Hewlett-Packard Company (NYSE:HPQ) agreed to pay $57 million to settle the class action lawsuit filed by its shareholders who accused its former management under the leadership of Leo Apotheker of defrauding them by abandoning its business model.
Sudden change in business strategy
The shareholders of Hewlett-Packard Company (NYSE:HPQ) filed a complaint after they were surprised by Apotheker’s announcement in August 2011 that the PC maker will change its business strategy.
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At the time, former CEO Apotheker disclosed that the company decided to abandon WebOS, discontinue the sales of its Touchpad after its availability on the market for just seven weeks, and the potential spinoff of its PC business. Hewlett-Packard Company (NYSE:HPQ) also revealed that it was in talks to acquire Autonomy, a British software company for $11.1 billion.
The surprising decision of Hewlett-Packard Company (NYSE:HPQ) caused a steep decline in its stock price, around 20%. The shareholders argued that they were not aware or did not perceive any indication from the company that it would abandon WebOS or spin off its PC business. They also complained that the executives of the company did not disclose their concern regarding the future of its business model.
Hewlett-Packard Company (NYSE:HPQ) fired Apotheker and appointed Meg Whitman as CEO a month after the announcement. The shareholders also filed a lawsuit in the same month.
Mutually acceptable resolution
Sarah Pompei, the spokesperson for Hewlett-Packard Company (NYSE:HPQ) said the company “reached a mutually acceptable resolution through a mediated settlement.”
Under the proposed settlement, the company will deposit $57 million into an interest-bearing account within 20 days after obtaining approval from United States District Judge Andrew Guilford in Santa Ana, California.
Jonathan Gardner, co-lead counsel representing the shareholders in the class action lawsuit said, “We are very happy with the settlement and are glad to have achieved this recovery for the affected HP shareholders.”
The primary complainants in the case include the Arkansas Teacher Retirement System; the Labourers’ Pension Fund of Central and Eastern Canada in Oakville, Ontario; the LIUNA National Pension Fund and LIUNA Staff & Affiliates Pension Fund in Washington, D.C.; and Union Asset Management Holding AG in Frankfurt, Germany.