SiliconBeat

On the New York Times DealBook blog this week my latest column about the questions still unanswered in the Hewlett-Packard scandal was roundly criticized by Jeffrey Sonnenfeld, senior associate dean for executive programs at the Yale School of Management. I posted my response in the comments section below his post. But I thought I’d also share them here:

Jeffrey:

I find your conclusions in this instance puzzling, and can only guess that you haven’t been following the story closely and read through my column on the matter a bit too hastily. Otherwise, you wouldn’t have portrayed the column as focusing on the personal details in this matter. Here’s what I wrote:

“There are certainly other questions we’d love to know the answers to (”Did they have sex?” “Did Hurd harass her?”), but aside from their salacious value, I don’t think they would add to our understanding of this scandal.”

So you and I agree on that. But you muddled this by mashing the first half of that sentence with the first of five questions I asked:

“What was the nature of Hurd’s relationship with Fisher? The other supposed misdeeds stem from this one key issue. All sides say there was no sex and no affair. And yet HP said Hurd’s relationship with Fisher crossed a line into territory that required him to disclose it to the company. It remains unclear where the company drew that line.”

The point of my column was that the basic circumstances of what occurred remain largely unknown. That remains true a week after I wrote it. As such, I find it impossible to imagine how anyone could conclude that the board handled things “just right” or applaud them for “noteworthy courage.” Perhaps they did. But in the end, we don’t know.

If the matter was so clear cut, why was the board negotiating a new contract for Mr. Hurd after an investigation concluded there was no sexual harassment? Why was the company leaking stories to the Wall Street Journal about being surprised by his settlement with Ms. Fisher, which supposedly cut short the investigation?

Surely the decision to oust Mr. Hurd was not out of sudden fit of conscience. After all, this is the board that had endorsed the firing of more than 100,000 employees under two CEOs over the past decade. This was the board the showered Mr. Hurd with increasingly absurd amounts of pay and perks even as layoffs accelerated. Shoving the latest CEO out the door with parting gifts worth more than $40 million isn’t likely to turn around the rank and file view of the board, which by all accounts is quite dim.

And in fact, it’s likely to cloud the arrival of whoever becomes the new CEO, since the board’s judgment in such matters remains in doubt. Those doubts will not be eased when the new CEO gets a nice starting bonus north of $20 million when he or she joins. And that’s not counting the need to hire a president and new board chair since Mr. Hurd filled all three roles. This will be a hiring spree bound to cost shareholders serious money. I’m not sure how you feel HP’s strong earnings during Mr. Hurd’s final quarter factor into whether we should be pushing for more answers.

I’m glad you know all the HP executives well enough to buy HP’s spin about their “strong executive bench.” Yet good governance would also seem to dictate that any major corporation have a succession plan in place. Where was HP’s in this case? Why wasn’t a member of this solid bench ready to step into the CEO role on a permanent basis?

Given the millions that will be spent on hiring bonuses and severance, this is a matter in which shareholders deserve straightforward answers. I’m surprised you would not only endorse the vague stories that have been given, but suggest we stop asking questions already.

Despite, Mr. Hurd’s hazy quote on the matter, it is important to note that he has not admitted to any of things which HP has accused him of doing. His other statements included in the first-day press release indicate that he was not leaving HP of his own accord. Sources close to him who have spoken to me have indicated he did not endorse the board’s view of events, has never been told how his relationship with Ms. Fisher violated HP standards, and only learned of the additional accusations about expense reports and false payments the day his departure was announced. These sources indicated he was never shown the evidence or given a chance to refute it.

Is Mr. Hurd’s camp right? Or is the board correct? I’m not sure how you judged the differences in their stories in this case.

Clearly, with a $40 million severance package on the line, Mr. Hurd felt compelled to say something. But nowhere does his statement endorse the board’s view of events.

You ask: “What then is the moral outrage or the vital material information denied investors?” To which I would answer: If Mr. Hurd did violate policy, why pay him his severance package? If there were misdeeds, true moral courage would seem to dictate the board take a stand by firing him for cause, and withholding that money. If, that is, there was really cause. Forcing him out, and then rewarding him with millions of dollars hardly strikes me as “noteworthy courage.” It feels like the board was hoping Mr. Hurd would quietly go away, and that the ensuing PR storm would pass quickly.

