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Carly Fiorina, the first woman to run a company in the Dow Jones industrial average, was asked by HP's board to resign this morning, and she did, citing differences in opinion on the company's direction. "While I regret the board and I have differences about how to execute HP's strategy, I respect their decision," Fiorina said in a written statement this morning.
While Fiorina's ouster didn't come as a huge surprise, it still made headlines this morning from Silicon Valley to Wall Street.
After a successful career at AT&T and Lucent, Fiorina took over as HP's CEO in 1999 with a tremendous amount of hope and goodwill. But her star power lost some luster in 2002 when Fiorina pushed ahead with a controversial plan to acquire rival Compaq computers, against the wishes of some powerful HP shareholders, including some members of the Packard family.
Fiorina claimed the deal would lead to double-digit-earnings growth potential and would make HP a one-stop shop for computer equipment and services. But many on Wall Street had their doubts. They still do. HP's shares have gained less than 1 percent a year over the past three years, while rival Dell's shares have gained more than 15 percent a year during that time.
Not surprisingly, Wall Street reacted positively to the ouster. HP shares rose as much as 10 percent in early-morning trading Wednesday before settling down to around $21.40 a share by noon. That still represents a 6 percent increase from Tuesday's close.
"Like many post-merger CEOs find, it is a real struggle to put together two completely different corporate cultures, a fact which undoubtedly contributed to Fiorina's demise," said John Challenger, chief executive officer of the outplacement firm Challenger, Gray & Christmas, which tracks CEO turnover. "It appears that the old guard, led by the Packard family, which lost the battle on the Compaq merger three years ago, came back and won the war."
The expectation now is that HP may end up splitting up into separate businesses or may simply spin off some units, such as its high-margin printer business, whose success has been overshadowed by HP's difficulties in the personal computer space. Despite the HP-Compaq merger, HP still trails industry leader Dell in that business. "We believe the long-term probability of a breakup of the company is rising, despite indications from the board that no such move is currently planned," noted Merrill Lynch analyst Steven Milunovich in a research report issued this morning.
Milunovich noted that while an overnight turnaround may be difficult to achieve at HP, it's not completely out of the picture once a new CEO is brought in. He cited quick turnarounds at Motorola, Xerox, and Apple as examples. He further added that a top choice to take over HP now may be Michael Capellas, former president of HP, former CEO at Compaq, and currently head of the long-distance company MCI.
HP this morning announced that chief financial officer Robert Wayman will serve as interim CEO until a permanent replacement can be found. Patricia Dunn, an HP board member, was named nonexecutive chairman of the board.
