HP Partners: Turmoil At The Top Could Impact Sales

sudden ouster

HP's board announced Fiorina's departure on Wednesday. The board named CFO Robert Wayman as interim CEO and director Patricia Dunn as non-executive chairman, effective immediately, and said a search for a new CEO is getting under way.

"It is disheartening to have more turmoil," said Don Richie, CEO of Sequel Data Systems, an Austin, Texas-based HP enterprise partner. In the past three months, Sequel's sales have been up in the wake of enterprise management changes at HP, he added. "Just as we get up on our feet, something else comes up. Now we have to fight that battle. I am absolutely stunned."

Richie said he was particularly miffed that Fiorina's exit comes on the eve of the company's annual Americas Partner Conference, which kicks off next week in Las Vegas. "Why did they do this just before the partner event? The timing couldn't be worse," he said. "This is an event that should be getting the partners excited. I have been absolutely ecstatic about HP for the past several months, and now this is going to set the tone for the partner event."

Wayman told CRN there would be no change in HP's direct vs. channel sales strategy and that he sees no change in HP's plans to turn over 250 direct enterprise accounts to the channel. HP Executive Vice President Mike Winkler likely will fill in for Fiorina as the opening keynote speaker at the Americas Partner Conference, Wayman said.

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Wayman, a 36-year HP veteran, and Dunn, an HP director since 1998, stressed that HP is committed to the current strategy.

"I'm happy the strategy is remaining unchanged because there has been a real commitment to the channel of late in the giveback of the 250 enterprise accounts to the channel," said Mike Cox, president and CEO of Bloomfield Hills, Mich.-based Logicalis, one of HP's largest enterprise solution providers. "It's not that big of a surprise [that Fiorina left], and I'm not that disappointed."

HP's channel relations soured after the Compaq acquisition, said Peter McMahon, vice president of sales at Protek, a London, Ontario-based solution provider. "HP has had two challenges since the merger, and they've tried to dance to two different tunes. Pre-merger, they were 'the' channel-friendly company. But after the merger, they have absolutely strained their relationship with the channel. And I really don't think they've had much success on the direct side," McMahon said.

"HP had the opportunity to be the integrated, one-source stop for small businesses. But they've had a difficult job integrating all the sides. One hand doesn't know what the other hand is doing," he added. "The thing is, customers are willing to pay a premium to a vendor that can be the one throat to choke. HP hasn't figured out a way to present that entire solution to the end user. Each side of the company has a difficult time communicating with the other. I think they now have a great opportunity to change that."

Rich Baldwin, president and CEO of Nth Generation, a San Diego-based solution provider, said that while Fiorina did a great job in terms of controlling costs in the wake of her company's acquisition of Compaq, she went too far.

"The things she did for the merger were good in a way," he said. "That was a pretty tough thing to do, to pool the two companies together and get the cost savings the first year ahead of schedule and all that. But that's all she knows how to do is cut costs. We're beyond that now, where I think they've cut too deep."

Marlene Brill, president of New York-based Digitask Consultants, took Fiorina's ouster in stride. "I knew this would happen. Things can't get much worse for VARs. I am upset she is gone. For women, it was nice to have her there," she said.

"Every year, they have a shakeup or new move, the field sales reps get more scared and they don't do as much," Brill said. "Every time they make a change, it affects the feet on the street. When you take a CFO and make him interim CEO, that always makes me nervous. It makes everybody nervous. He is not a marketing guy. He is a numbers guy who is going to start crunching numbers. What has to happen is innovation and making bold moves."

Other partners also voiced concern that the channel would feel reverberations from Fiorina's exit.

"Right now, this is a bad thing for VARs," said John Marks, CEO of JDM Infrastructure, a Rosemont, Ill.-based solution provider whose HP sales rose in 2004. "Anytime you show weakness at the top, the competition has a leg up. Short term, it may make it more difficult to sell HP. We'll find out a lot more this weekend when we go to the HP partner conference. What timing," he said.

"I am surprised at the amount of turmoil there has been at the top of the company in the last several months," Marks said. "It started with the storage and enterprise business, and then there was the merger of the printing group with PCs. Obviously, someone is not happy."

For HP, the challenge now is "getting all the pieces in place to uniformly grow the business," Marks said. "They need to have one voice moving forward for all their pieces and parts and remain channel-friendly." One critical mistake HP made years ago was to buy solution provider Inacom's build-to-order PC assembly operation, he added.

Some solution providers said HP had grown too large after the Compaq merger, which led to confusing and in some cases conflicting messages from the company.

"They were so big that one hand didn't know what the other was doing. We have three or four different HP reps calling us about different products or divisions. We'd ask, 'Well, what about this promo?' They'd say, 'That's not my area. I don't know,' " said Bob Parsons, president of Automated Office Solutions, Evansville, Ind. "I'm not sure [the Compaq merger] was the smartest thing they did."

STEVEN BURKE, SCOTT CAMPBELL and JEFF O'HEIR contributed to this story.