Fiorina Riled By Weak Results; Axes Three Top Execs - InformationWeek

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8/13/2004
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Fiorina Riled By Weak Results; Axes Three Top Execs

A management shakeup at Hewlett-Packard's Enterprise Servers and Storage business could change the way CIOs and other managers deal with the company. "If you're a customer with certain personal relationships with some of the people inside that organization, you'd better brace for change," says Jonathan Eunice, an analyst with IT advisers Illuminata. "Anyone with responsibility within that organization is at risk."

Following a preliminary earnings announcement in which HP sectors other than enterprise servers and storage performed well, CEO Carly Fiorina fired three executives. Mike Winkler, who'll stay on as chief marketing officer, assumes Peter Blackmore's job as executive VP of customer solutions. Jack Novia, senior VP and general manager of the Technology Solutions Group, replaces Jim Milton as group senior VP and managing director for the Americas region. Bernard Meric, senior VP for imaging and printing in Europe, the Middle East, and Africa, takes over Kasper Rorsted's job as group senior VP and managing director of Europe. "Execution issues cost us, and we are therefore making immediate management changes," Fiorina said.

An HP spokesman says he's unaware of additional changes, but the shakeup might not be over. Eunice says other executives on the hot seat include Ann Livermore, an executive VP who earlier this year was placed in charge of Technology Solutions Group, which includes Enterprise Servers and Storage, and Bob Shultz, senior VP and general manager of the Network Storage Solutions business unit.

Enterprise Servers and Storage revenue fell 5% year to year and 15% from the previous quarter, overshadowing solid results by the rest of the company. The unit had an operating loss of $208 million after revenue declines of 8% year to year in its business-critical server business and 15% in its storage business.

Fiorina says the company executed poorly on the migration to a new order-processing and supply-chain system, which led to missing some sales opportunities. The problems also required the company to take special measures to ensure deliveries, including fulfilling some direct orders by its channel partners and expediting orders with air shipment, which eroded gross margins.

The company also experienced declines in average selling prices in its storage business. Storage introductions in May, as well as those planned for September, are expected to strengthen HP's position, she says.

Fiorina says the Enterprise Servers and Storage unit should return to profitability in the fourth quarter.

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