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Sat, Sep 23, 2006 - Page 10 News List

Hurd worries cause HP stock price to tumble

REBUKEConcerns about what Hewlett-Packard's CEO knew about a spying program caused the first Wall Street backlash against the company since the scandal broke

AP , SAN FRANCISCO

Hewlett-Packard Co's stock price dropped by nearly 5 percent on Thursday as investors reacted to reports that chief executive officer Mark Hurd knew more about the computer and printer maker's elaborate spying program than previously thought.

It marked Wall Street's first significant rebuke in the two weeks since HP first acknowledged authorizing a surreptitious operation that tested the bounds of privacy laws and raised embarrassing questions about the ethics of the world's largest technology company.

California attorney general Bill Lockyer and several federal agencies are investigating whether HP and its executives broke any laws in their crusade to find a media leak on the company's board. A congressional panel plans to hold a hearing about HP's probe next Thursday and has the power to subpoena any key individuals who refuse to appear.

Until Thursday's backlash, HP's shares had actually gained in value despite the dark cloud hanging over the company.

Investors had largely shrugged off the scandal because none of the shady tactics deployed in HP's probe had been linked to Hurd, who has engineered a dramatic turnaround since taking over as company CEO nearly 18 months ago.

HP had even decided to expand Hurd's responsibilities in January when he is supposed to take over the chairman's job -- a position that is being surrendered by Patricia Dunn, who is stepping down as penance for authorizing the probe.

But now investors are worried Hurd is about to be sucked into the legal and political maelstrom.

Three separate newspaper reviews of e-mail message indicated Hurd was briefed about some of the subterfuge that HP's detectives used and may have approved a sting operation aimed at a San Francisco reporter who had written about the company.

HP shares fell US$1.80, or 4.9 percent, to US$34.98 in early afternoon trading on the New York Stock Exchange.

The Washington Post reported that an e-mail message sent by Dunn suggested Hurd approved the sting operation in February in hopes of duping a reporter at CNet Networks Inc's News.com, an online technology news site.

The Wall Street Journal reported that e-mails it reviewed suggest Hurd was kept abreast of the investigation early this year and offered some of his own suggestions about which HP directors might be leaking information to the media.

The New York Times reported that investigators looking for the leakers sought a meeting last January with Hurd and Dunn. The Times said it was unclear whether any meeting took place, but that other exchanges confirmed the level of concern over the leaks and indicate Hurd was pointing to possible leakers.

Hurd planned to hold a news conference yesterday to address concerns raised by HP's probe.

"This has nothing to do with the strategy or operations of HP," Hurd said in a Thursday statement. "What began as an effort to prevent the leaks of confidential information from HP's boardroom ended up heading in directions that were never anticipated."

"HP is working hard to determine exactly what took place and when, and without all the facts it has been difficult for us to respond to questions that have been raised. We plan to give as much clarity as we can to these matters," he said.

The Post provided the most detailed account of a planned sting operation that involved sending bogus e-mails to the CNet reporter, Dawn Kawamoto, in an attempt to trick her into providing clues to who had been providing inside HP information to her previously.

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