Here’s an odd thing. Today, a former colleague sent me an email saying they had just called the Facebook switchboard. When the automated attendant came on, the second option was for “law enforcement.”

I agreed that seemed unusual, so I called myself (650-543-4800). Sure enough, “law enforcement” is the second option. But the full message was also amusing.

The message starts with the expected, “Thank you for calling Facebook…For customer support, press 1. For law enforcement, press 2.”

Law enforcement comes ahead of business development, marketing, press, and employment verification in the list of options.

Is Facebook really getting that many calls from law enforcment? Apparently so. When I pressed 2, the next message says: “This message is only for members of law enforcment. Please note that due to a very large volume of incoming calls, the current call back time is two to four business days. For faster response time, please leave your work email. A member of Facebook’s security team will email you in a timely manner.”

So, what do you suppose all those cops are calling about?

In the past year or so, I’ve grown increasingly impressed with Facebook founder Mark Zuckerberg. Though he’s still young for a guy running the most important company on the Web, I felt he was growing into the CEO role. This was a reflection of his strategic insights, the way he’s expanded Facebook’s user base past 500 million, and his improved presentation skills. That last bit may sound shallow, but the ability to stand up in front of the world and convery your ideas and persuade people to believe in them and follow you is a critical skill for any tech CEO these days.

Given all this progress, I was left doing double-take after double-take as I watched the livestream of the Facebook Places announcement Wednesday afternoon. I lost count of how many times I found myself thinking, “Did he really just say that?” or “Did they really just do that?” It bordered on the surreal at times, and easily ranks as one of the most bizarre corporate announcements I’ve witnessed while covering Silicon Valley for more than a decade. To be clear, it wasn’t just Zuckerberg, but the whole crew of Facebook execs who toddled across the stage.

But let’s start with Zuckerberg, since he was up first.

When he first hopped onto the makeshift stage set up at Facebook, Zuckerberg seemed a bit lost. Holding up the microphone to his mouth, he said so the whole room (and the Web audience) could hear: “Hey, do I have to stand on this thing? Okay….It’s a driftwood stage we constructed. Awesome.”

Awkward pause.

Then, Zuckerberg explained the Facebook tradition of holding a launch party when they have new products. “These are a lot of fun to do, so thanks.” Another awkward pause.

Then: “This is going to be a long interesting summer. We’ve got a lot of interesting products we’re working on.” Pause. (Would I be nitpicking to point out that summer is two-thirds over?)

Then: “The thing we’re going to talk about tonight is a new Places product that we’ve been working on for a few months. Uh, awhile”

Okay.

Then, Zuckerberg told a story about how he knew the product was ready to go when he was showing it to his girlfriend and they discovered that Facebook VP Chris Cox and his girlfriend were at a restaurant next door.

“I was in Menlo Park, and I never go to Menlo Park. I’m always at home or in the office.”

“When that serendipitous moment happened, I knew that the product was ready to go. And we were ready to start sharing it with the world and help people stay connected wherever they go.”

What struck me as odd, as I listened to Zuckerberg and some of the Facebook execs that followed, was that they sounded like they had just discovered the wonder of location-sharing and check-ins. Zuckerberg explained that Facebook Places was intended to do three things: Help people share where they are in a “nice and social way,” help you see who is around you, and help you see what else is going on. Fine. But that’s pretty much what Foursquare, Gowalla, Brightkite, Where, and many others, have allowed you do for a couple of years now. Facebook is a relative late comer, though potentially a game changer given its 500 million users.

Then Zuckerberg was followed by a gauzy, Hallmark-card-y video that tugged at your heartstrings with some warbly music and shots of people interacting in the real world, all thanks to the magical thing that Facebook had just discovered:

Up next was Michael Sharon, product manager for Facebook Places. “Places is not about broadcasting your location to the world,” he said. “It’s about sharing your location with your friends.”

And again, he went through the list of wonders that pretty much every other check-in service has allowed you to do. Check-in! See who else has checked in!

What should they have done? While many of other early leaders in the space appeared on stage after Sharon (Gowalla and Foursquare), I think Facebook should have acknowledged their pioneering work. And then pivot and say: Hey, these are great, but it still leaves this gap. Define what that gap is: These are early adopter services. Facebook represents a way to bring location sharing to the masses. The more people you know who use this type of thing, the more useful it becomes. Facebook’s opportunity is to bake this into its platform, make in a mainstream activity, and let other people build applications on top of it, just as they have on Facebook’s main platform.

