HP: Carly Goes, Credit Rating Stays


By Martha Toll-Reed Carleton S. Fiorina has stepped down as chairman and CEO of Hewlett-Packard (HPQ

; S&P corporate credit rating, A-; ratings outlook stable), effective immediately, the company announced on Feb. 9. It also revealed that Robert P. Wayman, HP's chief financial officer, has been named interim chief executive officer and appointed to the board of directors. Patricia C. Dunn, a director since 1998, has been named nonexecutive chairman, also effective immediately.

This move, as well as recent involvement in changes to senior-management responsibilities, indicates the HP board's increasingly active governance posture. However, Standard & Poor's Ratings Services expects the board to maintain the right balance between oversight and management. The search for a new CEO is expected to focus on strategic execution and operational consistency.

SUBSTANTIAL LIQUIDITY. S&P doesn't expect the management change to affect its ratings or outlook for HP. While the company reiterated its commitment to its current strategy -- including no current plans to divest portions of HP's business portfolio -- if a future change in strategy occurred, it could have a ratings impact.

Although HP's operating performance in the highly competitive personal systems and enterprise segments has been variable and, in aggregate, subpar for the rating level, our rating on the outfit continues to be supported by strong results in its imaging and printing group.

HP is expected to maintain its strong financial profile and very substantial liquidity. As of Oct. 31, 2004, HP had cash and short-term investments in excess of $12 billion, compared with total debt (including capitalized operating leases) of $8.8 billion. Toll-Reed is a credit analyst covering the technology industry for Standard & Poor's Ratings Services


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