Hewlett-Packard Co. says CEO Mark Hurd is stepping down after a probe that found he falsified expense reports related to a former HP contractor who accused him of sexual harassment.

In this photo from March 3, Hewlett-Packard CEO Mark Hurd speaks during an appearance in Conway, Ark. (Danny Johnston/Associated Press)HP said Friday that Hurd decided to leave after the sexual-harassment claim, which was made against him and the company. The company probe concluded that HP's sexual-harassment policy was not violated, but that its standards of business conduct were.

Hurd will get a $12.2-million-US severance payment.

In a conference call with analysts late Friday, Michael Holston, HP's general counsel, said Hurd displayed a "systematic pattern" of turning in inaccurate expenses and financial reports connected to the female marketing contractor who accused him of sexual harassment.

"The facts that drove the decision for the company had to with integrity, had to do with credibility, had to do with honesty," Holston said, declining to elaborate.

He added that the pattern of inaccurate financial reports "related to Mark's conduct with this specific individual and wasn't broader than that."

Stock price falls

After the announcement, the technology company's shares dropped almost 10 per cent.

In a statement, Hurd said that during the investigation he "realized there were instances in which I did not live up to the standards and principles of trust, respect and integrity that I have espoused at HP." He added that he believed it would be "difficult to continue as an effective leader at HP."

Hurd and Robert Ryan, HP's lead independent board member, stressed that Hurd's departure has nothing to do with the company's financial health.

Ryan said in a statement that HP's board "deliberated extensively" about whether Hurd should leave his post.

"The board recognizes that this change in leadership is unexpected news for everyone associated with HP, but we have strong leaders driving our businesses, and strong teams of employees driving performance," he said.

Hurd, 53, joined HP in April 2005 as its chief executive officer, president and a board member. He gained the title of board chairman in September 2006.

Before coming to HP, he worked as CEO of banking machine maker NCR Corp. for two years, and as that company's president for nearly four years before that. He is also a member of News Corp.'s board.

The company's stock price has nearly doubled since Hurd started at HP on April 1, 2005, when the shares closed at $21.71 US. They closed trading Friday on the New York Stock Exchange at $46.30, then tumbled to $41.85 as investors reacted to the stunning news of his resignation.

HP, which makes a range of tech products including printers and computers, named chief financial officer Cathie Lesjak as its interim CEO. Lesjak, 51, who has been at HP for 24 years, will continue to act as CFO.

HP said a board committee will search for a new CEO, and the company said Lesjak decided not to be considered for the position of permanent CEO.

Also Friday, HP issued preliminary results for its third quarter, which came in slightly above analyst expectations.

HP said it earned 75 cents per share during the period, compared with 67 cents per share in the same quarter a year ago. Excluding one-time items, the company earned $1.08 per share. Analysts polled by Thomson Reuters expected adjusted earnings of $1.07 per share.

HP said its revenue rose 11 per cent from last year to $30.7 billion US; analysts were looking for $30 billion in revenue.

HP gave the outlook for its fourth quarter as well. The company forecast earnings of $1.03 to $1.05 per share, or $1.25 to $1.27 per share after excluding one-time items. Analysts were hoping for adjusted earnings of $1.26 per share.

HP expects $32.5 billion to $32.7 billion in revenue, in line with analysts' expectations of $32.6 billion.

HP plans to report its final results Aug. 19.