After the competitors left the stage, Cox appeared on stage to kick the weirdness quotient up another notch. He started out with an attempt at a joke that sucked the air out of the room: “The thing about Facebook employees is that we’re all closet sociologists.” Um, huh? “We all get on a bus and go to the Stanford library and check out books on the history of designing public spaces.” Hello, is this thing on? “That was a joke.” Ah, thanks for clearing that up. Cue nervous laughter.

This was all leading up to Cox’s sociology lecture. He gave a nod to noted sociologist Ray Oldenburg, who was apparently sitting in the audience. Cox then elaborated on Oldenburg’s theory about “third places.” He started by filling us in on particularly obscure sociological term that describes the first place: “home.”

“Home is where you wake up, it’s where you go to sleep, it’s where your family is, it’s where you eat and it’s where you go to digest and reflect upon the experiences you had during the day.” Got that? To recap, home is where you eat, sleep, live. There will be a test on this later.

Second place: work. (Do I need to explain that?) The third place is called….”the third place.” These are bars, restaurants, anywhere people go to share their lives with other people.

“Oldenberg made a pretty crazy hypothesis that the technology we were creating in the 20th century was in danger of destroying the third place. There was a fear that now we have television and phones and radios, we would just sit at home on our couches rather than going to the amphitheater to watch the play, rather than going out to have coffee, we’d just call our friends on the phone. Rather than experiencing the world outside, we’d cloister ourselves indoor…Over time, these third places would be destroyed and we’d be sitting in these pods. It’s like Wall-E, with these fat people rolling around in their bubbles.”

But!

Cox: “Technology can be the thing that pulls us out. Technology does not need to estrange us from each other.”

“Maybe one time you walk into a bar, you sit down at the bar, and you put your magical 10-years-into-the-future phone down. And suddenly it starts to glow. ‘This is what your friend ordered here’. And it pops up these memories…’Go check out this thing about the urinal that your friend wrote about when they were here about eight months ago.’ ”

Cox explained that all these check-ins, photos, and videos could be gathered on pages about a place to create “collective memories.”

“That’s dope.”

Yeah, he said that.

“Too many of our memories are still stuck at home, gathering dust on a shelf.” Now those stories are going to be on Facebook! “So that maybe one day in 20 years, our children will go to Ocean Beach, and their little magical thing will start to vibrate, and it will say, this is where your parents had their first kiss.”

As one journalist remarked to Cox later: He practically had tears in his eyes at this point.

Cue Zuckerberg back to the stage to introduce the product team. This included attempting to pronounce the name of one Indian engineer on team. ”Did I get that right?” Zuckerberg asked. “Awesome.”

For the finale, Zuckerberg recounted the tales of Facebook’s legendary hack-a-thons, in which people stay up all night working on a project not related to what they work on during their day job. Apparently, someone at one such event decided it would be cool to build a “launch switch.” Which would be: a wooden plank on the side of the room. That gets pulled whenever the launch a new product. But first, a gong must be banged:

Phew. That’s a wrap.

Now, I know I’m older (41) than probably just about every single person who works at Facebook. But the event felt like I was watching some guys in their dorm commons room knock back a few beers and practice their first presentation. Maybe that shouldn’t be a surprise given Facebook’s famous roots in a college dorm room. But it was hard for me to imagine the group I saw overseeing the massive company Facebook would become if it ever does an IPO.

Also odd: The performance of Zuckerberg won some healthy doses of praise. Dean Takahashi at Venture Beat, said Zuckerberg was “in his element”:

“The affair started late and Zuckerberg had some awkward pauses while on stage. But the 26-year-old handled himself well enough as he introduced a new feature that will likely make rivals in the location-based services business tremble with fear. We’ve uploaded scenes from the press conference in several videos for your enjoyment. You’ll also see the company’s video describing Facebook Places, which lets you share your location with friends, find out where your friends are, and discover new places.

I always find it fascinating to see how one of the world’s youngest billionaires at one of the hottest companies in Silicon Valley handles himself on stage. He seems like a pretty ordinary guy, just one more coder among many.”

