Capellas steps down from HP

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Hewlett-Packard president Michael Capellas is leaving to "pursue other career opportunities," the company said on Monday. The news comes amid reports that Capellas is the favourite to take over as WorldCom chief executive. Capellas will also leave the board of directors, said HP. In a statement, HP chief executive Carly Fiorina said that Capellas had "reached a natural transition point" with the company, which he joined when HP swallowed Compaq earlier this year. Capellas had been chief executive at Compaq. "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," said Fiorina. "I fully support this decision and appreciate the dedication and passion he brought to our joint endeavor," said Fiorina. HP said that it won't hire another president. The operating executives of the company who previously reported to Capellas will now report directly to Fiorina. Sources familiar with Capellas' status at HP said that he had been dissatisfied at the tech giant. Capellas was "not happy in his current role at HP," said one person familiar with the situation. "He wasn't being utilised." The former Compaq chief started to entertain offers as early as last summer, just a few weeks after the close of Compaq's merger with HP, the person said. HP recently started its first full fiscal year as a combined entity with Compaq. Steven Milunovich, an analyst with Merrill Lynch, said that Capellas' departure would not help HP. "Although Capellas has not had a contract at HP, we hoped he would stay a couple years," said Milunovich in a research note. "Investors may doubt that chief executive Carly Fiorina can handle such a big job herself." Analysts were mixed about HP's plans not to fill the president's office with someone new. Fiorina may have to find a replacement for Capellas to help oversee operations, Milunovich said. "Investors may doubt that chief executive Carly Fiorina can handle such a big job herself," said Milunovich. One of the opportunities that may await Capellas is the chief executive slot at downtrodden telecom company WorldCom. He is the front-runner to replace departing WorldCom Chief Executive John Sidgmore, according to The Wall Street Journal. Citing sources close to the matter, the newspaper reported that WorldCom's board is enthusiastic about Capellas, but that the company also has had serious discussions with XO Communications chief executive Dan Akerson and BellSouth vice chairman Gary Forsee. There is a fourth, unidentified candidate, the paper said. HP and WorldCom representatives weren't immediately available for comment. WorldCom is on the hunt for a chief executive to turn around the company, which is mired in a $9bn accounting scandal, a Chapter 11 bankruptcy reorganisation and a Securities and Exchange Commission probe. Former chief executive Bernie Ebbers resigned in April, and WorldCom restated its results amid uncovered accounting fraud a few weeks later. In June, WorldCom fired chief financial officer Scott Sullivan. Last week, WorldCom said it expected to restate more earnings results. With expectations of emerging from bankruptcy in mid-2003, WorldCom would be looking for a fresh start. Capellas could be a good fit since he helped stabilize Compaq before its merger with HP. In the tech industry, Capellas is known to have a strong focus on operations and customer relations. Capellas, along with Fiorina, also stumped to push through the HP-Compaq merger, which was marred by a bitter proxy fight. Despite its troubles, WorldCom, which carries a commanding portion of Internet traffic through its UUNet division, still has strong assets and customer numbers. "Restatements of past accounting have no impact on its ability to continue to provide service to its customers," said WorldCom in a statement last week. What is uncertain is whether WorldCom can meet Capellas' asking price. Any CEO compensation package would have to be approved by a bankruptcy court. News.com's John Spooner contributed to this report.
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