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HP shares stumble as spying scandal grows

Marketplace Staff Sep 21, 2006

KAI RYSSDAL: The wire services put out a list of the 10 most heavily traded shares on Wall Street every day. Right from the opening bell this morning Hewlett Packard was at the top of the page. And not in such a good way either. Almost 40 million shares of HP traded hands today. That’s a lot. Most of ’em at a loss, too.

Investors found out when they read the papers this morning the internal leak investigation that’s been hanging over the company for the past couple of weeks might go higher than anyone thought. Adam Lashinsky from Fortune magazine’s been following the story. Hi Adam.


RYSSDAL: So what’s the latest on this now today?

LASHINSKY: The latest is that for the first time it appears that Mark Hurd, Hewlett-Packard’s CEO, knew about the various attempts to ferret out who was leaking information to the news media from HP’s board. The reports suggest that he not only knew about it but was aware of some of the techniques that were being used that are being investigated as potentially illegal.

RYSSDAL: Obviously that’s a bad thing for the company. Troubling. But I have to point out that this story’s been burbling around for weeks and weeks and weeks and just now, today, investors start to take notice and drive Hewlett-Packard shares down 5 percent?

LASHINSKY: This is a wonderful reflection on what investors are truly interested in, Kai. They’re not interested really in ethics, in illegalities, on questionable corporate behavior. They’re interested in one thing at this point. And that is whether or not Mark Hurd is going to be in trouble. Mark Hurd is the golden boy of Wall Street. The stock is up considerably since he became CEO in April of 2005. Wall Street is in love with this no-nonsense chief executive. If he were to be in trouble, Wall Street would suddenly care about this situation, and that’s why the stock is down today.

RYSSDAL: Let’s move forward for just a second and think about what could happen here in the courts. I mean, The New York Times, and the Wall Street Journal and C-Net — you know, the companies that these reporters whose phone records were accessed work for — they’ve been talking about lawsuits. If the stock keeps going down like this, you might see investors filing some papers. What legal trouble could the company be in?

LASHINSKY: Sure, the California Attorney General has said that he has information to bring indictments against individuals involved. That implies criminal behavior. There’s also the assumption that they could go through civil lawsuits over this. But it’s extremely unclear what the damages are, how much that would be and who exactly has been damaged by the behavior.

You raise a very interesting point. Up until today shareholders would not have been able to argue that they’ve been affected by this scandal. That’s beginning to change.

RYSSDAL: Tomorrow, after the close, Mark Hurd to going to have a press conference. My antennae always go up when somebody has a press conference after the close. What do you make of that?

LASHINSKY: Well, it’s beginning to feel like a Watergate moment. What Wall Street wants to know is what did Mark Hurd know and when did he know it? If he is successful in making the case that he didn’t know anybody was potentially breaking the law — and we, of course, don’t know if anybody broke the law — then he’ll be able to skate through. If he can’t make that case, it’ll be a different story.

RYSSDAL: Adam Lashinsky from Fortune Magazine. Thanks, Adam.

LASHINSKY: It’s my pleasure, Kai.

RYSSDAL: Can’t let go of today’s HP news before we point this out. Nominations are being accepted for something called the HP Privacy Innovation Award. It goes to companies that make strong and unique contributions to the privacy industry. HP co-sponsors the award with a group in Maine — the International Association of Privacy Professionals. Take heart that nobody from HP is actually a judge.

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