HP Stock Falters In Spying Scandal

But Robert Passikoff, president of research consulting firm Brandkeys Inc., disagreed. His firm's surveys show that HP has lost 14 percent of what is known as "brand strength," a measure of consumer sentiment for a brand name, since the scandal began and has dropped from third place in its sector to seventh. While the allegations do not appear to affect how consumers think about the technical aspects of HP products, they have pushed down its reputation for openness, honesty and trustworthiness, Passikoff said.

The allegations dovetail with consumer fears about spyware and privacy loss in an information age, he said, noting that people are asking, "If they are doing that there, what are they doing to me?"

Until corporate spying became an issue for HP, the company stood to benefit from recent missteps by rivals Apple Computer Inc. and Dell Corp., which recently recalled millions of laptop computer batteries because of overheating. "People will reserve judgment on the company for a few weeks, but if there isn't a big change, with someone of high credibility brought in, it's going to start to affect business," said Paul Argenti, a professor of corporate communication at the Tuck School of Business at Dartmouth. "When a breach in ethics happens in a senior group of managers, it calls into question the management of the company."

"It takes years and years to build up a reputation and a few weeks to lose it. They're doing a very good job of losing it right now," Argenti said.

Although it remains unclear whether HP executives or its outside investigators violated laws, some analysts said the prospect of criminal charges against either the firm or its executives and directors could seriously tarnish the company.

"If it were simply a civil matter, it would be easier to solve," said Howard Rubenstein, founder of New York public-relations firm Rubenstein Associates. But in this case, where California officials are talking about criminal wrongdoing, "they've got to be cautious that they don't convict themselves out of their own mouths."

Staff writers Mike Musgrove and Ellen Nakashima contributed to this report.