On February 9, 2005, Hewlett-Packard's (HP) Board of Directors announced that it had fired CEO Carleton S Fiorina after the controversial $19 bn Compaq acquisition failed to produce expected benefits. With her resignation taking immediate effect, Robert Wayman, Chief Financial Officer of HP, was appointed interim CEO and was also nominated to the California-based company's Board of Directors. Patricia Dunn, Vice Chairman of Barclays Global Investors, was named Non-Executive Chairman of the board. Dunn has been on the board of HP since 1998.
Under a severance plan passed by the committees of HP's board in 2003, Fiorina would received 2½ times her annual salary and bonus if she was "involuntarily terminated without cause." In 2003, Fiorina's salary and bonus totaled to $8.4 mn. So, Fiorina received a severance package worth about $21 mn. A very popular CEO and a top-ranked woman in the corporate circles of American business, Fiorina's ouster has come as a shock to many. But, the trouble for Fiorina had been brewing since she acquired Compaq back in 2001.
A phone conversation between Fiorina and Capellas in late June 2001, to discuss a possible licensing agreement triggered off the idea for a merger. By July, the basics of the deal had already been figured out. On July 19, 2001, Fiorina called for a board meeting to discuss the merger. All the directors except Walter Hewlett (Hewlett) endorsed the deal. Hewlett, the 58-year-old son of Bill Hewlett, was a software developer who also taught music at Stanford University.
The merged entity planned to invest an estimated $4 bn annually in Research and Development (R&D) in several core technology areas. A major portion of the research activity was to be focused on enhancing existing products by taking advantage of each company's skills in areas such as high-availability clustering and nonstop computing. In addition, the two companies planned to set up a common central research group, whose mission would be to focus on advanced technologies for the future. Hewlett believed that Fiorina had exaggerated the synergies. He thought that the merger, by increasing HP's exposure to the brutal, low-margin PC business, would only undermine its competitive position in the long run. The merger was also likely to undermine the value of HP's lucrative printing business. |
