HP boss Fiorina ousted by board
NEW YORK (CNN) -- Hewlett-Packard chief executive Carly Fiorina, one of the most powerful women in corporate America, has been ousted by the company's board of directors.
Shares of HP rose about 9 percent in heavy trading on the New York Stock Exchange on the news, and at mid-afternoon on Wednesday it was up about 7 percent.
Fiorina, the only female CEO at a company in the Dow Jones industrial average, had been with the HP since 1999. But the company's controversial deal to buy Compaq in the spring of 2002 -- after a bruising proxy fight led by one of the Hewlett family heirs -- has not produced the shareholder returns or profits she had promised.
"While I regret the board and I have differences about how to execute HP's strategy, I respect their decision," Fiorina said in a statement released by the company.
On a conference call with reporters, executives said Fiorina was not terminated for cause and she will receive severance pay -- and a company spokesman said she'll get a payout of $21.1 million, some of which is stock options.
Fiorina told analysts in December that Hewlett Packard had seriously considered breaking up the company on three separate occasions but each time decided against it.
Some industry analysts had argued HP should either split off its lucrative printer and imaging business, or break HP into separate firms, with one focusing on consumers and the other on corporations.
But during a conference call Wednesday morning, HP CFO Robert Wayman, who was named interim CEO, suggested that no major changes in strategy would take place following Fiorina's departure.
"We continue to believe we have the right ingredients for success in the marketplace," Wayman said during the call.
HP stock has been a laggard compared to the shares of rivals such as Dell and IBM. It was trading at only about 13 times 2005 earnings estimates before the announcement, while shares of IBM and Dell traded at 17 times and 26 times forecasts for the current year.
The legendary Palo Alto, Calif.-based company has struggled to generate profits in the cutthroat hardware business, particularly in personal computers.
Slowing sales and stiff competition in the PC business have been tough all around, leading IBM to announce last year that it planned to sell its PC unit to China's Lenovo Group -- a deal that some lawmakers are eyeing for what they call national security concerns.
PCs aren't the only trouble spot for HP. In the market for servers -- the computers used to build corporate networks -- analysts say HP has been squeezed by IBM on the high end and Dell on the low end.
The troubles at HP were among the factors that prompted Fortune to demote Fiorina to No. 2 on its list of most powerful women in business, behind eBay CEO Meg Whitman. Fiorina had been No. 1 since the list was created in 1998.
Fortune is featured in a cover story in the current issue titled "Why Carly's big bet is failing," with the tag line: "Buying Compaq hasn't paid off for HP's investors. And there's no easy way out."
In its statement, the board said it will start hunting for a new CEO immediately, and that Wayman will remain as CFO. Patricia Dunn, an HP director since 1998, was named non-executive chairman.
During the conference call, Dunn said no other executives changes were planned. She added that the recent round of negative press had no impact on the board's decision.
HP also said it will report results as scheduled after the market close on Feb. 16.
It said it expects results to be in line with the consensus of analyst expectations, after excluding special items. Analysts expect HP to report a profit of 37 cents a share on that basis, up 5 percent from a year ago, on sales of $20.9 billion, up 7 percent.
But Dell, by way of comparison, is expected to report an 18 percent increase in sales and 25 percent jump in profits when it releases its fiscal fourth quarter results after the closing bell Thursday.
Although Dunn and Wayman both said during Wednesday's call that no major strategic changes were coming, investors were still hoping that a new CEO might be in favor of a split-up.
"Hewlett's news will certainly help HP's stock, the technology sector and the overall market," said Timothy Ghriskey, stock market strategist and president of Ghriskey Capital Partners. "There's been speculation that it could also be the prelude to the breakup of the company into two or more pieces."
But what ultimately happens to HP will largely depend on who the next CEO is.
Dunn and Wayman did not rule out promoting someone from within the company. If that were the case, the most likely candidate would be Vyomesh ("VJ") Joshi. He had been the widely respected head of HP's printing and imaging division and was recently put in charge of a new unit that combines the printing and PC businesses.
During the call, one analyst asked Wayman whether the company was concerned about Joshi leaving if he were not named the new CEO. Wayman would not comment.
CNN/Money contributed to this report.