11 November 2002 Hewlett-Packard president Michael Capellas has quit amid speculation that the former Compaq CEO is set to take the helm at WorldCom, the scandal-racked telecoms giant currently in Chapter 11 bankruptcy protection.
According to unnamed sources cited by the Wall Street Journal, WorldCom’s board has already “signed off” Capellas for the job, although this claim is disputed in some quarters. “We’re at least a few days away and maybe a week away,” the WSJ quotes another source.
Capellas’s departure from HP was sudden and unexpected. He had been due to speak at the Oracle World conference in San Francisco, California on Wednesday, but was replaced at the last minute by Carly Fiorina, HP’s CEO.
However, it will also enable Fiorina to strengthen her position at the helm of HP. Capellas has run the day-to-day operations of HP since it acquired rival Compaq, a deal finally completed in May 2002. Staff who reported to Capellas will now report to Fiorina instead.
On the surface, the departure is amicable. “I have tremendous respect for Carly and her leadership. I could not be more proud of our accomplishments and I have every confidence in the future success of the company,” said Capellas in a statement. Fiorina was similarly effusive.
Capellas is up against BellSouth vice chairman Gary Forsee and, surprisingly, XO Communications CEO Dan Akerson. XO is currently in Chapter 11 bankruptcy protection as well. Akerson has been CEO of XO since July 1999.
However, whoever is appointed will have an uphill struggle to rebuild WorldCom’s shattered credibility. The company is under investigation for fraud after an estimated $9 billion (€8.9bn) in financial irregularities were uncovered.
In the last week, the WorldCom board has also seized assets belonging to founder and former CEO Bernie Ebbers. The assets were pledged as collateral for $415 million (€410m) in loans to Ebbers from the telecoms giant, which were used to purchase now-worthless WorldCom stock.
However, their value – which includes half a million acres of forest in southern USA, a Canadian cattle ranch and a yacht-builder – falls far short of the loans’ value. The WorldCom board has valued them at a maximum of $200 million (€198m) and Ebbers may be forced to file for bankruptcy.