Capellas Leaves HP for Other 'Career Opportunities'

by Alex Woodie

Michael Capellas, the former chief executive of Compaq who became president of Hewlett-Packard when the two companies merged earlier this year, has resigned from HP to pursue "other career opportunities," HP announced on Monday. As president, Capellas was in charge of the day-to-day operations of HP, and his departure is undeniably a blow to the ongoing efforts to integrate Compaq into HP. However, Carly Fiorina, HP's chief executive, says the integration is on track and should not be affected.

Capellas has reportedly been the front-runner for the top job at embattled telecommunications giant WorldCom, according to reports in the Wall Street Journal. An analyst at Merrill Lynch, which maintained its buy rating on the stock despite the negative news, says Capellas yearns to be a chief executive again. News of Capellas' departure sparked selling that resulted in a 10 percent decline in the value of HP's stock, representing a loss of $5 billion in the company's market capitalization. Analysts said it represented a good time to buy the company's stock.

HP's statement indicated that it will not fill the empty president's positions, although it did not say for how long the president's seat would remain empty. Operating executives who previously reported to Capellas will report directly to Fiorina. Fiorina, who is also the chairman of the board at HP, said the integration of HP and Compaq is ahead of schedule and will not be set back as a result of Capellas' departure. "We've reached a natural transition point. 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," she said.

As the former chief executive of one of the largest server companies in the world, Capellas is in line for a tidy severance package. According to a Dow Jones report, Capellas is due a minimum lump payment that is three times the sum of his annual salary and bonus. Capellas earned a salary of $1.6 million in his last full fiscal year at Compaq, and he was eligible for a $3.2 million bonus, which puts his severance package at more than $14 million. This is small potatoes in some ways, however. IBM's former chairman, president, and chief executive Louis Gerstner's severance package includes a 10-year consulting gig with IBM and 20-year's access to company jets, cars, and help with financial planning.

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