HP's Capellas resigns, may be headed to WorldCom

Five months after the merger of Hewlett-Packard Co. and Compaq Computer Corp., Michael D. Capellas, president of the merged companies, is leaving HP, the company said Monday.

In an announcement, HP said Capellas is leaving his job as president and member of the HP board to "pursue other career opportunities."

The news of Capellas' resignation comes as he is reported to be the front-runner to succeed John Sidgmore as CEO at troubled telecommunications company WorldCom Inc., according to a published report in today's online edition of The Wall Street Journal.

Spokesmen for HP couldn't be reached for comment. A spokesman at WorldCom also declined to comment.

WorldCom's board has already informally signed off on picking Capellas for the job, and representatives from WorldCom's creditors on the search committee also back the selection, according to the Journal, which cites a person close to the situation.

No final decision has been made, however. Three other executives are still being considered, and an appointment is at least a few days and maybe a week away, according to the article.

Carly Fiorina, HP chairman and CEO, said in a statement that Capellas' departure comes at "a natural transition point."

"Michael made a commitment to see the merger through, and now thanks to the hard work of the entire team, we are meeting or exceeding all of our integration targets," Fiorina said. "I fully support this decision and appreciate the dedication and passion he brought to our joint endeavor."

In a statement, Capellas said he is "comfortable making this move because of the progress of the integration, HP's market momentum and the strength of the management team."

The president's position at HP won't be filled, according to the company. The executives who previously reported to Capellas will now report directly to Fiorina.

Capellas, formerly chairman and CEO of Compaq, became president of HP after the sale of Compaq to HP in May. Capellas and Fiorina prevailed in a difficult public relations battle and persuaded shareholders to approve the deal.

WorldCom in April appointed Sidgmore president and CEO after the resignation of Bernard Ebbers, who built the second-largest long-distance telecommunication company in the U.S. from a series of acquisitions, but left as questions emerged over the financial viability of the company. Sidgmore plans to return to his previous role as WorldCom vice chairman.

Two months after Ebbers' departure, WorldCom announced it had discovered accounting irregularities and would restate its earnings for 2001 and the first quarter of 2002 by $3.8 billion.

WorldCom's woes have since grown worse. In August, the carrier said it had discovered an additional US$3.8 billion in errors and would restate earnings for 2000. Last week, WorldCom disclosed its earnings restatement could top US$9 billion. The company filed for Chapter 11 bankruptcy protection in July and faces fraud charges brought by the U.S. Securities and Exchange Commission, several shareholder lawsuits and congressional investigations.

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