HP's Growth Goals Impact CEO Search

By Jeffrey Burt  |  Posted 2005-02-21 Email Print this article Print
 
 
 
 
 
 
 

Under threat of increased competition during this transitional period, the HP board seeks a replacement for Fiorina who will lead in the right direction.

As Hewlett-Packard Co.'s board of directors begins the search for a new CEO, it must ward off competitors eager to lure away users during this time of transition.

The board is looking for an executive search company to help find a replacement for Carly Fiorina, who resigned Feb. 8 at the request of directors who no longer felt she could execute on the strategy she had laid out for the Palo Alto, Calif., company.

In a conference call with reporters last week announcing the vendor's first-quarter earnings, Robert Wayman, HP's chief financial officer and interim CEO, said giving more details about the search would hamper HP's ability to find the right person.

Finding that person will be key for HP, analysts say. In her six years at the company, Fiorina laid out an ambitious plan for HP to rival IBM in the breadth of its product portfolio, offering everything from commodity low-end servers to massive multiprocessor systems, services and storage.

The result of HP's $19 billion purchase of Compaq Computer Corp. in 2002 has been products that haven't meshed, uneven financial results, overreliance on HP's printing business and a muddled corporate identity, analysts say.

Read more here about Fiorina's exit.

Cal Braunstein, an analyst with Robert Frances Group Inc., said that before finding a CEO, the board needs to decide what kind of company it wants HP to be.

HP should steer away from simply selling boxes and instead grow into a company that can mold its assets into a greater enterprise solutions offering, Braunstein said. The directors have said they want a hands-on manager who can execute on Fiorina's strategy, but the real indication of the board's direction will become obvious in its choice of CEO, Braunstein said.

"If they bring in someone with a product mind-set, I think you'll be seeing a breakup of the company," said Braunstein in Westport, Conn. "If they look in the right places, they can find the right executive."

Competitors hope to use the uncertainty to steal customers. Sun Microsystems Inc., in a newspaper ad last week, criticized HP's decision to standardize its high-end systems on Intel Corp.'s 64-bit Itanium chip. Sun, of Santa Clara, Calif., has targeted HP users over the past couple of years with its HP Away program. It's now considering adding HP-UX users to that mix, said Larry Singer, senior vice president and strategic insights officer at Sun. HP's new CEO may decide against the company's Itanium strategy, a move that could alienate HP-UX customers.

"That could open up [Sun's access to] HP-UX customers," Singer said. "[Itanium is] the only platform that will be able to run HP-UX."

Sun this week is hosting a meeting of several hundred employees to develop a strategy in which the company will compete more against IBM and less against HP, Singer said. Sun will focus on its strengths—such as server consolidation and Web services—as it battles directly against IBM, he said.

During the earnings call last week, Ann Livermore, executive vice president of HP's Technology Solutions Group, said there is a lot of publicity surrounding HP's CEO situation, "but we feel our server lineup is in a much better position than [Sun's]."

HP users said that they care more about what is ahead than about Fiorina's resignation. "I like the direction HP is going," said Matt Merrick, executive vice president of IT at The Merrick Printing Company Inc., in Louisville, Ky. "I would be much more antsy about the direction the new person would try to go, as opposed to [the impact of] Carly's leaving."

What do industry partners say about the HP shakeup? Click here to read more.

David Nardi, senior systems administrator at The Yankee Candle Company Inc., in South Deerfield, Mass., said he hopes that with Fiorina out, HP will run more smoothly.

"When she was brought on, it was understood that she was going to grow that company," Nardi said. "Almost everything she's done has been with turmoil. There was always turmoil. She might have gotten them on the right path, but it was never easy. I think [the board] saw there was an easier way to execute it, and it's not with her."

HP officials contacted customers right after Fiorina's resignation, said Mike Rigodanzo, senior vice president for HP's technology services.

 
 
 
 
 
 
 
 
 
 

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