and walk in the public entrance like everyone else. Gone also are stays at swank hotels in favor of more modest accommodations.

"It's back to Bill and Dave's culture," Whitman says, acknowledging that these moves were the easy ones. "Symbolism is important. I learned that in politics."
Whitman has moved decisively to make changes in the executive committee. She forced out longtime printer head Joshi, merging his unit into the PC group, and general counsel Holston. Chief strategist Shane Robison retired.
Still, Whitman has already had a few stumbles. HP's first-quarter results were even worse than expected, sending shares skidding. In a call to discuss those earnings, she allowed a touch of hubris to seep into her assertion that she will turn HP around. "I've done this a number of times in my career," she said. "It's what great business leaders do."

For his part, Lane shows no signs of fading into the background. In their first joint interview on CNBC on the day after Whitman was named CEO, Lane dominated the interview, at times filibustering Whitman. He has since told employees he is ready to "take Meg's training wheels off."

For now, anyway, Whitman and Lane's strategy boils down to do what we do -- better. One of Whitman's first announcements was to confirm that HP is keeping its PC group. It couldn't be spun out, HP argued, without inflicting significant damage on HP's other businesses. Meanwhile HP's revenues, margins, and cash position continue to deteriorate. The spate of acquisitions, chief among them the Autonomy deal, means the company has little money for new moves. In coming months, tens of thousands of employees are expected to be laid off.

Whitman faces a daunting, though surmountable, challenge in devising a strategy that will put HP on the path to recovery or reinvention. But that's only part of her task. Exorcising HP's demons -- in its boardroom, in its executive suites, and among thousands of dispirited engineers and staffers -- will be another matter entirely.

By James Bandler with Doris Burke CNNMoney.com May 8, 2012


How Hewlett-Packard lost its way - Fortune Tech

Amazon Plans Smartphone to Vie With IPhone - Businessweek

Amazon Said to Plan Smartphone to Vie With Apple IPhone

Amazon.com Inc. (AMZN) (AMZN) is developing a smartphone that would vie with Apple Inc. (AAPL) (AAPL)’s iPhone and handheld devices that run Google Inc. (GOOG) (GOOG)’s Android operating system, two people with knowledge of the matter said.

Foxconn International Holdings Ltd. (2038), the Chinese mobile- phone maker, is working with Amazon on the device, said one of the people, who asked not to be identified because the plans are private. Amazon is seeking to complement the smartphone strategy by acquiring patents that cover wireless technology and would help it defend against allegations of infringement, other people with knowledge of the matter said.

A smartphone would give Amazon a wider range of low-priced hardware devices that bolster its strategy of making money from digital books, songs and movies. It would help Chief Executive Officer Jeff Bezos -- who made a foray into tablets with the Kindle Fire -- carve out a slice of the market for advanced wireless handsets. Manufacturers led by Samsung Electronics Co. and Apple shipped 398.4 million smartphones and other mobile devices in the first quarter, according to researcher IDC.

Drew Herdener, a spokesman for Amazon, declined to comment.

Mark Mahaney, an analyst at Citigroup Inc., said in November that Amazon is planning to release a smartphone.

Seattle-based Amazon considered buying wireless patents from InterDigital Inc. before the King of Prussia, Pennsylvania- based company said in June that it will sell the assets to Intel Corp. for $375 million, two people said. Amazon is taking pitches and setting up briefings with other sellers, the people said.

Patent Protection
Amazon slipped less than 1 percent to $225.05 at the close in New York. Foxconn gained 3.7 percent in Hong Kong.

Amazon beefed up its patent prowess recently by hiring Matt Gordon, formerly senior director of acquisitions at Intellectual Ventures Management LLC, the company that was founded by former Microsoft Corp. Chief Technology Officer Nathan Myhrvold and owns more than 35,000 intellectual property assets. Gordon will be general manager for patent acquisitions and investments at Amazon, according to his profile on LinkedIn.

Adding patents would help Amazon protect itself against lawsuits alleging illegal use of technology. Amazon has been involved in five patent-related cases (AMZN) this year, and 20 cases last year, according to data compiled by Bloomberg.

Demand for mobile patents has increased, as shown recently by Google’s $12.5 billion acquisition of Motorola Mobility Holdings Inc. and its thousands of patents, which closed this year.

