Capellas quits as No. 2 at HP, considered likely WorldCom CEO
By Brian Bergstein AP Business Writer
NEW YORK (AP) – After just six months as No. 2 at Hewlett-Packard Co., Michael Capellas quit the computing giant and its difficult integration of Compaq Computer Corp. on Monday, apparently with an eye on another sizable challenge: the leadership of bankrupt WorldCom Inc.
Capellas would replace John Sidgmore as chief executive at WorldCom, the Mississippi-based telecommunications provider that admitted a $9 billion accounting fraud and is mired in the biggest bankruptcy in U.S. history.
Sidgmore always has been considered an interim replacement for WorldCom founder Bernard Ebbers, whose aggressive style and high-flying ways have made him one of the central characters in the telecom industry’s bust.
WorldCom spokeswoman Julie Moore would not comment on the CEO search. But HP’s announcement that Capellas was leaving to “pursue other career opportunities” came hours after The Wall Street Journal reported that he had become the front-runner to succeed Sidgmore.
Capellas’ departure sent HP shares plunging $1.69, 10 percent, to $14.99 in afternoon trading on the New York Stock Exchange.
Capellas was Compaq’s CEO for three years before HP’s $19 billion acquisition of Compaq in May. His hyperkinetic, workaholic style made him a natural at overseeing HP’s daily operations.
But Palo Alto, Calif.-based HP contended that Capellas won’t need to be replaced because Carly Fiorina, the chairwoman and chief executive, will assume his duties. Business units that reported to her before the Compaq acquisition will do so again.
HP spokeswoman Rebeca Robboy portrayed Capellas’ resignation as a sign of his confidence in the company’s ability to keep carrying out the complex Compaq integration.
“His immediate responsibilities are more transition-related,” Robboy said. “The process and teams he put in place are functioning well.”
Ironically, Capellas, 48, spent more time fighting for the HP job than he actually spent in it.
Capellas and Fiorina announced HP’s purchase of Compaq in September 2001, then barely survived a brutal proxy fight with former HP director Walter Hewlett, son of company co-founder William Hewlett.
When the deal finally closed May 7, Capellas became HP’s president and a board member. At the time he said he would concentrate on reassuring employees who were uncertain about the merger and the resulting job cuts, which are reducing the work force from 150,000 to around 133,000.
But Capellas never bought a house in Silicon Valley, choosing instead to rent a place and maintain his home near Compaq’s old base in Houston.
Also, as part of Capellas’ contract with HP, he now can collect a $14.4 million bonus for which he would have been ineligible if he quit HP more than a year after the Compaq deal closed.
Walter Hewlett, criticized that potential payout during the proxy fight. But through a spokesman, Hewlett declined to comment Monday.
Fiorina said in a statement that she supported Capellas’ decision and appreciated the “dedication and passion he brought to our joint endeavor.”
While the Journal reported that Capellas was the front-runner for the WorldCom position, it also said other executives were being considered, including XO Communications Inc.’s chairman and CEO, Dan Akerson, and BellSouth Corp. vice chairman Gary Forsee.
A source familiar with the search, however, told The Associated Press on condition of anonymity that Forsee was “never seriously interested” in the job.
Capellas’ resume reflects his long career in information technology but no direct experience in telecom.
He spent 16 years with oilfield services giant Schlumberger Ltd. in an array of tech-related management positions. He also worked at SAP America and Oracle Corp., where he led the software maker’s sales to oil and gas companies, before joining Compaq as chief information officer.
Before becoming Compaq’s CEO in a surprise decision in 1999, he had been acting chief operating officer for only two months.
At WorldCom, he would have a whole new set of challenges. Having declared debts of $41 billion when it filed for Chapter 11 in July, WorldCom may have to sell off important assets to satisfy creditors. Rival providers of corporate telecom services, including AT&T and Sprint, claim to be winning customers who fear WorldCom’s instability.
Then again, if WorldCom and its MCI long-distance division emerge from bankruptcy relatively intact and with debts drastically reduced, WorldCom could haunt debt-laden competitors by offering low prices.
Steve Mader, CEO of headhunting firm Christian & Timbers, said that while it might seem that taking WorldCom’s top job would be “walking into a mess,” there are advantages to heading a company where everyone understands a complete new start is required.
“Even as the brand new guy, it’s a time when your leadership and your opinion will not be challenged much, so it’s a fairly easy assimilation,” said Mader, whose firm is not involved in the WorldCom CEO search.
“You don’t go into a job like that saying to yourself, “I’ll figure it out,”‘ Mader said. “If Capellas has agreed to take the WorldCom assignment, he already has a strategy.”
—
On the Net:
http://www.hp.com
http://www.worldcom.com