Henry Blodget praised Zuckerberg’s performance:

“One final observation: We thought Facebook and Mark Zuckerberg were at the top of their games tonight. Mark was relaxed and in his element, and after a couple of challenging and awkward public appearances recently, seeing him in his element was refreshing. Facebook, meanwhile, is positively bursting with excitement and energy, as might be expected of a company that has wrested the center-of-innovation mantle from Google and is really, truly changing the world.”

I agree with the bit about Facebook taking the mantle from Google. But if this was Zuckerberg was “at the top” of his game, then I’m terrified to think what those other appearances were like.

Joe Nocera is one of the business columnists I respect most. So it’s rare that I find myself in strong disagreement with his take on an issue. But his blistering column about why he thinks Hewlett-Packard really got rid of CEO Mark Hurd is one of those instances. And since things in the New York Times have  way of becoming conventional wisdom, I think it’s worth explaining why his theory is almost totally improbable.

To be clear, I’m not defending the HP board or Hurd. As Nocera writes:

“In fact, the directors should be called out for acting like the cowards they are. Mr. Hurd’s supposed peccadilloes were a smoke screen for the real reason they got rid of an executive they didn’t trust and employees didn’t like.

The stand-up thing would have been to fire Mr. Hurd on the altogether legitimate grounds that the directors didn’t have faith in his leadership.”

I agree with that statement as written. And yet, I don’t agree with its larger implication. Yes, HP’s board is looking more and more like craven weasels every day. And they’re digging their own hole by not coming out with a plausible explanation for why Hurd was really ousted. I agree with Nocera completely on that point.

(As an aside, it seems the board is waging it’s own battle of counter spin by leaking at least one version of what happened to the Wall Street Journal this weeked. I’ll come back to this story at the end.)

While we don’t know exactly what Hurd did, it’s clear he did something. He had some kind of relationship with Jodie Fisher that went beyond professional but stopped short of sex. And whatever it is, he clearly shouldn’t have done it. He put himself in this pickle and has only himself to blame for that. And like the board, Hurd is also not explaining himself to the world, though most likely his separation agreements contains a non-disparagement clause of some kind. While telling the truth and stating the facts ought not to be considered disparaging to anyone, even if it makes them look bad, no doubt HP lawyers would use anything as grounds to recoup the $40 million or so that the board is paying Hurd to go away.

So where does Nocera go wrong? It’s with his conjecture on what the board’s real motivation was. In a nutshell, Nocera is arguing that the board secretly has disliked Hurd for years, in part due to his power play during the HP spying scandal. In the recent book, “The Big Lie: Spying, Scandal and Ethical Collapse at Hewlett-Packard,” former BusinessWeek writer Anthony Bianco claims Hurd was really the main actor, but managed to pin the blame on board chair Patricia Dunn.

Nocera then goes on to note that employees detested Hurd, citing an internal survey in which two-thirds of HP employees said they would bolt the company for another if they could find a similar job. Nocera writes:

“Then there were the company’s employees. The consensus in Silicon Valley is that Mr. Hurd was despised at H.P., not just by the rank and file, but even by H.P.’s top executives.”

So here’s the leap Nocera wants us to make: After several years of massive layoffs, savaging the HP way, and not being a nice guy, the board was looking for an excuse to ditch him. In essence, Nocera wants us to believe that all of the sudden, the board of HP developed a conscience.

When you look at it like that, you realize this theory is nonsense. First, let’s remember this is, in fact, just Nocera’s theory. Like all of us on this story, he’s on the outside looking. He doesn’t point to a source or an internal memo or anything that bolsters this theory. He mainly relies on conversations with ex-HP workers, who not surprisingly despise Hurd.

Next, the Mercury News has reported that Hurd and the HP board were in negotiations for a new contract until the sexual harassment allegation hit. That would seem unlikely if they really wanted to force him out somehow.

But the part of this that I have the hardest time swallowing is that all of a sudden HP’s board suddenly started caring about what employees thought of Hurd. After all, in its various configurations over the past decade, the HP board has signed off on the mass firings of more than 94,000 employees. This was part of a deliberate strategy to reinvent the company that was launched by ex-CEO Carly Fiorina and perfected by by Hurd. Here’s what I wrote on this subject back in June, when Hurd announced another 9,000 layoffs:

“It’s a ruthless, brutally effective strategy launched under former CEO Carly Fiorina and practiced with precision by current CEO Mark Hurd. Without question, the strategy has transformed HP from being the sickly also-ran at the end of the last century to its present position of dominant front-runner.”

