Hewlett-Packard ousts CEO Fiorina

THE board of Hewlett-Packard has ousted chief executive officer Carly Fiorina after five years in which the company’s shares fell more than 50%.

Hewlett-Packard said chief financial officer Robert Wayman will be interim CEO. Patricia Dunn will be chairwoman, the company said.

Ms Fiorina struggled to boost PC profits, make money on storage devices and report consistent gains in sales of servers. Under Ms Fiorina’s watch, Palo Alto, California-based Hewlett-Packard lost the PC market lead to Dell.

She engineered the purchase of Compaq Computer to broaden Hewlett-Packard’s reach in 2002, and some investors still say the buyout was a mistake.

“The Compaq merger was a fiasco right from the start,’ said analyst Jason Maxwell at Los Angeles-based TCW Group Inc., which manages $100 billion and owns Hewlett-Packard shares.

“The premise was that they were going to gain some kind of scale that would allow them to get a better cost structure and gain market share, and that is just not true.”

Hewlett-Packard shares surged $2.11, or 10%, to $22.25 at 8.55am in New York Stock Exchange composite trading.

Fiorina was named CEO on July 19, 1999. Since then, the stock has fallen 55%. The decline is the third-largest among the Dow Jones Industrial Average’s current members. Only Merck & Co. and SBC Communications Inc. have done worse.

Hewlett-Packard’s shares are trading at 13 times projected earnings, compared with 32 times for Dell and 17 times for IBM.

Hewlett-Packard has missed analysts’ earnings estimates three times in the past eight quarters. The performance over the past few years “has been marred by inconsistency”, Ms Fiorina, 50, told analysts at a December 7 meeting in Boston.

“While I regret the board and I have differences about strategy, I respect their decision,” Ms Fiorina said yesterday.

At a June 2002 meeting with analysts, one month after the Compaq deal closed, Fiorina said operating profit in the PC division would surge to at least 3% of sales in fiscal 2004, ending October 31. Profit in the printing unit was forecast at 11% to 13%.

While both printers and PCs had about $24bn in sales last year, the printer unit made $3.85bn in profit, for a margin of 16%. The PC business made $210 million as its profit margin dropped to less than 1% of sales.

“She’s been a strong change agent. She’s been a cultural catalyst,’ said Sanford C Bernstein & Co. analyst Toni Sacconaghi, the top-ranked hardware analyst in an institutional investor survey. “But on the earnings side, the inconsistency in performance has worried investors.”