To contact the reporters on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net; Olga Kharif in Portland at okharif@bloomberg.net; Ashlee Vance in San Francisco at avance3@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

By Tim Culpan, Olga Kharif and Ashlee Vance Bloomberg Businessweek Jul 06, 2012


Amazon Plans Smartphone to Vie With IPhone - Businessweek

Google's Nexus 7 guns for the Kindle

The new Google Nexus 7 tablet will ship in mid-July starting at $199 — the same price as the Kindle Fire.

NEW YORK - In the 1982 sci-fi movie "Blade Runner," there are hints that the hero, played by Harrison Ford, is an artificial human -- an "android" or "replicant." His job is to go out and kill other, rogue androids.

If he's an android, he's of the latest model, Nexus 7. That's also the name Google Inc. has picked for the first tablet to bear the Google brand. Clearly, its mission is to go out and kill rogue tablets running Google's Android software.

Specifically, the Nexus 7 seems to have been designed to give anyone who bought a Kindle Fire from Amazon.com Inc. or a Nook Tablet from Barnes & Noble Inc. a lethal case of buyer's remorse.

The Nexus 7 costs $199, the same as Amazon and Barnes & Noble charge for their tablets. But it's better than theirs in significant ways. Google announced the tablet last week and is taking pre-orders for delivery in mid-July.

Why is Google targeting the Kindle Fire and the Nook? Because they've been relatively successful competitors to Apple Inc.'s iPad tablet, yet Google is getting no benefit from their success.

Google makes its Android operating software available for any device maker to use. Amazon and Barnes & Noble took Android and modified it heavily. Namely, they took out the apps that point to Google's services and the advertising it sells. Instead, the apps point to the companies' own stores. In other words, these tablets are rogue Androids.

Other tablets, such as Samsung's Galaxy, use the "proper," Googlish version of Android, but they've been more expensive than the Kindle Fire and Nook Tablet. Apparently, Google thought it was time to make a really good, proper Android tablet for $199.

It's succeeded. From my few days of use so far, the Nexus 7 is a really good value. It's made by AsusTek Computer, a Taiwanese company that was originally planning to sell a similar tablet for $249.

The Nexus 7 is a plain black slab with a screen that's 7 inches on the diagonal -- the same size as the Nook and the Fire. The most noticeable feature it has over the competition is a low-resolution camera, facing the user. That means the Nexus 7 can be used for videoconferencing, but it's nearly impossible to use for snapshots. It also has a microphone, which the Fire lacks, making Amazon's device useless even for audio conferencing.

The screen has a higher resolution than the Fire, and colors are more vivid. The tablet is slightly thinner and appreciably lighter than the Fire.

Other nifty but invisible hardware upgrades on the Nexus 7 include Bluetooth and GPS chips for use with headsets and navigation software. The tablet even has a chip for near-field communications, which means it can "talk" to some phones and store payment terminals when tapped against them.

But the most-important difference between the Nexus 7 and its prey is the software. Not only is it running stock Android, but it's also the first device to run the latest version of Android. Google, with its trademark combination of cute and cutthroat, calls it "Jelly Bean."

Stock Android gives Nexus 7 access to a much wider array of applications than its competitors, running into the hundreds of thousands. The diversity also applies to content: You can use a wider range of e-book stores and movie services on the Nexus 7. You can read Kindle books on the Nexus 7, for example, but you can't read Google books on the Kindle.

Google does its best, though, to steer users to its "Play" store for apps, movies, music and books. Buyers even get a $25 credit toward store purchases, partly defraying the cost of the tablet itself.

With a powerful processing chip and plentiful RAM memory, the type available for running programs, the Nexus 7 is fast and slick. You can switch directly from application to application, something that isn't possible with the Fire or Nook.

The chief issue buyers will likely face with the Nexus 7 is a lack of storage space. The $199 model has just 8 gigabytes of storage, and a quarter of that is overhead. It has just 5.9 gigabytes actually available.

There's a step-up model with 16 gigabytes of storage for $249, which I would highly recommend. There's no option to expand storage with a memory card, a feature available with the Nook Tablet and many other Android tablets (but not the Kindle Fire, either).

Early buyers may also find that some applications will not work on it. Because Jelly Bean is the bleeding edge of Android, app developers haven't had time to rewrite their products for it.

Last, the size of the screen is going to frustrate some buyers. The Nexus 7's screen is a nice step from a smartphone screen, but the iPad is a really big step up. The iPad also has the best selection and quality of third-party software.

by Peter Svensson - Jul. 4, 2012 07:56 PM
Associated Press



Google's Nexus 7 guns for the Kindle

July 4, 2012

Women Win Facebook, Twitter, Zynga; Men Get LinkedIn, Reddit [INFOGRAPHIC]


When it comes to the sexes on social media, there are a few places where the battle lines seem settled. It probably won’t surprise you to learn, for example, that men are from Google+ and women are from Pinterest.

