March 2005

Carly exits amid 3000 customer wishes

After board demands CEO’s resignation, 3000 sites ponder new future

The CEO who hawked change as HP’s new mission — and so sparked the 3000’s exit from the company’s lineup — has left HP in a resignation that made some customers hope for a change in HP to alter the 3000’s fate.

But HP’s board of directors, after demanding Carly Fiorina’s resignation on Feb. 9, have shown no signs of changing the company’s commodity and consumer-driven strategy, one which hurried the 3000’s HP exit.

Interim CEO Bob Wayman told stock analysts the next CEO will need to march to the tune Fiorina composed during the five-plus years she headed the company.

The company won’t change because its board hasn’t changed much. Venture capitalist Thomas Perkins came on board in early February, but the list of directors includes a group of officers who have approved Fiorina’s plans to grow HP. The board said it removed its CEO and chairman because she did not execute HP’s strategy well enough. The company’s earnings growth has disappointed analysts in recent quarters.

Wayman said during an analyst briefing that the board is looking for a CEO to work with the current strategy: Offering a broad portfolio of products while operating a printer business integrated with the rest of HP.

“While they won’t preclude any open discussion on a new CEO’s view of what the future strategy should be,” Wayman said, “we are looking for a CEO who also embraces that strategy, in all probability.”

Fiorina, who earned $44 million in signing bonuses to join HP in 1999, left the company with a $21.1 million payout. Her contract also provides $50,000 in job counseling services, a point of irony that didn’t escape HP 3000 customers who have seen careers ended or altered after the 3000’s cancellation.

“She was the executioner,” said John Dunlop of 3000links.com “She chopped and pruned product lines and employees. Unfortunately for the HP 3000 community, the HP 3000 was one of the early casualties. Thus she became the name synonymous with the death of the HP 3000.”

Another customer said Fiorina represented a strategy of judging a customer by what they’ve bought lately. The 3000 customer has been expected to buy what HP produces after it said it won’t offer the HP 3000.

“Carly was viewed by many to be of the mindset that our value as customers was limited to our wanting to buy what HP had to sell,” said Russ Smith of credit union Cal State 9. “It was not that our value was inherent as customers, period — and that HP should produce what we need.”

The majority of customers were realistic about how much change would filter down to the HP 3000 issues that remain at the company. “HP now has bigger problems such that this issue won’t even be on the radar,” said John Wolff, the CIO at LAACO, Ltd and vice-chair of OpenMPE. “Not only did they break the HP 3000 product line, but Carly broke the whole company — 60 years to build it, six years to wreck it.”

Fiorina was the first CEO ousted from HP in such a public manner: Stories of the forced resignation aired on all major US TV networks; HP called a press conference to explain on the day it removed Fiorina. She was not the first to leave involuntarily, though. Another HP CEO, John Young, “was politely retired when Dave Packard came back out of retirement to put the company back onto the right path in October, 1992,” Wolff said. “Young was paid $1 million for ‘unused vacation time.’”

An enterprise change?

Some 3000 customers said they were hopeful a better enterprise server strategy would emerge under a new CEO. The majority of customers responding to a spot poll by the NewsWire reported they were migrating away from the server, a position that has them considering HP’s server alternatives. For many, the damage has already been done.

“We lost all faith in HP’s strategy some time ago,” said Don Baird, president of EnCore Systems. “We do not rely on anything HP except our 3000s, which we are replacing with non-HP solutions.”

HP’s change of heart is having an impact on a choice of vendor for migration sources. At the Anchorage, Alaska light and power utility, systems analyst Wayne Johnson is moving to Windows — but HP’s moves with the 3000 make the utility wary.

“Part of my company’s fear has been the HP 3000 is going away, so let’s steer clear of any other HP product,” he said. “Could the change mean that the HP 3000 will be resurrected and not meet its demise in 2006? Our Windows platform is not HP.”

Some drew a direct link to Fiorina’s strategy and the slide of HP’s enterprise business. “HP lost its personality under Carly. Their niche was solid, reliable computing platforms, not PCs and not iPods,” said John Lee of reseller Vaske Computer Solutions. “Hopefully, the new CEO will re-focus the company on its core strengths, one of which used to be enterprise computing.”

Even those moving to HP’s Unix systems want to believe more change in management is on the way. “I really hope the shakeup continues down the line,” said a long-term HP 3000 manager who wanted his name withheld. At his firm, HP 9000s are replacing HP 3000s. “Maybe we can get back to a point were the customer and our needs come first, and the profits and sales will follow,” he said. “Since the Compaq-HP merger, the quality of our service programs and sales support have dropped.”

