Update: HP fires Blackmore, other sales executives

Move follows disappointing quarterly earnings report

Hewlett-Packard Co. (HP) fired three major sales executives Thursday, including former server group head Peter Blackmore, in a management shakeup following a disappointing quarter for HP's server division.

Blackmore was executive vice president of the Customer Solutions Group (CSG), a new group formed last December to manage direct sales to enterprise and public-sector customers worldwide. He will be replaced by Mike Winkler, currently executive vice president and chief marketing officer. Winkler will keep those responsibilities in his new role.

Jim Milton , CSG senior vice president and managing director of the Americas region, and Kasper Rorsted, CSG senior vice president and managing director for the Europe, Middle East and Africa (EMEA) region, were also dismissed. Milton will be replaced by Jack Novia, senior vice president and general manager of HP's Technology Solutions Group. Rorsted's replacement is Bernard Meric, senior vice president of HP's Imaging and Printing Group in EMEA.

Chairman and Chief Executive Officer Carly Fiorina announced the changes in an e-mail sent to HP's employees, which was then sent to the media.

"We thank Peter, Jim, and Kasper for their years of service and dedication," Fiorina wrote.

HP's Enterprise Servers and Storage Group suffered through a painful second quarter, Fiorina said in HP's second-quarter earnings conference call held earlier on Thursday. The Palo Alto, California, company had been expected to report earnings next week.

A planned migration to a new ordering processing and supply chain system went very poorly during the quarter, Fiorina said on the conference call. The European operations were hurt by aggressive discounting and poor channel management, she said.

Blackmore came to HP along with several former Compaq executives, including Milton and Rorsted, when the two companies merged in May of 2002. He was originally the head of HP's server division, but in December 2003 that division was folded in with the services and software teams under the Technology Solutions Group (TSG), headed by Ann Livermore, formerly head of HP Services.

Blackmore was then given a role as head of CSG, which was designed as the sales arm for enterprise hardware, software and services customers. The idea was to create more revenue by having one sales team market all of HP's products together, rather than asking a customer to work with separate hardware, software, and services sales teams.

"This whole CSG/TSG concept and aligning everyone under concepts was supposed to fix sales," said an HP employee who asked not to be identified. "This was supposed to be the solution to everything."

However, HP's second-quarter enterprise sales were worse than the company and analysts expected.

While at Compaq, Blackmore was vice president of sales and services, and his role as head of a global sales team was seen as a more natural role than his tenure as head of a technology division, analysts said last December.

Despite that, "he was the likely candidate (for dismissal), because he's been there longest and I don't think they would have tossed Ann Livermore out the window," said Charles King, research director with The Sageza Group Inc. in Mountain View, California.

HP's enterprise server group has stumbled by betting big on Intel Corp.'s Itanium, at a time when its major competitor, IBM Corp., focused on its Power architecture, King said. The group has also failed to incorporate some of the technology it acquired along with Compaq, such as the Alpha processor and Nonstop server technology, he said.

Compaq's Nonstop line was "the nearest thing any vendor had to competing with IBM's mainframe division," and it has languished since the merger, King said.

HP's storage division has also struggled since the merger. "The Compaq deal brought them a lot of good quality midrange storage products," King said. But after losing former Compaq executive Mark Lewis in 2002, who had served as vice president of worldwide marketing and solutions at HP's Network Storage Solutions Group, the company has dealt with a flood of executive defections to EMC Corp. and its storage business has suffered.

Lewis' departure "was a huge loss for HP," King said. "He's a very, very smart guy. EMC was a major beneficiary of HP's inability to articulate what they wanted to do with storage."

In Europe, Rorsted presided over a region that had been historically strong for HP, but was under attack by rival Dell Inc. Dell said in April that it believed it had taken market share from HP over the course of the year with the same direct-sales approach it uses in the U.S.

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