Leo Apotheker

Léo Apotheker
Apotheker in 2008, while co-chief executive of SAP.
Born	Léo Apotheker 1953-09-18September 18, 1953 (age 73) Aachen, West Germany
Nationality	German
Education	Hebrew University of Jerusalem (economics)
Alma mater	Hebrew University of Jerusalem
Occupation	Business executive
Years active	1978-present
Employer	SAP (1988-2010) Hewlett-Packard (2010-2011)
Company	Hewlett-Packard Company
Title	Chief executive officer and president, Hewlett-Packard Company
Term	2008-2010 (SAP) 2010-2011 (HP)
Predecessor	Henning Kagermann (SAP) Cathie Lesjak, interim (HP)
Successor	Bill McDermott and Jim Hagemann Snabe (SAP) Meg Whitman (HP)
Known for	Co-chief executive of SAP Chief executive of Hewlett-Packard The acquisition of Autonomy Corporation

Léo Apotheker (born September 18, 1953) is a German business executive who served as co-chief executive officer of SAP from 2008 to 2010 and as chief executive officer and president of Hewlett-Packard from November 2010 until his dismissal in September 2011.

Apotheker spent more than 20 years at SAP, joining in 1988 and rising through its European sales organisation to become head of global field operations and then co-chief executive alongside Henning Kagermann's departure. He is credited with building much of SAP's international sales capability, and his tenure at the top coincided with the financial crisis and with a contentious increase in software maintenance fees that provoked organised resistance from the company's largest customers.

His eleven months at Hewlett-Packard are among the most heavily criticised chief executive tenures in the technology industry. On August 18, 2011, HP announced simultaneously that it would discontinue its webOS device business, explore the separation of its personal computer division, the largest such business in the world, and acquire the British software company Autonomy Corporation for about $11.1 billion. The share price fell nearly 25 percent the following day. The board dismissed him on September 22, 2011, replacing him with the director and former eBay chief executive Meg Whitman.

HP subsequently reversed the personal computer decision, wrote off almost $9 billion of the Autonomy purchase price, and alleged accounting irregularities at Autonomy together with inadequate due diligence on its own part. HP's market capitalisation fell by more than $30 billion during Apotheker's tenure, and its shares fell about 40 percent. He received compensation of more than $13 million for the eleven months.

Early life and education

Family

Apotheker's parents were Polish Jews who fled east to the Soviet-Chinese border after the German invasion of Poland in 1939. They survived the war and afterwards settled in Aachen, in what became West Germany, where Apotheker was born on September 18, 1953. The family later moved to Antwerp in Belgium.

His background bore on his later career in a way he has discussed publicly. Of his decision to join SAP, a company founded in 1972 by five former IBM engineers, he told The Economist: "If SAP had a pre-war history, I would never have joined the company." When he became co-chief executive he was the second person whose parents had escaped the Holocaust to lead a major German company, after Ron Sommer's appointment at Deutsche Telekom in 1997.

Education

By his own account Apotheker organised a strike at his secondary school and lost two teeth to a mounted police officer in the disturbance that followed.

At 18 he moved to Israel, where he studied economics at the Hebrew University of Jerusalem.

He is fluent in five languages: German, Dutch, French, English and Hebrew.

Career

Early roles

Before joining SAP in 1988, Apotheker held a succession of financial and operational posts at European companies.

SAP, 1988-2010

Building the European sales organisation

Apotheker joined SAP in 1988 and advanced through its sales organisation. In 1995 he founded and became chief executive of SAP France and SAP Belgium. He was made president of SAP's South West Europe region in 1997 and president of the Europe, Middle East and Africa sales region in 1999.

The period was formative for SAP. The company's R/3 enterprise resource planning system, released in 1992, was becoming the standard back-office software for large corporations, and the constraint on growth was the ability to sell and implement it across many countries at once. Apotheker built much of that capability in Europe, and his reputation inside the company rested on it.

Executive board and global field operations

He joined the SAP executive board in 2002 and served as president of global field operations from 2002 to 2007, with responsibility for the company's worldwide sales, consulting and support organisation. He was appointed deputy chief executive in 2007.

Co-chief executive

In April 2008 Apotheker was promoted to co-chief executive alongside Henning Kagermann, an arrangement designed to allow a gradual handover as Kagermann's contract ran to its expiry. The succession plan had been communicated in the business press earlier in 2008, and the transition was praised at the time as characteristic of SAP's culture, described in one account as "a seemingly contradictory mix of internal consensus and competition". Apotheker became sole chief executive when Kagermann left in 2009.