The CEO’s departure won’t change much for Pivital Solutions, a company that signed on for the last year of HP’s authorized 3000 sales and now offers third-party support for the server and MPE. “The only hope I still loosely hold is that they will sell off the enterprise systems group before they run it into the ground,” said president Steve Suraci.

Operator seeks operations whiz

HP’s executives say the company now needs a CEO with better operational skills. Its top sales officer Mike Winkler, quoted in a published report from the recent Goldman Sachs Technology Investment Forum, said HP’s fortunes would rise with a CEO like Lou Gerstner, the IBM leader who came in to turn around that company in 1992. In that same year, HP’s founders Bill Hewlett and Dave Packard asked LaserJet czar Dick Hackborn to take the CEO reins from John Young. Hackborn wouldn’t leave his home in Boise, Idaho to take the job and retired a year later.

But Hackborn, an operator behind the scenes in most of HP’s business choices since his retirement, played the lead role in bringing Fiorina to HP after the company felt it missed out on the Internet boom during CEO Lew Platt’s watch. Another report, published in the wake of the Fiorina ouster by BusinessWeek editor Peter Burrows, says Hackborn acted as the catalyst to spark the board’s removal of Fiorina.

Now Hackborn and the rest of the HP board will try to find an operational, COO style of CEO. HP will change CEOs because of Fiorina’s inability to execute, not over her direction. “She had a strategic vision and put in place a plan that has given HP the capabilities to compete and win,” HP’s press release assured investors.

The strategy which Hackborn has pulled HP into — commodity sales like printers, with less direct customer contact — relies on resellers and outside distributors to stay in touch with all but the largest customers. Typical HP 3000 shops, working for small and medium-sized businesses, say they have not felt much contact with any HP operation except its support group.

“Working for a small company, I don’t feel that I or my company has ever been part of an ‘enterprise systems strategy,’” said John Bawden of health insurance provider QualChoice, an HP 3000 shop. “Generally we are ignored unless we have the energy and the need to go to HP for something.”

Holding slim hopes

Despite knowing the 3000’s return is a very long shot at HP, customers still saw change as an agent that might work in their favor. “My heart hopes that the HP3000 line will be resurrected,” Bawden added, “but my mind says that it is probably too late in the game.”

Some customers have not begun a transition, but said they need a signal soon to stall a migration. “I would need a commitment from HP soon to see any hope of keeping the HP 3000s here,” said Bob Phelan of Perot Systems, managing HP 3000s for Harvard Pilgrim Health Care. “I can’t help but wonder, however, if they might see a surge in 3000 sales if they announced a change of heart.”

Customers have read the ouster as a step away from the company’s commodity focus. “it appears that HP realizes that it’s time for a new direction,” said Connie Sellito of the US purebred registry Cat Fanciers Association. “HP is not just about printers.”

Greg Brown of Peerless Pumps said a migration is going to be costly and disruptive at his company. A CEO change gives him hope of avoiding the change, though he realizes many sites are already on the move.

“My fear is that it is too late, and that many organizations are well on their way to move on,” he said. “It is not too late for us, though. So I do hope that HP will quickly change their mind to reinstate the HP 3000 as a product to be supported and evolved.”

Some customers are only hoping HP will keep its 3000 resource in place longer than 2006, if only to aid long-term migration projects.

“If they continued support and brought their HP3000 gurus back to the response center, it would sure make our lives a bit more tolerable,” said Dave Evans of California’s San Bernadino County schools. “We are still rewriting our in-house apps to run in Windows. We are looking at at least five more years to do so — so if HP extended the 3000’s life, it would definitely help us.”

HP has already changed directions in what has appeared to be a hurry for some customers. Greg Gibbons, the MIS Director at See's Candies, reported that HP awarded See’s with a Bravo award for excellence in HP 3000 technology in 2001. “This award was presented to us two months before they announced they were killing the platform!” Gibbons said. “Talk about mixed messages. One minute encouraging us to continue with the platform, the next, killing it off.”

Gibbons’ shop is underway with its transition already, but Fiorina’s ouster gives him hope of something better being offered to 3000 shops like his.

“I do hold out hope for a change in position now that Carly is gone,” he said. “I don’t expect HP to reverse the decision to kill the platform, although I would welcome it.”

Gibbons said See’s wants a way to run 3000 apps on another HP platform. “I believe that they have a chance to do the right thing for their HP 3000 customer base,” he said, “to create a real, viable, operational migration path for their customers, a solution that will not require coding or porting. A solution that will allow us to run our apps, both third-party and custom.”

A shift in HP’s alternatives could win the vendor more business for its enterprise offerings, he added.

“I don’t mind buying new HP hardware to be able to run my applications,” Gibbons said. “What’s important to me is to be able to keep running in a supported environment.”