HP Shares Slide Following New CEO Appointment

New HP CEO Leo Apotheker has some work to do to convince the company's investors that he is the right man for the job.

HP shares were trading as high as $43.15 before his appointment as CEO on Thursday and closed down overall by some five percent to $40.77 on Friday.

"The initial investor reaction was slightly negative, but not totally unexpected given that Apotheker's name had not surfaced as a leading candidate and most investors in HP are hardware-centric," said Brian Alexander, a managing director of equity research for Raymond James & Associates, an investment firm, in a research note to clients. "Our conversations with software investors suggest a more positive tone. Apotheker's previous experience as CEO at a large software firm also makes him well acquainted with many global CIOs, which should make the transition in the eyes of large customers a bit less disruptive."

Alexander said he does not see "Apotheker's lack of hardware experience as an obvious negative. In our view, this indicates that he will rely on the seasoned executives already running these business units.

Next: This Is Not A Good Message

"Given that some of these executives were likely considered for the CEO position, we believe they will have more autonomy in running these divisions," wrote Alexander.

Several HP partners privately said they believe HP shares would have traded up if the company named Personal Systems Group Executive Vice President Todd Bradley.

"I just hope the board of directors knows what they are doing," said one top HP partner who did not want to be identified. "They just knocked their stock value down five percent. If they had picked Bradley everyone would have been dancing in the streets. But we have to wait this thing out and give this guy a chance."

Another partner, who did not want to be identified, asked: "When have you ever seen a company announce new leadership and the stock drop five percent? When you lose a leader the stock goes down. Not when you get a new leader. This is not a good message."