Carly Fiorina's nearly six-year reign at Hewlett-Packard ended abruptly yesterday as board members forced her out.
SAN FRANCISCO — Carly Fiorina’s nearly six-year reign at Hewlett-Packard ended abruptly yesterday as board members forced her out, disappointed by her inability to transform a plodding technology giant dominated by printer sales into a more nimble innovator.
HP’s stock, which has gone nowhere for two years and is down two-thirds from its peak in 2000, rose almost 7 percent after earlier soaring almost 11 percent on the news of her ouster.
Board members said they fired the chief executive — perhaps corporate America’s most influential woman — because Fiorina failed to slash costs and boost revenue as quickly as directors had hoped.
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Fiorina, 50, is expected to collect a severance package worth $21.1 million.
Fiorina is best known for orchestrating the 2002 acquisition of Compaq Computer — a $24.2 billion stock deal that required her and Compaq boss Michael Capellas to spend months wooing reluctant executives and shareholders.
The fiercest resistance came from HP director Walter Hewlett, son of an HP co-founder. Hewlett argued that the deal would dilute printing profits while the company absorbed Compaq’s low-margin PC business. Employees also soured on the deal, which led to the elimination of thousands of employees per quarter for more than a year.
Tech merger curse
The sudden departure of Hewlett-Packard chief Carly Fiorina casts new doubts on the biggest deal of her nearly six-year tenure: HP’s hotly contested, $19 billion merger with Compaq Computer. If it’s ultimately determined to be a mistake, the combined company would join a list of high-tech mega-mergers that didn’t deliver. They include:
Sperry and Burroughs: Merged in 1986 to form Unisys, which was supposed to challenge IBM in the mainframe market. IBM never lost its lead.
Silicon Graphics and Cray Research: Merged in 1996. SGI is still struggling to regain its lost glory as a supercomputer giant.
Compaq and Digital Equipment: Merged in 1998. Promised benefits simply never appeared, and corporate cultures clashed.
Tech companies nevertheless continue to seek out elusive synergies with each other through big mergers, including:
Oracle and Peoplesoft: The deal between rival business software makers closed in January after a tumultuous, 18-month battle.
Symantec and Veritas: Announced in December, the deal between anti-virus software maker Symantec and data-storage specialist Veritas is expected to close in the second quarter of this year.
Source: The Associated Press
Many analysts and shareholders remain skeptical that the biggest acquisition in the computer industry was worthwhile. Some business experts expect Fiorina’s ouster to precipitate a broad restructuring and management shake-up, possibly undoing many of the changes she spearheaded.
“She brought about a major acquisition that, from the objective of those of us who look at corporate restructuring, had absolutely no merit,” said James Owers, professor of finance at the Robinson College of Business at Georgia State University and an expert on corporate reorganization. “Combining HP with Compaq appeared to be more an ego trip, not a business deal. Many of us are still saying, ‘Where’s the rationale here?’ ”
HP directors appointed chief financial officer Robert Wayman as interim chief executive. They also named director Patricia Dunn non-executive chairwoman.
Dunn, a board member since 1998, said yesterday that directors had been discussing the change for “quite some time” based on consultations with lawyers, venture capitalists and academics.
In a conference call with reporters, Dunn said that Fiorina was asked to resign.
“The board asked Carly to step down,” Dunn said. “This is a result of differences between Carly and the board.”
Dunn declined to give details, but she said there was not one event that triggered Fiorina’s firing. She noted that the board has been discussing HP’s performance and Fiorina’s performance for several weeks. She also praised Fiorina for her “superior work” in executing a “major transformation” at HP and the controversial $19 billion acquisition of Compaq.
Fiorina was not available for comment, but in a statement she said that she and the board disagreed about HP’s strategy.
“While I regret the board and I have differences about how to execute HP’s strategy, I respect their decision,” she said. “HP is a great company and I wish all the people of HP much success in the future.”
HP’s board discussed shifting day-to-day responsibilities from Fiorina to other executives in mid-January, and it’s been reviewing her performance for months, Dunn said.
Directors said Fiorina, whose salary and bonus for 2003 totaled $3.5 million, failed to evenly boost profits across all divisions, ranging from printers and computer servers to technology-consulting for Fortune 500 companies. Dunn said Fiorina’s firing in no way reflected a change in direction of the board’s roadmap for the company.
Hewlett-Packard’s board ousted Chief Executive Officer Carly Fiorina after five years in which the company’s shares fell more than 50 percent and it lost the lead in the personal-computer business to Dell. Here’s a look at the company:
Headquarters: Palo Alto, Calif.
Market Value: $58.6 billion
2004 sales: $79.9 billion in 12 months ended Oct. 31
Number of employees: 151,000 as of Oct. 31
Interim CEO: Robert Wayman
Chairwoman: Patricia Dunn
Hewlett-Packard has long been considered the pioneer of Silicon Valley. William Hewlett and David Packard began the company in 1938 in a garage in Palo Alto, Calif. The first product was an audio oscillator, a test instrument used by sound engineers.
Source: Bloomberg News
“Looking forward, we think the job is very reliant on hands-on execution, and we thought a new set of capabilities was called for,” Dunn said.
HP shares rose $1.39, or 6.9 percent, to $21.53 — only a fraction of the 2000 split-adjusted high of almost $70 a share.
Board members said they would immediately begin searching for a replacement.
Analysts have been warning for months that HP needed a shot of adrenaline — new executives and even a deep strategic restructuring — to make it competitive against rivals Dell, one of the world’s most efficient personal computer retailers, and IBM, which has aggressively expanded in the lucrative consulting niche.
New HP chairwoman Patricia Dunn’s comments were provided by the San Jose Mercury News.