But when it comes to the two dominant social networks — Facebook and Twitter — you may be shocked to discover that women are now in the majority on both services. Not only that, but they’re posting far more frequently on Facebook than their slowpoke male counterparts can manage.

Online gaming, once a bastion of men, has fallen to the females as well. Zynga is by far the largest online gaming network, with 250 million players logging on every month; 60% of those players are women, especially women over 55.

But take heart, guys. You still comprise 63% of LinkedIn, the professional social network. Google+, as has been the case for some time, is more than two-thirds dude. And Reddit is practically a man cave, where you have less than a one-in-five chance of coming across the fairer sex.

Check out this infographic for more details, including the one social network where the gender distribution is equal. And let us know in the comments: Why do you think social media is shaking out this way?

by Chris Taylor Mashable Jul 4, 2012


Women Win Facebook, Twitter, Zynga; Men Get LinkedIn, Reddit [INFOGRAPHIC]

July 2, 2012

Arizona cyberbullying guidelines expanded

School districts in Arizona must teach cyberbullying awareness, monitor online chats and keep tabs on social media in schools starting this week as part of a beefed-up Children's Internet Protection Act.

With the school year still a month away for most districts, several school boards have made changes to their decades-old policies and get discounts of as much as 90 percent on their telecommunication bills.

The Peoria Unified School District recently expanded its policy to comply with the new guidelines from the Federal Communications Commission.

"And we hold an Internet-safety week where cyberbullying is addressed," said Erin Dunsey, spokeswoman for the Peoria district.

Mesa Public Schools, the largest district in the state with 64,000 students, also requires students to attend anti-bullying awareness classes, which include rules against harassing students online at school.

In the coming school year, the district is teaming up with researchers at Arizona State University in a program about the best ways to reduce bullying, said Paul Boyer, spokesman for Mesa Public Schools.

The district will spend $2.8 million on Internet access and telecommunications. The expenditure comes after a 75 percent e-rate discount for compliance with CIPA.

"School districts have additional responsibilities now with the Internet, but they knew this was coming," said Mel Van Patten with Oklahoma-based Kellogg & Sovereign Consulting, which helps schools qualify for the telecom discount. "It's not a huge surprise to many of these school districts."

A lot is at stake: School districts can save 20 percent to 90 percent on their telecommunications bills with the discount.

"For smaller districts, this could mean the difference between having Internet access or not," Van Patten said.

The firm recently sent a reminder to its clients about complying with the expanded requirements. It also recommends districts keep a copy of their curriculum to prove they are addressing cyberbullying.

The Arizona School Boards Association sent a recommended policy with suggested changes to its member school boards.

The Glendale Elementary School District adopted the revisions in April, although the district had already required students to learn about cyberbullying and acceptable computer uses, spokesman Jim Cummings said.

"It's not a big change for us because we've been teaching a lot of these things for years," he said.

The district receives an 89 percent discount off its telecommunications bill. The e-rate is based on the number of students -- 90 percent -- who participate in the district's free and reduced-priced lunch program.

The Chandler Unified School District, the second-largest in the Valley with 40,000 students, receives a smaller discount. It expects to shave $600,000 off its telecommunications bill after it amended its policy Wednesday to comply with the new CIPA requirements.

"With the gamut of social media, children can be bullied 24/7," said Jeff La Benz, assistant director of instructional technology.

The district will use videos and other lessons to teach appropriate ways to behave and interact with others.

"The CIPA update seems to spell it out now because cyberbullying and bullying has been in the news so much," La Benz said.

by Kerry Fehr-Snyder - Jul. 2, 2012 12:00 AM The Republic | azcentral.com



Arizona cyberbullying guidelines expanded

Microsoft must pay $1.1 bil fine inantitrustcase,EUcourtrules - USATODAY.com

BRUSSELS, Belgium — BRUSSELS, Belgium A European court on Wednesday upheld most of a massive fine levied against Microsoft by the European Commission's competition watchdog, closing a case against the software giant that began in 1998.

In an appeals ruling, the General Court of the European Union rejected Microsoft Corp.'s request to dismiss the fine levied in 2008 but did trim it by 39 million euros to 860 million euros ($1.1 billion). Counting two earlier fines, the case has wound up costing Microsoft a grand total of 1.64 billion euros ($2 billion). That's the most ever resulting from a single antitrust case in Europe.

