Fiorina exits HP amid board dispute

Carly Fiorina, the woman who executed the largest merger in high-tech history between Hewlett-Packard and Compaq Computer Corp., ended her six-year run at the helm of HP in February over disagreements about its future direction with the company’s board.

Fiorina said in a public statement that

she and the board “”have differences about how to execute HP’s strategy.”” Patricia Dunn, an HP board member, will take over as chairman, while the company’s CFO, Robert Wayman, will act as CEO on an interim basis. The board asked Fiorina to step down, said Dunn in a conference call.

In a separate conference call with investors, Dunn said HP’s board isn’t planning any other structural changes while it begins a search for Fiorina’s replacement, which she said would likely be an external candidate.

“”The differences really come down to the view that Carly was brought in to catalyze a transformation at HP, and she did that in remarkable fashion,”” she said. “”Looking forward, we think the job is very reliant on hands-on execution and we thought a new set of capabilities is called for.””

Neither Dunn nor Wayman would comment specifically on what those capabilities are, or the differences of opinion between Fiorina and the board. Wayman admitted the board had been disappointed with HP’s performance in the server and storage space last year. A botched SAP implementation had also brought challenges to its supply chain.

“”Those problems are behind us,”” he said. “”Now we need to establish a steady and consistent track record.””

Fiorina joined HP in July 1999 from Lucent Technologies, where as president of the Global Service Provider division she led the company’s US$3-billion IPO, at that time the most successful in U.S. history. In 1998 Fiorina was named as the most powerful woman in American business by Fortune magazine.

In 2001, as the IT sector endured an industry-wide slump, Fiorina initiated discussions with Compaq to merge in what became a US$18-billion transaction, which was bitterly contested by HP heir Walter Hewlett and some members of the Packard family. Fiorina campaigned hard to persuade customers, analysts and shareholders that the two firms’ desktop lines did not suffer from overlap and the combined entity could create a stronger adversary for IBM. The first major services win following the Compaq merger came in 2002, when CIBC outsourced significant portions of its IT infrastructure in a $2-billion deal. A spokesperson for CIBC, CIO Mike Woeller, said he didn’t expect Fiorina’s departure to have any impact on his the bank’s relationship with the vendor.

Peter McMahon, vice-president of sales at Protek Systems, an HP reseller in London, Ont., described Fiorina’s exit as a “”moderate surprise.”” The company has faced several problems in cultivating channel relationships since its massive merger with Compaq, he said.

“”One is they had some confusion as to whether they were a direct model or a channel model. While HP was known was one of the most friendly to the channel pre-merger (with Compaq), since the merger it’s tried to dance to two different tunes,”” he said.

The HP board’s move may have been a reaction to Fiorina’s recent decision to apparently fight pressures to spin off the company’s dazzlingly successful printer business by merging it with the struggling PC business, said Dave MacDonald, president of Softchoice Corp., a $200-million reseller with branches in Canada and the U.S.

It also may have been a reaction to a highly critical feature about the company in a recent issue of Fortune magazine, he added.

Since moving into hardware two years ago HP products have been big sellers, he said, now accounting for $40 million in annual sales or about 40 per cent of hardware revenues.

Recent reports in the Wall Street Journal and other publications quoted anonymous sources that said HP’s board was encouraging Fiorina to delegate her day-to-day duties to other members of the senior management team. There had also been increased speculation in the press that HP will eventually spin off several of its units, such as its lucrative printer business, but Fiorina had publicly resisted any such move. HP recently integrated its PC and printing divisions.

Dunn did not rule out spinning off parts of HP, but said no changes were planned at the moment.

“”The portfolio that has been assembled at HP is unique,”” Dunn said. “”(It is) a collection of businesses that each has the opportunity and the expectation of performing along with the best in class in their markets for products and services.””

Dunn said Fiorina’s departure shouldn’t take HP’s enterprise customers off-guard.

“”I think these things always seem precipitous when they occur because they’re sudden when the news hits, but the board has been deliberating on company performance and leadership for quite some time,”” she said.

— with files from Howard Solomon and Jeff Mackie

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