Good-bye Carly

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

Fiorina, 50, said in a public statement that she and the board “”have differences

about how to execute HP’s strategy.”” Patricia C. 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.

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, she did that in remarkable fashion,”” Dunn 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.””

Performance

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 company’s 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 she was named the most powerful woman in business by Fortune magazine, ahead of the likes of television mogul Oprah Winfrey.

Fiorina brought an unusual mix of education and experience to HP. A Stanford University graduate with a bachelor’s degree in medieval history and philosophy, she taught English in Italy, went back to school to pursue an MBA and then took a job selling long-distance for AT&T. Lucent was an AT&T spin off.

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 but could create a stronger adversary for IBM. Recent reports in the Wall Street Journal and other publications quoted anonymous sources that said HP’s board encouraged Fiorina to delegate her day-to-day duties to other members of the senior management team. There has 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 has 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 have the opportunity and the expectation of performing along with the best in class in their markets for products and services. The view that we see is one that includes driving value between the portfolio businesses.””

Wayman added that managing a portfolio of HP’s complexity demands a versatile leader.

“”It requires a little bit of everything,”” he said. “”We have times where we need to make adjustments with resources and that occasionally means some cost-cutting.””

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.

Reseller reaction

Resellers were caught off guard.

“”It’s a surprise to me,”” said David Ahoot, CEO of Hypertec Group of St. Laurent, Que.

“”HP is our largest partner,”” he said, “”and the decisions they make would impact us.””

As a reseller he said he’s always had problems with HP having both direct sales and a channel strategy.

“”The question of going direct or not going direct was never clear,”” he said. “”If they would have said they were in a conflict and would not go direct they would have been in a better position for the channel and the confidence would have been there 100 per cent. Whereas now it’s only 50-50.””

That was echoed by Peter McMahon, vice-president of sales at Protek Systems of London, Ont.

“”HP’s had two challenges in the last couple of years,”” he said. “”One is they had some confusion as to whether they were a direct model or a channel model. While HP was known as one of the most friendly to the channel pre-merger (with Compaq), since the merger it’s tried to dance to two different tunes. I don’t know that they’ve had a lot of success on the direct side, but they’ve definitely strained relationships on the channel side.””

“”The other challenge HP has is that our industry as a whole is very confusing to our customers. They are getting fed up with the finger-pointing — ‘It’s the hardware. No it’s the software. No it’s the drivers.’

“”HP has the opportunity to present more of a full solution than probably anybody else out there, and yet they’re divided internally into silos.”” The imaging, personal computing and storage groups don’t communicate with each other, he said.

“”The challenge HP has is that almost literally the left hand doesn’t know what the right hand is doing.””

For example, he said, at Protek’s weekly sales meetings he learns of HP sales specials. “”It’s monumental, because every product group has another special going on and sometimes they actually conflict with each other.””

Fiorina’s departure was only a “”moderate surprise,”” he said.

“”The performance of HP stock would have a lot of people concerned, because since the merger it’s gone down, although I think the merger itself went pretty well.

“”I was surprised at her stepping down. I’m not surprised big changes were to come”” at HP.

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Jim Love, Chief Content Officer, IT World Canada

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