Hewlett-Packard Co.'s board of directors has ousted Carly Fiorina, the high-gloss chief executive who hobnobbed with Hollywood stars and graced dozens of magazine covers but who ultimately was unable to meet Wall Street's expectations for the technology behemoth.
Grumbling about Fiorina, whom Fortune magazine once proclaimed the most powerful woman in business, began building soon after she masterminded the 2002 acquisition of Compaq Computer Corp. The takeover sparked a bitter proxy and court fight, led by the son of one of HP's founders.
But her termination at a board meeting Tuesday afternoon, which was announced early Wednesday, surprised many investors.
The move came as HP finds itself struggling to improve the profitability of its diverse units, which make printers, personal computers, calculators and high-end servers. It is also shifting into home entertainment products -- gadgets for the living room that deliver music and video. With about $80 billion in annual sales, HP is somewhat smaller than IBM Corp. but about 10 times the size of Apple Computer Inc.
Shares of Palo Alto-based HP rose nearly 7% after Fiorina's dismissal was announced. They have fallen more than 50% since she was named CEO in July 1999.
Over that time, Fiorina, 50, became one of the most recognizable executives in America and, at least publicly, came to personify her company the way Bill Gates is synonymous with Microsoft Corp. and Steve Jobs embodies Apple Computer.
She appeared to be equally at ease with political leaders at the World Economic Forum in Davos, Switzerland, and celebrities at the Academy Awards. Warren Beatty once told her that he wanted his wife, Annette Bening, to play Fiorina if a movie ever was made of her life.
Fiorina, who studied medieval history before earning an MBA and joining AT&T; Corp. in 1980, also attracted attention because no other woman had reached such heights in the male-dominated world of high tech. She was the first woman to lead a Fortune 100 company, and her hiring was seen as opening the door to future high-ranking female executives.
"I feel sad that we have one fewer female CEO," said Patricia Fili-Krushel, executive vice president of administration at Time Warner Inc. At the same time, though, Fili-Krushel said she didn't think gender had anything to do with Fiorina's dismissal.
"This shows that you treat women the same way you treat men, promoting them if they perform and firing them if they don't," she said.
In the end, HP's board said it was dissatisfied with Fiorina's "execution," particularly in an era when the lines between the high-tech, consumer electronics and entertainment industries are blurring and home computers -- once considered exotic -- are now relatively cheap commodities.
HP was once the top PC maker but lost that spot to Dell Inc. in 2003. HP's printer operation remains profitable, but the company's overall earnings have been dragged down by the cutthroat computer business and money-losing ventures in televisions, projectors and color photocopiers. To pare costs, Fiorina laid off thousands of workers.
"They gave her a chance to step up and take the challenge, and she didn't," said analyst Mark Stahlman of brokerage Caris & Co. "All the glamour aside, she's not the right one to grow the company. HP needs a Steve Jobs, somebody who can bridge the computer world with Hollywood, who understands technology and inspires growth."
Many observers said Fiorina was distracted by the pressure of trying to prove the wisdom of HP's $19-billion merger with Compaq, a deal opposed by board member Walter Hewlett. (His father, Bill, founded HP in 1939 in a Palo Alto garage with Stanford University classmate David Packard.)
They also said she spread herself so thin -- never finding a strong No. 2 executive to rely on -- that she couldn't concentrate on HP's biggest challenges.
"The board reviews leadership results on an ongoing basis, and the change is in the best interests of the company," said Patricia C. Dunn, an HP board member who has taken over Fiorina's position as chairwoman. "We think the job is very reliant on hands-on execution, and we felt that a new set of capabilities was called for."
Fiorina occasionally appeared at White House events, rubbing elbows with the likes of then-Secretary of State Colin L. Powell and Vice President Dick Cheney. She also advised Gov. Arnold Schwarzenegger as he set up his new administration.
The circles she frequented fueled rumors in Silicon Valley that she was interested in a second career in entertainment or politics. Some wags have joked that they savor a 2008 presidential race pitting Fiorina, a Republican, against Sen. Hillary Rodham Clinton (D-N.Y.).
Fiorina always scoffed at such rumors, telling reporters and employees that she planned to stay at HP for the long haul.
