SAN JOSE, Calif. — California's attorney general said yesterday that Hewlett-Packard insiders are likely to face criminal charges, putting a damper on the news HP was reshuffling its board because of the scandal surrounding its efforts to root out media leaks.

"We currently have sufficient evidence to indict people both within Hewlett-Packard as well as contractors on the outside," Bill Lockyer said in an interview aired on PBS' "NewsHour with Jim Lehrer."

The statement from Lockyer, who had already concluded that HP's probe broke some California laws, came on the day the company announced that Chairwoman Patricia Dunn would step down in January and be replaced by CEO Mark Hurd.

While defending the need for an investigation, Dunn said she regretted that private investigators hired by the company impersonated HP directors and journalists to access their personal phone logs

Hurd, who has the respect of Wall Street and is untainted by the investigation at the Palo Alto-based computer and printer maker, will take over, vowing that the probe's methods "have no place in HP." HP's stock rose to a 52-week high.

It was another chaotic day in a scandal that has rocked Silicon Valley's biggest and oldest technology company, led to investigations by state and federal authorities, and raised questions about one of the most powerful women in corporate America.

Dunn will remain on the board after giving up the top job on Jan. 18. Hurd will add chairman to his existing positions of chief executive and president.

COMPANY 'LIABILITY'

Director George "Jay" Keyworth II, who acknowledged sharing company information with reporters, resigned from the board Tuesday after refusing to do so in May.

Some analysts said Dunn's demotion sent a message to investors that HP was ready to move on, while others said she should have been removed completely.

"She needed to go — she had become a liability to the company whether she liked it or not," said Morningstar analyst Mark Lanyon. "But just removing her from the chairperson role and keeping her on the board is a half-measure at best and probably not appropriate.

"There are still legal matters that could come down on the company," he said, "and the issue is still festering with her there."

Roger Kay, who follows HP as president of the market research firm Endpoint Technologies Associates, had a different take.

"I think the fact that they made the statement that she's going to leave solves most of the problem," he said. "I don't think it's that material precisely when she leaves."

The pressure on Dunn to step down increased when Congress and federal investigators joined the probe of the scandal involving HP's board of directors.

STOCK STILL CLIMBS

On Monday, the FBI, the U.S. Attorney for Northern California and the House Energy and Commerce Committee all requested information on HP's investigation, which was already the subject of inquiries by the state attorney general, the Securities and Exchange Commission and the Federal Communications Commission.

HP's stock, meanwhile, remained immune to the spying scandal. It continued a steady climb that began not long after the company revealed the questionable tactics of its leak investigation in a regulatory filing last week.

Shares of Hewlett-Packard Co. rose 56 cents, or 1.54 percent, to close at $36.92 on the New York Stock Exchange. Before yesterday, they had traded in a 52-week range of $25.53 to $36.73.

Frank Gillett, vice president and principal analyst at Forrester Research, said the market seems unfazed by the problems on HP's board.

"I'm not hearing anything or seeing anything that makes me concerned about the success of the products," he said.

Hurd has won praise from Wall Street for a cost-cutting campaign that will have cut some 15,000 jobs by the end of this quarter.

"It makes perfect sense to give (Hurd) the chairmanship," Kay said. "He has the character, personality and chops to do it. I can't think of anyone else you would want to run the company at this point."

Hurd said in a statement he was "taking action to ensure that inappropriate investigative techniques will not be employed again.

Dunn was angry about media leaks of confidential board discussions and commissioned an unnamed outside firm to identify their source. The investigators used personal information to get phone companies to turn over detailed logs of home phone calls of reporters and company directors.