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Fiorina swings HP axe

HP CEO Carly Fiorina has axed three senior executives after ‘unacceptable execution’ in the IT giant’s enterprise servers and storage division led the unit to post operating losses of US$208m during the third quarter.

HP CEO Carly Fiorina has axed three senior executives after ‘unacceptable execution’ in the IT giant’s enterprise servers and storage division led the unit to post operating losses of US$208m during the third quarter ending July 31st 2004.

The poor performance was attributed to a combination of factors including channel management issues in Europe, Middle East and Africa (EMEA) relating to ‘channel compensation, overly aggressive discounting and the transition to a centralised claims process’. Migration to a new order processing and supply chain system in the US also proved to be more disruptive than anticipated while HP’s storage sales also disappointed.

An internal HP memo revealed the targets of Fiorina’s fury. Kasper Rorsted, managing director for EMEA and senior VP for HP’s Customer Solutions Group (CSG) has been axed. Bernard Meric, previously serving as senior VP for HP’s Imaging and Printing Group (IPG), has replaced him. HP’s enterprise servers and storage division is part of CSG.

The most senior casualty in Fiorina’s executive cull is Peter Blackmore. His role as executive VP of the CSG with responsibility for all direct sales to HP’s enterprise, small and medium size business and public sector customers worldwide has been handed on to Mike Winkler.

The third target on Fiorina’s hit list was Jim Milton. Jack Novia will replace Milton as CSG senior vice president and managing director for the American region. Previously, Novia was senior VP and general manager of the HP Technology Solutions Group (TSG) and spent two years as senior VP and general manager of HP Services America.

“Although we are satisfied with our performance in Personal Systems, Imaging and Printing, Software and Services, these solid results were overshadowed by unacceptable execution in Enterprise Servers and Storage. We therefore are making immediate management changes. We are also accelerating our margin improvement plans in this business. With these changes, we expect our server and storage business to return to profitability in the fourth quarter,” explained Fiorina in the company’s results announcement.

Third quarter sales for the enterprise storage and servers division slithered 5% year-on-year and 16% sequentially to US$3.35bn. Storage sales fell 15% year-on-year. The unit’s operating loss soared to US$208m compared to a loss of just US$20m a year earlier. In the second quarter of 2004, the division posted an operating profit of US$120m. For HP as a whole, EMEA sales climbed 14% year-on-year to US$7.5bn — accounting for 39% of a global total of US$18.9bn during the third quarter.

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