The other side of this strategy is the $45 billion that HP has spent on acquisitions under both Fiorina and Hurd. The most recent of the deals was the acquisition of Palm, but HP is still digesting numerous others, including 3Com and the much larger EDS. To one degree or another, these deals were orchestrated by Hurd as part of a relentless march that increased the overall number of employees at HP from 88,000 (pre-Compaq merger) to more than 300,000 (current employment after layoffs).

Many of these most recent acquisitions remain very much works in process. There are complex integration and strategic issues to be worked out. Hurd, though rightfully dinged for being less than a visionary leader, still obviously had some strategic and operational plan in mind for all of this. And no doubt he communicated that to other executives. But he had developed a strong track record for pulling all of these things off. His successor will have to not just lead HP forward, but sort out this massive integration puzzle. HP’s board would be seriously crazy to jettison the architect of all this in midstream without a darn good reason.

Even worse, the HP board got rid of Hurd at one of the most dynamic and challenging times in the industry’s history. As a result of all the mergers and acquisitions by HP and others in recent years, the competitive landscape has completely shifted. HP now finds itself in direct competition with Oracle (thanks to the Sun Microsystems deal) and Cisco Systems (now that HP has gotten into networking via its 3Com acquisition) while at the same time the company is taking on IBM even more directly in the services market (thanks to the EDS deal).

That’s a lot for any new CEO to walk into. Plus, let’s not forget the company now probably needs to hire a new board chair and president. After this, it would smell bad if they don’t break all of those jobs up. When the board says all is well, carry on, well, I can’t believe they’re really that delusional.

For all these reasons, though, I think Nocera’s theory is just plain wrong. I admire him taking a strong stand and delivering a strong critique on the board’s handling this. But his reason for doing so is off base. When Nocera refers to “the real reason they got rid of an executive they didn’t trust and employees didn’t like,” the truth is that we still don’t know what that reason is.

Finally, a word about the Journal story today. The story relies on a source who claims the board was angry about Hurd’s settlement with Fisher, which supposedly short-circuited their own investigation and caught them off guard. I have a hard time buying that the board didn’t know Hurd was talking to the woman about settling, but I suppose it’s possible. But for me, the story boils down to this sentence:

“The account of thinking at the board—which has faced criticism to the effect that it rushed to judgment and that the ouster wasn’t warranted—contrasts with an account given by someone familiar with Mr. Hurd’s thinking.”

In other words, it’s “He said, She said.” And it still feels like we’re not closer to knowing the real story here.

Since the announcement that it was killing Google Wave, Google has turned on the spin by proclaiming how they “celebrate our failures.” There is a lot to admire about Google, and one of those things is its ability to experiment and, as CEO Eric Schmidt said, “try things.” It’s not just hard for many organizations to find the culture and capacity to do that, it’s hard for them to acknowledge when those things don’t work.

Danny Sullivan, at Search Engine Land, mapped out many of Google’s most notable recent failures, and wondered just what the company was really gaining in terms of knowledge:

“But in its statements to the world, Google rarely sounds like it’s celebrating these missteps. It doesn’t really document anything that was learned. It just seems to say as little as possible to move on.”

But the bigger problem I see at Google is its approach to developing those new things. Just because you enable it, or allow it, doesn’t mean your approach to you develop new products and services. And what strikes me about Google is that so many of these products seemed dead on arrival.

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With everyone talking breathlessly about cloud computing, it seems I rarely hear this mega-trend being called into question. The advantages of moving your computing onto the Internet seem clear: Lower costs, more efficient management of resources. What’s not to like?

According to BitTorrent CEO Eric Klinker, the answer is: Plenty.

I had a fascinating conversation with Klinker about the state of his company, BitTorrent of San Francisco, which became the basis for my Sunday column about how TV remains the dominant way we consume video.

But one subject that didn’t fit into the column was Klinker’s views on cloud computing. In short, he sees the move to cloud computing to be a trend that runs counter to the very nature of the Internet.

“Cloud computing is a harkening back to centralizing everything,” Klinker said. “That’s just not the model that made the Internet so powerful.”

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