The court in Luxembourg said its decision "essentially upholds the Commission's decision and rejects all the arguments put forward by Microsoft in support of annulment."

The fine is a "penalty for noncompliance" with the watchdog's 2004 order for Microsoft to make computer-programming code available that would allow competitors' products to interface properly with Microsoft's server software.

Microsoft did so, but at a price the Commission said was so exorbitant it amounted to not complying.

The court upheld that finding but said Microsoft deserved a small break because of a letter the Commission sent in 2005 saying the company didn't have to freely distribute code that wasn't its own and was freely available elsewhere. That gave Microsoft some room to think it was okay to continue acting the way it had until 2004 and should have been "taken into account in determining the gravity of the conduct found to be unlawful," the written decision said.

The Commission's top regulator, Joaquin Almunia, said the judgment fully vindicates his office's action against Microsoft and "brought significant benefits to users."
"A range of innovative products that would otherwise not have seen the light of day were introduced on the market," thanks to the Commission, he said.

Microsoft was less enthusiastic.

"Although the General Court slightly reduced the fine, we are disappointed with the Court's ruling," the company said in a statement.

Microsoft initially was fined 497 million euros along with the 2004 order, then it was penalized another 280.5 million euros for noncompliance in 2006, and another 899 million euros in 2008.

The company has already booked provisions for all the fines and penalties and, after the ruling, it has no active outstanding quarrels with European regulators.

"In 2009 Microsoft entered into a broad understanding with the Commission that resolved its competition law concerns," the company said.

Most notably in the 2009 deal, Microsoft ended an investigation into allegedly abusive practices for bundling its Internet Explorer Web browser along with its operating systems. Microsoft agreed to offer customers a range of browsers to choose from instead.

By Toby Sterling, Associated Press Jun 28, 2012


Microsoft must pay $1.1 bil fine inantitrustcase,EUcourtrules - USATODAY.com

CityScape will add a pay-by-smartphone parking option

The downtown Phoenix retail-and-office complex CityScape is preparing to launch a new way to pay for parking in its underground garage: cellphone.

The smartphone application, PaNGo, was made by an Israeli company, MobyDoM. It is being used by a few workers at the two-block complex at Central Avenue and Jefferson Street for about a month while the developer and PaNGo prepare it for public use.

"The plan is to go live at the end of August," said Jeff Moloznik, general manager of CityScape for RED Development.

Michael Reitblat, vice president of products and services for PaNGo, said the smartphone application lets drivers use a registered bank or credit account to connect with any parking facility or metered spot in the world that works with PaNGo.

Reitblat demonstrated how, by activating the PaNGo virtual meter on a smartphone, a user can open the automated parking gate at a PaNGo-activated lot or garage or use it at a metered spot and immediately begin incurring charges.

When users leave the spot or the garage, they can stop the meter clock. That way, the driver pays only for the time the car was parked.

"This makes parking much easier," Reitblat said.

PaNGo hands control of parking costs to parking-facility owners, which makes it possible for CityScape and other PaNGo-linked lots and garages to charge drivers more during peak parking times, such as when the Arizona Diamondbacks are playing at home at Chase Field or when Phoenix hosts NFL Super Bowl fan festivities in 2015.

MobyDoM has been making deals to use PaNGo with parking companies in countries as far away as Poland. Reitblat said the company also is reaching out to U.S. cities such as Phoenix that own several facilities and maintain metered parking spots.

PaNGo's decision to roll out its pay-by-phone application in Phoenix is timely; the city is shopping for high-tech options to replace its on-street parking meters, which number more than 2,400, and is considering pay-by-phone meters, such as those installed recently in Tempe.

Phoenix officials say the coin-operated meters are outdated; the technology dates to the 1930s.

City officials said Phoenix isn't ready to go meterless yet, since not all drivers have smartphones and can connect to an app such as PaNGo. The city, though, is looking into solar-powered meters and credit- and debit-card-operated meters, as well as and those that allow drivers to pay with a cellphone.

Phoenix has narrowed the search for a contractor from nine companies to four: Cale America of Tampa; Duncan Solutions of Milwaukee; IPS Group of San Diego; and Parkeon of Moorestown, N.J.

The four companies must submit their contract proposals for new on-street meters by July 31.

The City Council is expected to award the contract this fall.

by Emily Gersema - Jun. 26, 2012 05:46 PM The Republic | azcentral.com




CityScape will add a pay-by-smartphone parking option

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