Carly Fiorina’s rocky tenure at Hewlett-Packard ended Wednesday when the board of directors ousted its chairman and CEO less than a week before HP’s Americas Partner Conference in Las Vegas.
The board asked Fiorina, one of the most powerful women in business, to step down after criticism concerning HP’s troubled Compaq merger and the company’s lack of execution came to a head recently. Several industry analysts have downgraded the company’s rating, while others have called for a breakup of HP that would split the printing and imaging business, HP’s strongest unit, from the rest of the company.
HP also announced that CFO Robert Wayman has been named interim chief executive and was appointed to the board of directors. Patricia Dunn, an HP director since 1998, has been named non-executive chairman of the board, effective immediately.
“Carly Fiorina came to HP to revitalize and reinvigorate the company,” Dunn said in a statement from the board. “She had a strategic vision and put in place a plan that has given HP the capabilities to compete and win. We thank Carly for her significant leadership over the past six years as we look forward to accelerating execution of the company's strategy.”
Fiorina issued a statement as well. “While I regret the board and I have differences about how to execute HP's strategy, I respect their decision,” Fiorina said. “HP is a great company and I wish all the people of HP much success in the future.”
HP didn’t say if the board’s decision to remove Fiorina was unanimous. On Tuesday, the same day the board said it reached the decision to oust Fiorina, HP announced that board member Sanford Litvack had resigned. Litvack, an attorney and former general counsel for Walt Disney Co. who had served on HP’s board since 2002, was replaced by Thomas Perkins, a venture capitalist and former HP and Compaq board member who had retired from HP last year. According to SEC filings in January, Litvack had announced he would not stand for re-election to the board at HP’s annual shareholder meeting next month. But Litvack’s early departure and Perkins’ return raised concerns among some industry watchers and channel partners, who wondered if the change signaled dissension within the company.
An HP spokesperson declined to discuss the board’s vote concerning Fiorina and said there was no connection between the matter and Litvack’s resignation.
“We’re not getting into the deliberations or the specifics of the board’s voting,” says Mike Moeller, director of corporate communications at HP. “[Litvack] resigned for personal reasons.”
The board said it has begun a search for a new CEO and is considering both internal and external candidates. Wayman, a 36-year veteran of the company, will retain his CFO duties. The company also said it does not expect to make any additional structural changes or executive leadership changes at this time. In conference calls Wednesday morning with media members and analysts, Dunn and Wayman emphasized their goal was not to change the current strategy put in place by Fiorina, but to improve execution.
“We should focus on improving the profitability of these businesses,” Wayman said. He also discussed the “negative synergies” of breaking up the company and clearly advocated keeping HP’s businesses together in what they described as a unique portfolio.
Dunn called recent press reports regarding friction between HP’s board and Fiorina as “coincidental,” adding that the board had been deliberating on the matter for several weeks and that the decision was reached Tuesday.
“We’re looking to accelerate the growth of the company, and we think that requires hands-on execution,” Dunn added. “The board has been deliberating on company performance and CEO performance for quite some time. The timing of the announcement was due to a decision being reached, and not because a decision was made quickly.”
A former HP employee, who requested anonymity, believes Fiorina’s exit is good news for everyone -- customers, employees, investors and business partners.
“My only question is, what took so long?” the source tells VARBusiness. “The Compaq merger has been a disaster for shareholders. If you talk to customers and employees, they’ll tell you the place is broken, so I’m thrilled they’re finally making a change at the top.”
As for a potential breakup of HP, Wayman dismissed the idea.
“We continue to believe we have the right ingredients for success in the marketplace,” he said. “We have a unique portfolio, one that is stronger together than apart.”
Wayman added that HP would pursue a new chief executive candidate who supported the current strategy of keeping the company together and would help the company execute better. He also said there would be no change in HP’s channel strategy or any kind of shift between direct sales and channel sales.
Some solution providers believe Fiorina’s dismissal will be a positive development for HP partners. John Freres, CEO of Meridian IT Solutions of Schaumburg, Ill., says the CEO change at HP is “a milestone” and adds that he hopes the company “recognizes what its core strengths are, like the channel and the SMB market. Hopefully this will make HP recognize the channel partners are who helped to make it strong.”
Still, some HP partners are wondering what a new CEO can do if HP continues with its current strategy of keeping the entire portfolio under one roof.
“It’s no surprise that they fired [Fiorina],” says John Marks, CEO of JDM Infrastructure in Rosemont, Ill. “The question is, what do they do now? The merger went better than anyone could have expected, but that doesn’t change the fact that it was a bad idea. If that’s the problem, then getting rid of the CEO and bringing in someone new to execute better may not matter.”
Fiorina may not have been the only HP employee dismissed from the company. Several partners say they have noticed a number of HP sales managers and representatives were fired by the company this week; one solution provider puts the number of employees recently laid off by HP at 2,000. Such actions suggest there could be much more going on at HP than just a CEO change.
So far, Wall Street has reacted favorably to the news of Fiorina’s departure. HP’s stock rose more than 6 percent early Wednesday to $21.38 at press time. A Merrill Lynch report issued this morning authored by analysts Steve Milunovich and Richard Farmer stated that a new CEO could be a catalyst to improve HP’s share price. In addition, the report states that Merrill Lynch “believes the long-term probability of a breakup of the company is rising, despite indications from the board that no such move is currently planned.”
HP said it still plans to report its first quarter financial results on Feb. 1 after the market close. The company said it expects results to be in line with consensus analyst expectations. The company's annual shareowner meeting will be held in Chicago on March 16.