Management Toolkit

Fiorina's departure: The beginning of the end?

John G. Spooner CNET News.com

Published: 10 Feb 2005 14:45 GMT

While the departure of HP CEO Carly Fiorina is unlikely to immediately alter the computer hardware market, it will be used as ammunition by Dell and others in an attempt to win HP customers, analysts say.

Although HP plans to continue selling its main products and will keep its PC business in-house at least for now, analysts say competitors ranging from Dell and IBM to specialists such as Sun and lesser PC players such as Gateway will attempt to wrestle away its corporate accounts, as well as large government and education customers.

HP's changes "could present the opportunity for its competitors to have a good year," said Chad McDonald, senior manager for product planning at Gateway.

Bob Wayman, HP's CFO and interim CEO, said the company doesn't intend to alter its fundamental structure, suggesting that radical measures such as spinning off HP's PC business -- a measure that, like IBM's plan to sell its PC business to Lenovo Group, would change the face of the PC market -- won't come in the short term, while it searches for a new chief executive.

HP weathered the storm of uncertainty relatively well during its acquisition of Compaq in May 2002. It maintained relationships it inherited with large companies such as Walt Disney. But it has been under tremendous pressure from the likes of Dell, whose shipments outgrew HP's during the fourth quarter -- normally HP's strongest time of year -- ranking Dell as the top PC maker.

Stirring up the pot
"It'd be easy for Dell to characterise HP as being in disarray, whether or not it's actually true," said Roger Kay, an analyst at IDC. "Any time there's a disturbance in a company, competitors can point to instability. They can stir up the pot, and they do."

For its part, "Dell continues to stir up the pot with IBM's customers -- it'll use anything it can to pry away customers from competitors," Kay said.

IBM's plans to sell its PC business to Lenovo has been under scrutiny from the US government. Between IBM's shifts and HP's leadership changes, analysts say some customers might perceive an increasingly tumultuous PC market and turn to Dell, which has been steadily growing.

Others could benefit as well. Gateway, which acquired eMachines last year and subsequently reorganised by trimming its work force and reforming its product lines, will also seek an edge. The company, which plans to make a push in selling business notebooks during 2005, continues to be strong in government and education, its executives say.

While HP will face new battles on the PC front, Sun and IBM could move in on it with big iron as well.

HP and Compaq argued that one technology in particular would carry the combined company to greater heights: Intel's Itanium processor. Both companies believed that Intel's Itanium would sweep the market for servers and become as widely used as x86 chips such as the Pentium -- and that the new HP would lead the market.

But that Itanium ubiquity failed to materialise because of delays, unspectacular initial performance and difficulties adapting software to the processor.