Randy Mott's Pot of Gold
NEW YORK - There's an old joke in the tech industry that CIO stands for "career is over." Get promoted to the job of chief information officer, and you're likely to spend your remaining days stuck in a chilled server room somewhere, ignored by more important executives.
But the recent poaching of Dell Chief Information Officer Randall Mott by rival Hewlett-Packard proves that joke is far from the truth. According to regulatory filings, HP is paying upwards of $15.3 million to lure away the experienced tech executive—a sum that reflects the increasing demand for very experienced CIOs as well as the difficulty of hiring senior executives away from a company as successful as Dell.
HP is willing to pay such a high price to hire Mott because the company wants badly to reinvent itself after several years of stagnating stock price and shrinking business. That the executive in question comes from the company putting the most hurt on HP only sweetens Mott's pot.
Dell has a reputation for retaining executives far longer than other corporations of its size. "Dell has a tremendous rate of attrition, there’s no doubt," says SG Cowen analyst Richard Chu, of Dell's lack of executive turnover. But Mott's defection isn't so unusual as to indicate any problems at Dell. "Retention is very strong, but it doesn’t mean people don’t move."
Mott, 49, served as senior vice president and CIO of Dell for five years, and was a member of the company's global executive management committee. Before that, he spent 22 years at Wal-Mart Stores, including six years as senior vice president and CIO.
According to documents filed with the U.S. Securities and Exchange Commission, HP will pay Mott a base salary of $690,000 per year, the option to buy 500,000 shares of HP common stock, and a targeted short-term bonus opportunity of 100% of base salary guaranteed at target for the remainder of fiscal 2005 and fiscal 2006. To replace benefits Mott had at Dell, the company will give him a $2.2 million signing bonus and a $1 million relocation bonus. He'll get 285,000 shares of restricted stock, vesting at 20% per year for five years, which would be worth more than $7.1 million at the stock's current price. And he'll receive targeted long-term performance cash of $7 million for the 2005-2008 performance cycle, of which $5 million is guaranteed.
As generous as the base salary is, Mott's new base salary isn't out of line for the industry, says Victor Janulaitis, CEO of management consulting firm Janco Associates, which tracks IT salaries. A CIO at a company the size of HP should expect to receive between $250,000 and $750,000, he says.
Mott's signing and relocation bonuses also aren't very surprising, considering his experience, reputation and HP's current troubles. "He's going into an organization that's in ruin," says Janulaitis. "If they want to get somebody, they're going to have to pay for it."
But all the stock being thrown Mott's way is a different matter. "That's highly unusual," says Janulaitis. "Basically, they're saying, 'we want you to come, we're going to give you a bunch of money, we want you to be successful, and being successful means you're going to be here five years from now.'"
HP's new chief executive is expected this week to announce a restructuring that may include layoffs up to 15,000 employees, or 10% of HP's workforce.
Hurd was brought in partly to get HP's costs in line with the rest of the industry. Mott, groomed at two of the leanest-run companies in the world, Wal-Mart and Dell, will surely have ideas on how to bring HP's infrastructure costs in line and improve efficiencies.