In First, Hewlett-Packard Picks Outsider as CEO

Carleton Fiorina, the new CEO of Hewlett-Packard Co., could add some fresh perspectives to HP's strategies at a time when the company is finally showing signs of emerging from a two-year slowdown, observers said.

HP was split in two in March. Fiorina heads the computer and printer company, which retains the HP name. The other, as-yet-unnamed company is focused on medical equipment.

Pioneer of Sorts

Fiorina's unexpected appointment this week as president and CEO of the US$40 billion corporate supplier marks the first time HP has installed an outsider, and a woman, in the top post. Fiorina, 44, is the former head of Lucent Technologies Inc.'s $20 billion global-services provider.

The announcement ended a five-month search to find a replacement for former CEO Lewis Platt, who announced his retirement in March but said he would stay until a successor was found. Platt, who is HP's chairman, is expected to step down by the end of the year.

The move belied expectations that HP would promote Ann Livermore, the head of HP's enterprise computing division, to the post. "I was very surprised by the move. ... I hope HP is going to be able to retain Ann after this," said Thomas Kucharvy, president of Summit Strategies Inc., a Boston consultancy. Analysts have credited Livermore with developing an aggressive Internet services strategy that has generated much of the company's recent momentum.

In addition to Livermore, other HP insiders who were considered to be in the running included enterprise marketing chief Nick Earle and Bill Russell, head of HP's enterprise software group.

Rallying such executives behind Fiorina and building support for her leadership is going to be a crucial early challenge, said Joyce Becknell, an analyst at Aberdeen Group Inc. in Boston.

Fiorina -- who has been rated among the most powerful women in corporate America by Fortune magazine -- spent 20 years at AT&T Corp. before taking the Lucent job. She's credited by analysts with spearheading the spin-off and successful initial public offering of Lucent from AT&T in 1996 and of growing the company's service-provider business in international markets.

"I think what she really brings to HP is a lot of knowledge in the telecom, networking and services space," Becknell said.

Electronic Strategy

That experience is considered critical for HP's electronic-services strategy to succeed. Under the plan, HP -- still considered by many as mainly a box vendor -- is trying to position itself as a one-stop shop for electronic-business applications, selling everything from Unix servers and e-commerce application software to hosted services, as well as network management and integration services. That kind of positioning will require tighter integration among HP's traditional hardware business and its systems integration and network services groups.

Fiorina steps in at a time when HP's fortunes are beginning to look up again following a two-year slump triggered by sluggish server sales, the Asian financial crisis, PC price wars, increased competition in the printer business and its failure to establish an Internet presence. Though HP remained profitable through that period, its growth rate slowed to a crawl, resulting in job cuts and office closings last year.

The past two quarters saw HP record double-digit growth again. The company claimed better-than-expected sales across most of its products as its stock price hit an all-time high of $115 this week.

Analysts said much of that comes from the more-focused corporate message HP has been able to deliver following its split into two units.

Analysts added that HP's new Internet strategy -- under which it has begun teaming with scores of large and small partners to deliver a wide range of products and services -- is beginning to get noticed by customers.

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