Carly Fiorina’s nearly six-year reign at Hewlett-Packard Co. ended abruptly Wednesday as board members forced her out, disappointed by her inability to transform a plodding technology giant dominated by printer sales into a more nimble innovator.
H-P’s stock, which has gone nowhere for two years and is down two-thirds from its peak in 2000, rose almost 7 percent after earlier soaring almost 11 percent on the news of her ouster.
Board members said they fired the chief executive — perhaps corporate America’s most influential woman — because Fiorina failed to slash costs and boost revenue as quickly as directors had hoped.
“While I regret the board and I have differences about how to execute H-P’s strategy, I respect their decision,” said Fiorina, 50, who is expected to collect a severance package worth $21.1 million.
Fiorina is best known for orchestrating the 2002 acquisition of Compaq Computer Corp. — a $24.2 billion stock deal that required her and Compaq boss Michael Capellas to spend months wooing reluctant executives and shareholders.
The fiercest resistance came from H-P director Walter Hewlett, son of an H-P co-founder. Hewlett argued that the deal would dilute printing profits 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.
Many analysts and shareholders remain skeptical that the biggest acquisition in the computer industry was worthwhile. Some business experts expect Fiorina’s ouster to precipitate a broad restructuring and management shake up, possibly undoing many of the changes she spearheaded.
“She brought about a major acquisition, that, from the objective of those of us who look at corporate restructuring, had absolutely no merit,” said Dr. James Owers, professor of finance at the Robinson College of Business at Georgia State University and an expert on corporate reorganization. “Combining H-P with Compaq appeared to be more an ego trip, not a business deal. Many of us are still saying, ’Where’s the rationale here?”’
H-P directors appointed chief financial officer Robert P. Wayman as interim chief executive. They also named director Patricia C. Dunn non-executive chairman.
Dunn, a board member since 1998, said Wednesday that directors had been discussing the change for “quite some time” based on consultations with lawyers, venture capitalists and academics.
H-P's board discussed shifting day-to-day responsibilities from Fiorina to other executives in mid-January, and it’s been reviewing her performance for months, Dunn said.
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. 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.
H-P shares rose $1.36, or 6.8 percent, to $21.50 a share in afternoon trading on the New York Stock Exchange. Earlier in the day they soared as high as $22.26, which still is only a fraction of the 2000 split-adjusted high of almost $70 a share.
Board members said they would immediately begin searching for a replacement. Dunn and Wayman said directors were leaning toward external applicants.
They emphasized they did not foresee any other management changes at this time, despite worries from analysts that the change could spark the defection of Vyomesh Joshi, a highly respected executive vice president who heads a newly created division overseeing printing, digital cameras, desktop and notebook PCs, handheld products and workstations.
Analysts have been warning for months that H-P needed a shot of adrenaline — 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.
Dunn emphasized that the board was searching only for a chief executive officer — not for a chief operating officer or other candidates. She suggested that the board would favor people who agreed with the board’s strategy — not someone who wanted H-P to take a radically different path.
“We have not put a litmus test together,” Dunn said of CEO candidates. “We are not making any conditions but we expect that the strategy is something that will, of course, be a topic of great discussion with CEO candidates.”
Fiorina was lured from Lucent Technologies Inc. to take the helm at H-P in 1999. The following year, the company added chairman to her list of titles, making her the first woman to hold all three top posts — president, CEO and chairman — at a major computer company.
Fiorina, who holds degrees in medieval history and philosophy, business administration and management, is a standout in liberal Silicon Valley for her Republican activism. She has taken heat for her outspoken advocacy of the offshoring of U.S. jobs to low-wage workers abroad.