HPs Growth Goals Impact CEO Search

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 vendors first-quarter earnings, Robert Wayman, HPs chief financial officer and interim CEO, said giving more details about the search would hamper HPs 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 HPs $19 billion purchase of Compaq Computer Corp. in 2002 has been products that havent meshed, uneven financial results, overreliance on HPs printing business and a muddled corporate identity, analysts say.

/zimages/1/28571.gifRead more here about Fiorinas 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 Fiorinas strategy, but the real indication of the boards direction will become obvious in its choice of CEO, Braunstein said.

"If they bring in someone with a product mind-set, I think youll 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 HPs 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. Its now considering adding HP-UX users to that mix, said Larry Singer, senior vice president and strategic insights officer at Sun. HPs new CEO may decide against the companys Itanium strategy, a move that could alienate HP-UX customers.

"That could open up [Suns 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 HPs Technology Solutions Group, said there is a lot of publicity surrounding HPs CEO situation, "but we feel our server lineup is in a much better position than [Suns]."

HP users said that they care more about what is ahead than about Fiorinas 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] Carlys leaving."

/zimages/1/28571.gifWhat 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 shes 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 its not with her."

HP officials contacted customers right after Fiorinas resignation, said Mike Rigodanzo, senior vice president for HPs technology services.

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