Wayman Replaces Fiorina at Hewlett-Packard
Wednesday, February 9th 2005, 8:37 am
News On 6
SAN FRANCISCO (AP) _ Hewlett-Packard Co. directors appointed Chief Financial Officer Robert P. Wayman as interim chief executive to replace Carly Fiorina, who was ousted because she didn't execute the board's strategy quickly enough.
Fiorina was long lauded as one of the most powerful and prominent women in corporate America, a forceful CEO who sought to invigorate Hewlett with radical change during her nearly six-year tenure.
But her attempts to reinvent the company founded by two engineers in 1938 didn't create a more successful HP. On the contrary, the company seemed to stumble from one execution mistake to another, especially after its hotly contested merger with Compaq Computer Corp. closed in 2002.
HP's stock, which has gone nowhere for two years and is down two-thirds from its peak in 2000, surged 6.9 percent, based in part on expectations that big changes may now be in store for the company.
``While I regret the board and I have differences about how to execute HP's strategy, I respect their decision,'' said Fiorina, 50, who is expected to collect a severance package worth $21.1 million.
The board also named director Patricia C. Dunn non-executive chairman and said they would immediately begin searching for a replacement. Dunn and Wayman said directors were leaning toward external applicants.
Dunn, a board member since 1998, said directors had been discussing the change for ``quite some time'' based on consultations with lawyers, venture capitalists and academics. She said the board discussed shifting day-to-day responsibilities from Fiorina to other executives in mid-January.
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 contracts with Fortune 500 companies.
Fiorina was lured to HP in July 1999 from Lucent Technologies Inc., where her background was in sales, and put in charge of a company dominated by engineers since its founding in a Palo Alto garage. She quickly moved to reorganize its structure and remove bureaucracy, then launched ad campaigns focusing on HP's innovation.
But, observers say, HP lost more than expenses and thousands of employees during the process. Fiorina erased the employee-focused culture once known as the ``HP way,'' focused single-mindedly on quarterly profits, and alienated employees. That, business experts say, ultimately may be her lasting legacy.
``This was a company that was the essential model of innovation, a great model of leadership style. Everyone used this as a model for the integrity of the engineers,'' said Jeffrey Sonnenfeld, associate dean of the Yale School of Management. ``No CEO uses HP as a model for anything now.''
Fiorina is best known for orchestrating the Compaq acquisition _ a $19 billion deal that required her and Compaq boss Michael Capellas to spend months wooing reluctant executives and shareholders.
``No matter how anyone feels about what in fact was the misguided acquisition of Compaq, this has been a disaster for the image, reputation and performance of this firm,'' Sonnenfeld said. ``All it did was get bigger and dumber, instead of smaller, leaner and more profitable.''
The fiercest resistance came from HP director Walter Hewlett, son of an HP co-founder. Hewlett argued that the deal would dilute profits from its printer unit 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.
Although Hewlett toned down his vitriol after the acquisition, he remains concerned that Fiorina's rule erased the employee-focused, decentralized culture that his dad, Bill Hewlett, and David Packard painstakingly created.
``HP has been a great company. It is facing a number of challenges,'' Hewlett wrote Wednesday in an e-mail. ``I know many of the people who make up HP and they are extremely dedicated to the company's future success. We all look forward to HP fulfilling its promise.''
Analysts have been warning for months that HP needed a shot of adrenalin _ new executives and even a deep strategic restructuring _ to make it competitive against rivals Dell Inc., one of the world's most efficient personal computer retailers, and IBM Corp., which has aggressively expanded in the lucrative consulting niche.
Some business experts expect Fiorina's ouster Wednesday to precipitate a broad restructuring and management shake up, possibly undoing many of the changes she spearheaded. But Dunn said Fiorina's firing in no way reflected a change in direction of the board's general roadmap for the company.
``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.