Users Face Prospect of Further Changes at HP

Vendor says Fiorina's firing won't alter strategy, but board sets no firm conditions for next CEO

Many of Hewlett-Packard Co.'s users, especially those running its older systems, were rocked by changes during the six-year tenure of former CEO Carly Fiorina, who was ousted by HP's board last week. And now there's the potential for more upheaval as the company hunts for Fiorina's replacement.

"What's going to happen now is really up in the air," said Denys Beauchemin, a member of the board of Interex, an HP user group.

But Beauchemin added that he doesn't see how HP can make major changes to its end-of-life plans for technologies such as its PA-RISC processors, which the company is dropping in favor of Intel Corp.'s Itanium chips.

"They're really not in the chip building and designing business anymore," said Beauchemin, a systems migration consultant at Austin-based IT services firm Sector7 USA Inc. "They put all their eggs in the Itanium basket."

Satish Ajmani, CIO of the government of Santa Clara County, Calif., sees the prospect of new leadership as a good thing for the company. Ajmani said HP is a major supplier of the county's 12,000 desktop PCs and 1,000 laptops, but he added that the IT department has had some problems with HP equipment.

"We ordered things, turned on the switch, and they wouldn't work," Ajmani said. Referring to whoever becomes the next CEO, he added, "I think they need somebody to focus on the delivery side."

After being appointed CEO in 1999, Fiorina oversaw the phaseout of the HP e3000 midrange systems line and the end of both PA-RISC and the company's Alpha processors.

Former Hewlett-Packard CEO Carly Fiorina
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Former Hewlett-Packard CEO Carly Fiorina
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Two operating systems—the e3000's MPE software and the Tru64 Unix technology that HP acquired when it bought Compaq Computer Corp.—also were put on the scrap heap.

Like Beauchemin, most users and analysts interviewed last week said they believe that HP is too far along to reverse course on those doomed systems, even if it wanted to.

Donna Garverick, a senior systems programmer at Longs Drug Stores Inc. in Walnut Creek, Calif., said any change in the status of the e3000 "would fall under the miracle category." But at this point, "we've got to see where HP is headed," said Garverick, who is a member of OpenMPE.org, a group that has been working to keep the MPE operating system alive.

Robert P. Wayman, who is HP's chief financial officer and was named interim CEO last week, worked to reassure customers about the company's direction in a conference call. "The board believes this is the right strategy," Wayman said when he was asked about HP's technology strategy.

Patricia Dunn, an HP director who was named nonexecutive chairman of the board, also said the decision to replace Fiorina doesn't signal any changes in strategy.

However, both Dunn and Wayman noted that HP's board doesn't have a strict set of conditions for CEO candidates. "Looking for someone who will fit in the culture is part of it, but that doesn't mean you want a leader that doesn't challenge that culture," Wayman said.

Uncertain Future

Analysts said anything is now possible, from a breakup of the company to changes in its product plans.

"HP has no choice but to move forward with Itanium," said Rich Partridge, an analyst at D.H. Brown Associates Inc. in Port Chester, N.Y. But he added that users need to consider the possibility of product road-map modifications, possibly to speed up HP's transition away from technologies such as Alpha and PA-RISC. That would help reduce the number of products the company has to support, Partridge said.

Frank Gillett, an analyst at Forrester Research Inc., said the leadership change "increases the uncertainty around Itanium-based businesses and about where that [technology] goes."

HP has placed big bets on the success of Itanium and says that its sales of systems based on the 64-bit technology are growing. But Gillett said the Itanium business has struggled to win over users.

That effort hasn't been helped by the growing popularity of Advanced Micro Devices Inc.'s 64-bit Opteron processor, which HP also now sells in some of its systems, or by Intel's addition of 64-bit capabilities to its x86 architecture. Both of those technologies offer "a compelling alternative in some cases" to Itanium, Gillett said. "I think the short-term advice is, don't make any big bets until this sorts itself out."

But Meta Group Inc. analyst Nick Gall said he doesn't see any immediate repercussions for corporate users in the wake of Fiorina's departure. He noted that there are still users buying Alpha-based systems, for instance.

The Fiorina Era at HP

1999

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JULY: Fiorina, then 44, is named president and CEO of HP after heading the global service provider business unit at Lucent Technologies Inc.

2000

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JUNE: HP spins off Agilent Technologies Inc., its testing and measurement products unit.

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SEPTEMBER: Fiorina adds chairman's title; HP says it is negotiating to buy the consulting unit of PricewaterhouseCoopers.

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OCTOBER: HP announces agreement to acquire middleware vendor Bluestone Software Inc.

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NOVEMBER: After a disappointing fourth quarter, HP ends talks with PricewaterhouseCoopers.

2001

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MARCH: HP combines its IT consulting, outsourcing and support operations into a single unit.

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APRIL: Fiorina reduces second-quarter forecast, says HP will cut 3,000 management jobs.

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MAY: HP introduces systems based on Intel's 64-bit Itanium chip, which it helped develop.

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JULY: Fiorina announces the elimination of 6,000 more jobs because of weak IT spending.

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SEPTEMBER: HP says it plans to acquire Compaq Computer Corp. in a $25 billion stock-swap deal.

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NOVEMBER: HP discloses that it will stop selling its HP e3000 midrange systems within two years.

2002

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MARCH: HP and Compaq shareholders approve the proposed merger, ending a six-month proxy fight.

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MAY: HP completes the Compaq deal and names Compaq CEO Michael Capellas its president.

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JULY: HP drops the middleware products acquired in the Bluestone deal; IBM agrees to buy the PwC Consulting unit HP once coveted.

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NOVEMBER: Capellas resigns to become CEO of WorldCom Inc. (now MCI Inc.).

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DECEMBER: Fiorina says she expects to reach a $3 billion cost savings goal from the Compaq deal a year ahead of plan.

2003

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MAY: HP combines its server and storage operations into a single enterprise products unit.

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AUGUST: The company falls short of third-quarter financial targets, its first earnings miss since buying Compaq.

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NOVEMBER: HP reports strong fourth-quarter results, with all business units profitable.

2004

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MAY: HP says it surpassed $20 billion in revenue for the first time in its second quarter.

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AUGUST: Fiorina fires three executives after server and storage sales drop 5% year to year in the third quarter; HP blames the shortfall partly on a flawed migration to a new SAP order-processing system.

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NOVEMBER: HP reports record revenue at each business unit and tops the $21 billion mark in its fourth quarter.

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DECEMBER: HP stops its Itanium research and development work and drops plans to integrate Compaq's Tru64 technology into HP-UX.

2005

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JANUARY: The company merges its PC and printer operations into a single unit.

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FEBRUARY: HP's board ousts Fiorina.

Source: IDG News Service, Hewlett-Packard Co.

Copyright © 2005 IDG Communications, Inc.

 
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