H-P Ousts Fiorina

CIBC World Markets analyst Ali Irani said that in the short term, the ouster removes the "Carly discount" from the stock.

"She's been a controversial figure, and many investors have felt that she has not set forth with sufficient credibility a path for a sustainable trajectory for the company," Irani said. "The long-term implications of this move depend entirely on who the new replacement CEO will be."

Wednesday's news undoubtedly will empower voices that have called for the separation of Hewlett-Packard's printing business from the personal computer division, a strategy that got a boost in December when IBM(IBM Quote) sold its PC division to China's Lenovo Group. Advocates say Hewlett-Packard's printer business, which by some estimates commands 40% of its market, could trade for more than $20 a share on its own.

Based on the current Thomson First Call consensus, H-P shares currently fetch about 13.3 times estimated 2005 earnings. By contrast, Lexmark(LXK Quote), a pure-play printer and supplies business, trades for 18.6 times the 2005 Wall Street consensus.

Still, separating the printer and PC businesses will be difficult just months after the decision to combine them. One analyst said the tenor of Fiorina's dismissal suggests a spinoff isn't in the cards.

"Our understanding is that Carly Fiorina stepping down as CEO comes from an operational and performance difference with H-P's board rather than a strategic one," wrote Goldman Sachs analyst Laura Conigliaro. "The implication seems to be that this would not result in a move to either split up or merge the company."

(Conigliaro doesn't own shares in H-P, but Goldman does have an investment-banking relationship with the company.)

Rod Bare, an analyst at Morningstar, said the board's hands are probably tied.

"They've already looked at splitting up the company, and they've probably decided they're unable to," Bare said. "It would be impossible to, perhaps. They're so intertwined. It would be so incredibly painful that they're probably stuck with the mix that they have."