Update: HP board dismisses Fiorina

Fiorina's departure stems from disagreements on company strategy

Hewlett-Packard announced Wednesday that its board of directors has dismissed Carly Fiorina as the company's chairman and chief executive officer.

Fiorina, who has been HP's CEO for the past six years, is to be replaced on an interim basis by HP's current chief financial officer, Robert P. Wayman, the company said in a statement. Wayman, who has been with HP for 36 years, will also continue to fill his role as CFO. HP has already begun its search for a new CEO, the Palo Alto, California, company said.

HP also named Patricia Dunn as its non-executive chairman of the board. Dunn has been an HP director since 1998.

HP said it does not plan to make any additional structural changes or executive leadership changes for the time being.

"Carly Fiorina came to HP to revitalize and reinvigorate the company," Dunn said in a telephone press conference. "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."

The company statement indicated that Fiorina's departure stems from disagreements on company strategy.

"While I regret the board and I have differences about how to execute HP's strategy, I respect their decision," Fiorina is quoted as saying in the statement.

According to Dunn, the board's decision to replace its CEO did not signal a change of strategy, but rather a desire to accelerate that strategy. Wayman, who was also made a member of the HP board on Wednesday, added that no changes in the company's product portfolio were expected.

Dunn declined to give specific reasons for Fiorina's dismissal. "We thought a new set of abilities was called for," Dunn said. "We are looking to accelerate the growth of the company and we think that requires hands-on execution."

Last month HP denies published reports that said the board of directors was considering a plan that would redistribute some of Fiorina's day-to-day responsibilities to other HP executives, due in part to the board's displeasure with the company's uneven performance.

Dunn said on Wednesday that the board had been deliberating on company performance and CEO performance for "quite some time." Dunn added, "the timing of the announcement was due to the fact that a decision was reached."

Both Dunn and Wayman insisted the HP board does not have a strict set of conditions for the CEO candidates it will interview. "Looking for someone who will fit in the culture is part of it, but that doesn't mean that you don't want a leader that doesn't challenge that culture," Wayman said.

Fiorina survived a bruising shareholder battle to push through HP's purchase of Compaq Computer Corp. in May 2002. The expectation at the time was that if shareholders rejected the merger, which Fiorina argued was needed to keep HP competitive, Fiorina would leave the company.

She won the necessary shareholder support, but has been under pressure ever since to make the US$21 billion deal pay off, with results analysts call mixed. Recently, Fiorina came in for a round of brutal press coverage, with both Business Week and The Wall Street Journal savaging the HP-Compaq deal as a failure. Last month, HP combined its printer business, a lucrative division often referred to as the company's "crown jewels," with its ailing PC group, in an effort to improve profitability in its PC and server lines.

Increasing HP's exposure to the PC market was one of the most controversial aspects of the HP-Compaq deal: Detractors warned that buying Compaq would dilute HP's profit margins by increasing its business in a commoditizing market, while Fiorina argued that only the biggest IT players would thrive in the future. Making HP a head-to-head competitor with IBM -- which just sold its own PC business -- was the goal.

Fiorina's ouster also removes one of the tech industry's most prominent female executives. Fiorina topped Fortune magazine's "50 Most Powerful Women in Business" list every year from the list's introduction in 1998 through to 2004, when eBay's Meg Whitman displaced her. After majoring in college in medieval history and philosophy, Fiorina went on to a business career that began with a position as a sales representative at AT&T Corp. and led to Lucent Technologies, where she guided its 1996 initial public offering and subsequent spin-off from AT&T. That put the ambitious Fiorina on the business world's radar, and soon after, HP wooed her to be its CEO.

In early Wednesday morning trading, shares of HP (ticker symbol: HPQ) were up $1.74 percent to $21.88.

HP said it plans to report its first quarter financial results on Feb. 16 and will hold its annual share owner meeting in Chicago on March

According to Wayman, HP expects its quarterly results to be in line with consensus analyst expectations, after adjusting for the effects of the previously announced Intergraph settlement. Last month, HP said it would pay $141 million to Intergraph to settle a dispute over HP's alleged infringement of Intergraph's microprocessor patents.

"The decision (to fire Fiorina) was made independently of the quarterly report," Wayman said.

Copyright © 2005 IDG Communications, Inc.

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