In a statement Wednesday, Fiorina said that although she regretted that she and the board "have differences about how to execute HP's strategy, I respect their decision. HP is a great company and I wish all the people of HP much success in the future."
Her severance package is worth an estimated $21 million, most of it in cash.
"If you added up all the money that the board lavished on her and compared that to the negative return to stockholders, there is absolutely no way you can describe that as value for the money," said Paul Hodgson, a compensation analyst with the Corporate Library, which tracks executive employment agreements.
HP named Chief Financial Officer Robert P. Wayman interim CEO while the board searches for a permanent replacement.
Among those rumored on Wednesday as a possible successor was Michael Capellas, 50, the former CEO of Compaq who was named HP president after the merger. He left shortly afterward to become CEO of long-distance company WorldCom Inc. (now known as MCI Inc.). Capellas declined to comment.
Internal candidates include Vyomesh Joshi, 50, who oversees printers and PCs, and Ann Livermore, 48, head of the technology solutions group. She was passed over for the CEO job in 1999 in favor of Fiorina.
Whoever wins the job will take over a company with a proud tradition in Silicon Valley but a recent history of stumbles as the tech industry has changed.
Although HP shares have fared only slightly worse than the average of 80 big U.S. tech stocks since Fiorina took over in 1999, the price has sharply lagged behind the market's recovery since the end of 2002. The stock has risen 24% since then, compared with a 42% gain for the average of 80 tech issues.
Fiorina intended for the Compaq deal to make HP a computer powerhouse that would hold off a strengthening Dell. But the PC business has evolved in such a way that HP's culture of innovation counts less than prowess in distribution and manufacturing -- Dell's core strengths. At the same time, consumer electronics have taken on more of the features of PCs, such as hard disk drives to store music and video.
"The Compaq deal was architected by her to assure their PC business would be No. 1," said Michael Cohen, an analyst with Pacific American Securities. "When they slipped to No. 2 on her watch, surrendering the position to Dell, I believe the board saw this as an admission of the failure of the Compaq deal."
HP's slippage in PCs has led some analysts to call on the company to spin off its profitable printer unit and focus on fixing the PC and server computer businesses. The latter two "account for half the revenue but virtually no operating profits, and that's not sustainable," said Rod Bare, an analyst with investment research firm Morningstar Inc. in Chicago.
On Wednesday, though, interim CEO Wayman and Chairwoman Dunn made clear that HP remained committed to being a full-service technology company with a broad offering of products and services -- in essence agreeing with Fiorina's vision, if not her follow-through.
Stahlman, the Caris analyst, believes that's the right bet.
HP is determined to develop technology "to bring multimedia to the living room, the back seats of cars, people's pockets," he said. "Their focus going forward is growing the company as the most aggressive consumer electronics company on Earth."
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Fiorina's tenure at HP
July 1999: Carleton "Carly" Fiorina named chief executive of Hewlett-Packard, becoming the first woman to lead a Fortune 100 company.
September 2000: Fiorina named chairwoman of HP.
November 2000: HP's stock drops sharply when its fourth-quarter earnings fall short of Wall Street expectations. HP abandons its proposed purchase of PricewaterhouseCoopers.
July 2001: The company announces 6,000 job cuts, more than 6% of its workforce.
September 2001: Fiorina announces that HP will buy Compaq Computer Corp.
November 2001: The family of Hewlett-Packard's co-founder says it will vote against the Compaq deal.
March 2002: HP and Compaq shareholders approve the merger, a
$19-billion stock deal.
November 2002: HP's president resigns and is not replaced, consolidating Fiorina's control.
August 2004: HP ousts three top managers and reports lower profit than anticipated.
December 2004: Fiorina announces that the company will buy back
$2.9 billion in stock and aim for consistent profit after the roller-coaster results of recent years.
January 2005: The company combines its profitable printer unit with its struggling PC division.
Wednesday: Fiorina resigns as CEO and chairwoman.
Sources: Associated Press, Reuters, Bloomberg News, Times research
Times staff writers David Colker, Kathy M. Kristof and Sallie Hofmeister in Los Angeles contributed to this report.