Hewlett-Packard ousts CEO Carly Fiorina

Hewlett-Packard Co on Wednesday said it ousted its chairman and chief executive Carly Fiorina, the architect of a controversial merger with Compaq Computer that never produced the results she promised.

Hewlett-Packard Co on Wednesday said it ousted its chairman and chief executive Carly Fiorina, the architect of a controversial merger with Compaq Computer that never produced the results she promised.

HT Image

Chief financial officer Robert Wayman, who was named interim chief executive on Wednesday, said HP did not plan to reverse the Compaq deal but left the door open, saying the board would not be close-minded on strategy changes once it locates a new CEO.

HP has turned in erratic financial results under Fiorina, one of the most powerful women in corporate America.

The board said its chief concern was to improve "execution" of strategy, although many on Wall Street hope HP will spin off its printing division, which delivers most of its profit.

HP shares, which have lost 63 per cent of their value since Fiorina became CEO in July 1999, rose as much as 10 per cent on Wednesday and closed up nearly seven per cent.

Corporate recruiters saw Mike Zafirovski, Motorola's former chief operating officer, as a top contender to become CEO, while others pitched Michael Capellas, current CEO of communications company MCI and former Compaq chief. But Capellas's link to the merger was seen as a problem by some.

Fiorina, 50, HP's first outside leader, took over in 1999 with a mandate to revitalize Silicon Valley's original start-up, founded in 1938. HP had become known for an insular and balkanized corporate culture celebrated internally as "The HP Way."

But the record under Fiorina remained spotty, with HP dashing investor hopes in three of the last nine quarters as it lost market share to rivals Dell and IBM.

Fiorina, the only female CEO of a component of the Dow Jones industrial average, resigned after a showdown on Tuesday afternoon, ending a tumultuous five-and-a-half-year reign. She will leave with a $21 million severance package.

Her ouster came after "weeks and more" of meetings in which directors took issue with her inconsistent track record of executing on HP's strategy, board members said.

Wayman, a 36-year veteran of the company, also was appointed to the HP board of directors. He said a search for a new CEO was underway and that the board had agreed to stick with the strategy combining its printer, corporate computer and personal computer businesses.

"We are looking for a CEO who also embraces that strategy, in all probability," Wayman said in a conference call with Wall Street analysts. But he told reporters later, "The board is saying they are not closed-minded about the strategy."

Fiorina said in a statement, "While I regret the board and I have differences about how to execute HP's strategy, I respect their decision. HP is a great company and I wish all the people of HP much success in the future."

Patricia Dunn, vice chairman of Barclays Global Investors and a member of HP's board since 1998, was named non-executive chairman of the board.

CONTROVERSIAL MERGER

Fiorina had become a lightning rod for criticism from investors and some in the Silicon Valley establishment for pushing through the 2002 merger with rival PC maker Compaq.

She took on the founding families who opposed the deal, beating family scion Walter Hewlett in a proxy contest decided the morning of the vote.

"Today's announcement basically is a validation that Walter Hewlett was probably correct, that it was an ill-fated strategy," said David Katz, chief investment officer at Matrix Asset Advisors, one of the first HP investors to publicly oppose the Compaq merger deal. He said a printer spinoff was a possibility.

Hewlett himself resisted any temptation to claim vindication, saying in a statement that he looked forward to HP fulfilling its promise. "HP has been a great company. It is facing a number of challenges," he said in a statement.

Wall Street generally endorsed the change, although Bear Stearns downgraded its rating on HP shares, saying Wednesday's gain reflected most of the possible upside from a potential break-up of the company.

Shares of HP closed up 6.9 per cent at $21.53 on the New York Stock Exchange after rising as much as 10 per cent to $22.20 earlier in the session.