He used his early prominence to set out a view of the industry, explaining enterprise software in an interview with Charlie Rose by analogy to the human nervous system, and emphasising SAP's commitments on sustainability, including a target to reduce its own carbon emissions.

Enterprise Support and the customer revolt

The defining difficulty of Apotheker's SAP tenure was a change in support pricing. In January 2008 SAP announced that from February 1 it would phase out its Basic Support offering, priced at 17 percent of licence value, for new customers, requiring them instead to take Enterprise Support at 22 percent. The intention was to move the entire base to the higher tier over several years.

The timing was poor. The increase was introduced as the financial crisis took hold and customers were cutting information technology budgets, and it was presented as a move to a superior service rather than as a price rise. National user groups in Germany, the United Kingdom and elsewhere objected, and SUGEN, the international body coordinating SAP user groups, negotiated a set of measurable benchmarks that SAP was required to meet before further increases could take effect.

Apotheker's handling of the dispute was criticised as insufficiently conciliatory. Analysts covering the company observed that he had attempted to hold the position rather than concede early, and that the resulting damage to customer relations outlasted the financial benefit. SAP eventually reinstated the lower support tier in 2010, after his departure.

Recession and departure

SAP's licence revenue fell sharply in 2009 as corporate software spending contracted. The company announced about 3,000 job reductions, its first significant redundancy programme, which sat uneasily with its self-image as a stable employer and required lengthy negotiation with works councils in Germany.

On February 7, 2010, the SAP supervisory board announced that it had agreed with Apotheker not to extend his contract as a member of the executive board. He stepped down as chief executive and left the company. Bill McDermott and Jim Hagemann Snabe were appointed co-chief executives in his place.

Hewlett-Packard, 2010-2011

Appointment

Hewlett-Packard's board announced on September 30, 2010, that Apotheker had been elected chief executive and president with effect from November 1. He succeeded Cathie Lesjak, the chief financial officer, who had served as interim chief executive since August 6 following the abrupt departure of Mark Hurd. Hurd had resigned after an internal investigation into a sexual harassment complaint, which did not substantiate the complaint but identified irregularities in his expense claims.

The appointment was questioned immediately. Apotheker was a software and sales executive taking charge of a company whose revenue came overwhelmingly from hardware: personal computers, printers, servers and services. Larry Ellison of Oracle, which had hired Hurd, publicly disparaged the choice, and HP's shares fell on the announcement. The board was also criticised for the process, several directors reportedly having never met Apotheker before voting to appoint him.

Strategy

Apotheker's strategic judgement was that HP's hardware businesses were structurally low-margin and that the company's future lay in enterprise software and services, broadly the direction IBM had taken a decade earlier under Lou Gerstner and Sam Palmisano. He began acquiring software companies, including Vertica in February 2011.

He also inherited webOS, the mobile operating system acquired with Palm in 2010 for $1.2 billion, and launched the TouchPad tablet in July 2011 as its flagship device. The product sold poorly against the iPad and was discontinued within seven weeks.

August 18, 2011

On August 18, 2011, HP announced three decisions at once alongside disappointing third quarter results:

• It would discontinue operations for webOS devices, ending the TouchPad and webOS phones, on the basis that they had not met internal milestones or financial targets.
• It would evaluate strategic alternatives for its Personal Systems Group, the personal computer division, including a possible spin-off. The division was the largest PC business in the world by volume and accounted for roughly a third of HP's revenue.
• It would acquire Autonomy Corporation, the Cambridge-based enterprise search and data analytics company, for about $11.1 billion, a premium of roughly 64 percent to Autonomy's share price.

The combination was received badly. Announcing that the largest PC business in the world might be sold, without a buyer, a price or a timetable, invited customers and channel partners to defer purchases and competitors to court them, while the Autonomy price was widely judged excessive for a company with revenue of under $1 billion. HP shares fell nearly 25 percent on August 19.

Dismissal

Reports that the board was considering replacing Apotheker appeared on September 21, 2011. The following day, September 22, the board removed him as chief executive with immediate effect and appointed Meg Whitman, a director of the company and the former chief executive of eBay, in his place. He had been in office for about eleven months.

Apotheker received more than $13 million: severance of $7.2 million, shares worth $3.56 million and a performance bonus of $2.4 million.

