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The Board Giveth, the Board Taketh Away

The Board Giveth, the Board Taketh Away

A year after they put him in the driver's seat to replace a CEO that had left under a cloud of scandal, HP's board members have ousted Leo Apotheker. His short yet tumultuous reign at HP will be followed by that of former eBay chief Meg Whitman. Meanwhile, Google gets grilled, Netflix says sorry and Facebook gets another nip'n'tuck.

By Paul Hartsock
09/24/11 5:00 AM PT

I'm no HP historian, but it looks like the company must have just set a new personal record for how quickly it disposes of its CEOs. Less than a year after putting Leo Apotheker on the job, HP's board has sent him packing.

The news became official a day after rumors began making the rounds that HP's board was looking for a replacement. It could have been a case of a lone blabbermouth, but it smells a lot like an intentional leak. Regardless of who put it out there, though, the market seemed to love the aroma. On an otherwise murky day for Wall Street, HP stock shot up nearly 8 percent right after the rumors started flaring up. When the board officially did the deed the next day, HP was on a downswing, but then again, so was the rest of Wall Street. Overall, it seems shareholders were already tired of Apotheker's leadership.

So what did he do that was so horrible and wrong? It seems he's guilty of being Leo Apotheker. He's a former SAP boss, someone who's at his best in the world of enterprise systems, competing with companies like Oracle and IBM. That's partly what HP does, but it also has a huge consumer PC arm, and when Apotheker stepped on board, it had just made a big grab for smartphones and tablets by buying Palm. Once Apotheker was in office, he scrapped it all, maybe because he figured he was made CEO for a reason.

If he's a bad person to lead HP, consider the people who chose to put him there. HP's board knew what they were getting, or at least they should have known. But reportedly, at the time Apotheker was hired, more than half the board had never actually bothered to meet him. It seems anyone with a pulse and a resume was as good as anyone else.

Unfortunately, HP's been tanking ever since Apotheker started putting his plans in action. Maybe he moved too fast -- webOS hardware was gone just days after a major product launch, and at the same time the company began openly talking about selling the PC business, before there was even a hint of a buyer lined up. Combined with some weak quarterly numbers, HP stock took a pounding, and now Apotheker has only his giant, solid-gold parachute for consolation.

But what about the new boss? That's going to be Meg Whitman, former CEO of eBay. She is a board member, albeit a relatively recent addition. She lead eBay to big growth in her years on the job there. But HP is a hugely different company than eBay. It's big hardware vs. classified ads. And it's not as though Whitman has plans to reverse Apotheker's reversal -- she's reportedly already said she supports the actions of Aug. 18, the day HP threw webOS and consumer PCs out the window. So once again, we have an old CEO leaving behind plans that just don't look right on the new one.

We can only stand by and see how she does, but if she doesn't get off on the right foot, we can only guess HP's board won't hesitate to can her too.


Listen to the podcast (14:08 minutes).

Had Some More Work Done

Once again, Facebook has redesigned its interface, and that never fails to really upset a certain number of users. There's usually a predictable progression: dismay, anger, threats to quit, the formation of special user groups to protest the changes, circulation of petitions, and finally complete acceptance, as though that's the way it's always been. I know, some people really have quit Facebook in the past over a change they just couldn't abide, but that's a distinct minority. Facebook just keeps growing.

But is it possible things are going to be different this time? Facebook's been adding and changing features very quickly lately, and it's almost becoming a chore to keep up with it all. One change in particular involved a deep alteration to the News Feed, the network's main interface. That's what I'd guess most users spend most of their Facebook time with. It's still usable -- maybe even better, from a newcomer's perspective. But for some Facebook old-timers, it's all stunted and odd-looking. It breaks normal usage habits. Some have complained it's confusing.

So are we looking at yet another Facebook facelift that will blow over and be embraced within a week or two? Or has Facebook cut too deeply this time around? You know how some celebrities get a little too much plastic surgery and reach that tipping point where they no longer look younger, just weirder? Did Facebook just hit that point?

Whatever the case, Facebook probably still has plenty of momentum from the inside. Its f8 conference has kicked off, and new kinds of social applications, partnerships and music features are coming, as well as a new way to present yourself on the network called "Timeline" -- basically your whole life flashes before your eyes, or at least the parts of your life you've let Facebook in on.

Despite all these new ideas it's putting out there, the situation has changed for Facebook in a way it can't control. It has a credible competitor now in the form of Google+. In the past, people who've quit Facebook out of frustration had to either forget about online social networks, tie themselves to a sinking ship with MySpace, or join some kind of micro-network and hope they could convince all their friends to join too -- by putting the word out on Facebook, of course. Now there's a real alternative, and Facebook may need to be extra-careful not to rattle users with feature fatigue.

Mr. Schmidt Goes to Washington

It was bound to happen one of these days: Google finally took its turn to get smacked around by the U.S. Senate's antitrust hazing paddle. It's almost like a rite of passage for giant tech corporations. It's also a sign big trouble might be just around the corner -- the Department of Justice might try to put Google through the wringer the same way it did with Microsoft all those years ago.

Back in Microsoft's day, the big deal was over Windows and whether the company used Windows' overwhelming market dominance to unfairly promote Microsoft's own software, like Internet Explorer and Media Player, over applications made by other companies.

The story's sort of similar with Google, just on a different scale. Critics say Google unfairly promotes its own products. Search for "maps" in Google, and the first link to come up is Google Maps. Search for "restaurant reviews," and first result is Zagat, which Google owns. Type in a generic search for just about any kind of Web service Google has its fingers in, and Google's service will probably be your first result. And that's a whole lot of different kinds of services.

