November 11, 2002, 1:10 PM — Former Compaq Computer Corp. Chairman and Chief Executive Officer (CEO) Michael Capellas will resign his post as president of Hewlett-Packard Co. (HP) to pursue other career opportunities, HP announced Monday.
The announcement comes amid speculation that Capellas is the top contender to succeed John Sidgmore as CEO of bankrupt telecommunications company WorldCom Inc.
HP did not say whether Capellas will move to WorldCom. Representatives at HP could not immediately be reached for comment. A spokeswoman for WorldCom in the U.K. did not want to comment.
Capellas became president of Palo Alto, California-based HP after it acquired Compaq. The sale of Compaq to HP was completed in May after Capellas and HP Chairman and CEO Carly Fiorina prevailed in persuading shareholders to approve the deal over strong opposition from the families of the HP founders.
"I'm comfortable making this move because of the progress of the integration," Capellas said in the HP statement. Fiorina in the same statement said that HP has reached a "natural transition point" and that Capellas "made a commitment to see the merger through." All integration targets are being met or exceeded, according to Fiorina, who thanked Capellas.
The president's position at HP will not be filled. All the executives who reported to Capellas will now report to Fiorina, the company said.
Brian Gammage, an analyst with Gartner Inc. in Egham, England, said Capellas leaves a gap on the operational management side at HP.
"Fiorina does not have the reputation of being an operational player. She is more the high level manager, while Capellas was generally seen as a very good COO, chief operational officer. An important link has been taken out here and those responsibilities will need to be shared out," said Gammage.
Fiorina should not take up the full mantle of responsibilities herself, but farm those out to the people running the business units, said Gammage.
"If she does delegate, I think it can benefit HP's management. This is a company that needs to execute at the moment. Having people who understand the business at the operational level would be a good thing," he said.
Merrill Lynch & Co. Inc. analyst Steven Milunovich hoped Capellas would stay a couple years. His departure is "a negative for HP," Milunovich wrote in a research note published on Monday.
"Capellas focuses on the company's operations; he has a good feel for the industry and the steps HP needs to take to be more competitive," Milunovich wrote. "Investors may doubt that CEO Carly Fiorina can handle such a big job herself."
Capellas tops the wish list of WorldCom's search committee to succeed Sidgmore, The Wall Street Journal reported on Monday. 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 article, which cites a person close to the situation.
Embattled WorldCom in September started looking for a new CEO to replace Sidgmore, who took over the role in April after Bernard Ebbers' abrupt departure. Sidgmore previously was vice chairman and says he will fall back into that role when WorldCom's board finds a replacement.
Sidgmore, in an interview with The New York Times published Monday, says the search for his replacement has come down to two candidates. An announcement should come by the end of the month, Sidgmore told The New York Times.
WorldCom is mired in the largest accounting scandal in U.S. history. The Clinton, Mississippi, carrier in June discovered US$3.8 billion in accounting errors. That amount was doubled in August and WorldCom last week said its earnings restatement could top $9 billion.
WorldCom 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.