Aftermath

HP reversed most of the August announcements. Whitman confirmed in October 2011 that the personal computer division would be retained. The remaining webOS assets were placed in a subsidiary named Gram and the software was later released as open source.

The Autonomy acquisition completed and became the subject of protracted litigation. In November 2012 HP wrote down about $8.8 billion of the purchase price and alleged that more than $5 billion of the impairment resulted from accounting improprieties and misrepresentations at Autonomy before the acquisition. HP also acknowledged deficiencies in its own due diligence. Autonomy's founder Mike Lynch denied wrongdoing. He was later acquitted of fraud charges in the United States in June 2024, having earlier been found liable in English civil proceedings brought by HP, and died in August 2024 when his yacht sank off Sicily.

Apotheker has defended the strategic logic of the purchase while saying he was stunned by the accounting allegations, and has noted that the transaction was approved by the board, examined by external advisers and supported by the chief financial officer's analysis.

Later career

Apotheker returned to Paris after leaving HP and explored investing in mature and distressed companies with private equity firms.

He was appointed an independent director of the Paris information technology services provider Steria on June 1, 2012, and chairman of the board of KMD, a Danish information technology services company, in December 2012. He has served on the supervisory boards of Schneider Electric and GT Nexus.

In 2014 he became non-executive chairman of the Dutch software company Unit4, and in May 2016 non-executive chairman of the advisory board of Signavio, a Berlin software company. He joined Appway as its first independent board member in 2021, and in May 2022 was appointed chair of the board of the Eudonet Group.

He is a board member of PlaNet Finance, a non-profit organisation working in microfinance.

Business philosophy and management style

Apotheker's consistent strategic position across both companies was that value in the technology industry accrues to software and to the business processes it automates, and that hardware is a commoditising business in which scale provides diminishing protection. That view was orthodox by 2011 and was substantially vindicated by the subsequent decade, in which software and cloud services captured most of the industry's profit growth.

The criticism of him concerns execution rather than analysis. At SAP he introduced a correct commercial judgement, that maintenance revenue was underpriced relative to the value delivered, in a manner and at a moment that maximised customer resistance. At HP he announced a correct strategic direction in a single statement that gave the market no sequence, no transition plan and no reassurance about the businesses that were then generating the company's cash.

He was by background a salesman, having spent two decades in field operations, and his strength was the building and running of large distribution organisations. Observers noted the mismatch between that background and the demands of a chief executive of a hardware conglomerate in transition, where operational detail in manufacturing, supply chain and channel management determined results.

Controversies

The Autonomy acquisition

The purchase of Autonomy is the central controversy of Apotheker's career. The price of about $11.1 billion represented roughly eleven times Autonomy's revenue, a multiple well outside the range for enterprise software transactions of the period, and HP's own chief financial officer was reported to have opposed the deal.

The write-down of about $8.8 billion in November 2012, and HP's assertion that more than $5 billion of it stemmed from misstatements at Autonomy, produced shareholder litigation against HP and its directors, regulatory investigations in the United States and United Kingdom, criminal charges against Autonomy's chief financial officer Sushovan Hussain, who was convicted in the United States, and charges against Mike Lynch, who was acquitted in 2024.

Apotheker was not accused of wrongdoing. The criticism of him is that he committed a substantial part of the company's capital to a business he had not adequately examined, and that the board's approval does not displace the chief executive's responsibility for recommending it.

The August 2011 announcements

The decision to announce a possible separation of the personal computer division without having decided to proceed was criticised at the time and afterwards as a basic error of corporate communication, on the grounds that publicly questioning the future of a business that customers depend on damages it immediately whether or not the separation happens. HP later estimated that the episode cost it substantial PC market share, and the reversal a month later compounded the confusion.

The SAP support pricing dispute

The move to Enterprise Support pricing in 2008 and 2009 damaged SAP's relations with its largest customers and with the user groups that had historically been among its strongest advocates. Commentators have treated the episode as a case study in the risk of altering a maintenance pricing model that customers regard as a long-standing entitlement, particularly in a recession.

Compensation

The payment of more than $13 million to Apotheker for eleven months in which HP lost more than $30 billion of market value attracted criticism as an illustration of the disconnection between executive reward and shareholder outcome, and featured in the public debate on chief executive pay in 2011 and 2012.

Personal life

Apotheker is married to a Hebrew-speaking Belgian. He has kept his personal life private and has given few interviews about it. He lives in Paris.

External links

• Profile at Forbes