Channel Insider content and product recommendations are editorially independent. We may make money when you click on links to our partners. Learn More.

SAN FRANCISCO, Aug 6 (Reuters) – Hewlett-Packard Co (NYSE:HPQ) CEO Mark Hurd unexpectedly resigned on Friday after a sexual harassment probe found he had a "close personal relationship" with an HP contractor who received improper payments.

The shocking announcement from the world’s top personal computer maker sent its shares plunging 10 percent as Hurd is one of the most admired chief executives in Silicon Valley and credited with reviving the company after the tumultuous reign of Carly Fiorina.

HP said one of its former contractors, involved in marketing activities from late 2007 to the fall of 2009, had levied sexual harassment allegations at Hurd.

HP said Hurd, who is 53 and married, had a "close personal relationship" with the contractor. An investigation found no violation of HP’s sexual harassment policy, but did find that Hurd violated standards of business conduct, HP said.

There were instances where the female contractor received compensation or reimbursement without a legitimate business purpose, HP said.

A source familiar with the situation told Reuters that Hurd never had sex with the woman and that the expense account issues stretched over two years and amounted to no more than $20,000.

"The board investigation found that Mark demonstrated a profound lack of judgment that seriously undermined his credibility and damaged his effectiveness in leading HP and Mark agreed," HP General Counsel Mike Holston said.

Hurd will be replaced by Chief Financial Officer Cathie Lesjak on an interim basis. Lesjak has taken herself out of consideration as the permanent CEO, HP said.

Hurd said the decision to step aside was a "painful" one.

"I 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," Hurd said in a statement.

News of the shake-up stunned the technology world. HP is the largest technology company in the world on a revenue basis, and is a major player in personal computers, servers, services and printers.

"Shock and puzzlement, that’s how it’s going to go down," said Russell Hancock, president and chief executive of Joint Venture Silicon Valley, an area business group. "There wasn’t anybody who criticized his handling of the company."