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Martin LaMonica

Staff Writer, CNET

Carly Fiorina, the embattled leader of Hewlett-Packard, stepped down as chairman and CEO on Wednesday as HP tries to redefine itself for a new era.

The company’s board said the change is effective immediately. Robert Wayman, HP’s chief financial officer, has been named interim CEO and has been appointed to the board.

Carly Fiorina

Patricia Dunn, who has served on the board since 1998, has been named chairman.

According to HP, the departure stemmed from disagreements over how to execute the company’s strategy.

“The differences came down to Carly catalyzing the transformation of HP. She did that in remarkable fashion and executed the merger with Compaq in superior fashion. But looking forward, we think we’ll (need a CEO with) hands-on execution,” Dunn said on a conference call.

In a statement, Fiorina acknowledged discord with the company’s board.

“While I regret the board and I have differences about how to execute HP’s strategy, I respect their decision,” Fiorina said in a statement.

Robert Wayman

HP is scheduled to report its fiscal first-quarter results on Feb. 16. The company said Wednesday that results will be in line with expectations.

The departure of Fiorina, who arrived at the company in 1999 from Lucent Technologies, comes as HP struggles to achieve consistent growth in its financial performance, particularly in its enterprise group. The company reorganized last month, combining its PC and printer units.

Fiorina has resisted calls to break HP, a Silicon Valley icon, into two separate companies, with one focused on business customers and another focused on consumers.

HP’s merger with Compaq Computer, which was spearheaded by Fiorina, has also been criticized. Although the merged company has managed to wring out costs by combining operations, it has lost market share in certain areas, according to analysts.

Just two weeks ago, HP denied reports that it was planning to redistribute some of Fiorina’s day-to-day responsibilities.

Walter Hewlett, a former HP director and the son of the company’s co-founder, said in a phone interview that he was surprised by the decision.

“I know she’s been under a certain amount of criticism, but (this) is somewhat unexpected,” said Hewlett, who led an unsuccessful proxy battle to defeat HP’s acquisition of Compaq. “I believed her when she said she had an excellent relationship with the board.”

Hewlett also said he believed the board would give Fiorina much more time to execute on the merger, which was completed in 2002. “I didn’t expect the board to act so soon,” he said.

HP said it will start the search for a permanent CEO. Wayman said on the conference call that he expects to step back into his CFO role once a new chief executive is found.

Although HP’s board said that it intends to stick with the company’s current strategy, analysts said that Fiorina’s departure clears the way for the dramatic possibility of splitting the company in two, with the printer/PC unit becoming its own entity.

“The decision opens up the possibility, which was really off the table before, that the new management will reexamine the possibility of possibly partitioning the company, which we view as positive for the stock,” said Richard Chu, an analyst at SG Cowen.

Regardless of whether the company does split, HP still needs to address the challenge of marketing itself as both an enterprise company and consumer one, analysts said.

“To be selling iPods out one door and on the other side helping Procter & Gamble manage its IT infrastructure–it doesn’t seem like it can come together for one company, unless you’re running a conglomerate” like General Electric, said Chris Foster, an analyst with Technology Business Research.

HP will likely begin trying to address the message and company vision, said Frank Gillett, an analyst with Forrester Research.

“Strategically, HP is (at) an interesting crossroads,” said Gillett. He noted that its competitors IBM and Dell have clear business strategies, while Sun has been reinvigorated after struggling for the last few years.

On Tuesday, Sanford Litvack resigned from HP’s board of directors. He was replaced by venture capitalist and former board member Thomas Perkins.’s Dawn Kawamoto and John Spooner contributed to this report.