One particularly vocal critic of Google is Yelp CEO Jeremy Stoppelman, who says he must either allow Google to co-opt his company's content or withdraw from having his site listed on Google at all. For a site like Yelp, not showing up on Google would be death. He and NexTag CEO Jeffrey Katz said that if they'd wanted to start their businesses today, they wouldn't be able to do so because of Google.

Google Chairman and former CEO Eric Schmidt showed up to the hearings to defend his company, which he did by saying this situation is nothing like Microsoft's. Whereas Microsoft's platform was an operating system it owned, Google's platform is the Internet, which no single entity really owns. If consumers don't like what they're getting with Google search results, alternatives are just a click away, and they're free.

As for emphasizing its own products, there is a point to be made about Google's ability to destroy competitors simply by entering a market. If you're the Web's top provider of, let's say, squid migration information, and suddenly Google Squid comes along, your days may well be numbered, because it's going to be Google's site, not yours, that comes up on top of a Google search.

But should the government be able to tell a business it can't endorse its own products? Will Apple stores need to start putting Lenovos and Acers on the shelves? If regulators try to press ahead with an antitrust case, it may take some imagination to decide what needs to be done to remedy the situation.

All Apologies

Netflix customers who've stuck with the company through its recent turmoil got a little bonus last week. In addition to DVDs in their mailboxes, they got something in their inboxes: a long, strange, sorrowful, awkwardly supplicating, weepy-sounding apology email from the CEO.

Reed Hastings took to the company's email list, apparently in the wee hours of Monday morning, to beg forgiveness from Netflix's remaining customers for how the company "lacked respect and humility" -- his words -- in how it went about separating its DVD-rentals and its streaming business.

Last summer, the company announced that customers would have to pay for streaming and DVD delivery separately, and the result was that customers who wanted to keep the same services would end up paying quite a bit more. Netflix tried to spin it as a price decrease, and it's true that customers who dropped one or the other service would pay a little less, but for a lot of Netflix users, that message came off as almost insultingly disingenuous. So if that's the way you felt about it, be aware that Hastings is now very, very sorry.

But that doesn't mean he's going to stop making changes to the system. In fact, the changes just got bigger and weirder. In that very same email, Hastings revealed that Netflix would soon shove its DVD business further away by renaming it "Qwikster" and completely severing it from Netflix.com.

That means in order to arrange your DVD queue, you'll go to Qwikster.com. Netflix will be where you go to handle your streaming library. None of your personal ratings will flow through -- if you suddenly become a big Woody Allen fan on Netflix, Qwikster will have no way of knowing that. Billing info will be separate, and you'll have to search both sites separately for the movie you want.

The new service's name makes me think Netflix doesn't have much love left for DVDs. "Qwikster" sounds like a failed late-'90s urban delivery service. There are probably two dozen different ways to easily misspell it, and best of all, the Twitter handle "qwikster" was already taken before Hastings made the announcement. It apparently belongs to a man named Jason Castillo. Profile image as of last Monday morning: Elmo smoking a joint. Enjoy your moment in the spotlight, Jason.

By slapping its DVD service with a silly name and making it move out to the guest house, Netflix is practically screaming that it wants to sell it off and concentrate entirely on instant. And "sell" is exactly what shareholders are saying to each other. Within days of the email, Netflix stock hit a 52-week low, digging below $130. Incidentally, its all-time high was $304.79, and it hit that price just after it announced its price increase last July -- and just before it became clear its customers were seeing red.

Getting out of the DVD business isn't a bad goal in itself, but things look like they're happening way too fast. The fact is, Netflix's streaming library is still really weak compared to the DVD library, and by attaching the Netflix name exclusively to a limited streaming catalog that rarely has new releases or major titles, the brand risks becoming identified as the last resort for non-stop, cheap and mostly lousy entertainment. And that's not a knock on customers who like streaming. A limited streaming selection is fine, but for years, Netflix has been the place that has all the movies. By disassociating the DVD library from the main brand, Netflix is turning into an online grindhouse.

Do Accept the Terms?

The act of using a piece of software sometimes means you'll need to personally approve more legal documents than you'd have to sign to go on a skydiving trip. For software, those documents come in the form of a EULA or ToS -- an end user license agreement or terms of service.

They're these dense, eye-glazing legalese tomes that most people never actually read. They just click "accept" because ... well, how bad can they be? They're just there to cover the software publisher's butt in case someone does something illegal with its product, right?

Sometimes, but not always. In fact, Sony recently rolled out a new ToS to users of its PlayStation Network. That itself is not out of the ordinary -- PS3 consoles do tend to need frequent updates, so it's likely most users just waved the ToS right through.

But if you look closer at the language of that last ToS, there's a very interesting tidbit hidden inside: If you click "accept," that means you give up your right to join class action suits against Sony, and you OK an individual binding arbitration clause.

This comes at an interesting time for Sony. It's been a few months now, but the Great PSN Blackout of '11 still might be a bit of a raw nerve, especially considering that user information like credit card numbers may have wound up in the hands of criminals. Sounds like class-action fodder.

There's another factor related to it, though: Earlier this year, the U.S. Supreme Court ruled that binding consumers to an arbitration clause in something like a cellphone contract is legally kosher. ToSes are basically the same thing, so it's very possible this kind of language will find its way into EULAs all over the place soon.

All is not lost, though. If you must, MUST remain class-action eligible or you can't abide the thought of binding arbitration as opposed to a good old courtroom knife-fight, then you have recourse. You've got to notify Sony, in writing, through the mail, within 30 days. Then your agreement to that ToS is null and void.

But if that's just too much trouble, it looks like your dreams of becoming $35 or $40 wealthier by hopping into a class action suit against Sony will be shattered.


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