Posted on 09/16/2015 5:06:30 AM PDT by RC one
Fresh from strong debate quips, Carly Fiorina has improbably raced from 14th to fifth place in the New Hampshire Republican primary polls and now enjoys a 70% favorability rating in Iowa, ahead of such career politicians as Jeb Bush, Marco Rubio, John Kasich, Rand Paul, Chris Christie, Rick Perry, George Pataki, and Lindsay Graham.
It is time to take her candidacy seriously and examine her leadership record. Having never held elected office, she has staked her reputation on her business career.
...with a scant 5% of Fortune 500 firms employing women CEOs, her leadership of a huge global enterprise in the macho field of IT is impressive. But how did she do?
The answer in short is: Pretty badly
In 1999, a dysfunctional HP board committee, filled with its own poisoned politics, hired her with no CEO experience, nor interviews with the full board. Fired in 2005, after six years in office, several leading publications titled her one of the worst technology CEOs of all time. In fact, the stock popped 10% on the news of her firing and closed the day up 7%.
Arianna Packard, the granddaughter of HP’s founder, commented when discouraging voters from supporting Fiorina in her 2010 senatorial run, “I know a little bit about Carly Fiorina, having watched her almost destroy the company my grandfather founded.”
However, before Conservative Political Action Caucus in February, Fiorina proclaimed that under her HP command, “We would double its revenues to $90 billion, triple its rate of innovation to 11 patents a day, and go from a laggard to a leader in every product category and every market segment in which we competed.”
Sure, she doubled revenues—through a massive, ill-conceived, controversial acquisition of Compaq Computer in 2002—but Fiorina did nothing to increase profits over her five-year term, with the S&P 500 showing net income across enterprises concomitantly up 70%. Furthermore, shareholder wealth at HP was sliced 52% under her reign against the S&P, which was down only 15% in that bearish period. She modeled the old joke of “making it up in the volume.”
Fiorina rammed the Compaq deal through despite intense opposition by analysts, employees, and shareholders. When it appeared that she would lose the proxy vote, the balance was tipped back the other way using hardball tactics that would make Donald Trump wince.
In proxy voting, Deutsche Bank originally voted against the transaction with the massive HP shares it held in various fiduciary accounts—representing the interests of its investment clients. Enraged, Fiorina threatened in a recorded voicemail, “we may have to do something extraordinary” to bring Deutsche Bank over the line. In a conference call with Deutsche Bank commercial bankers eager to do business with HP, she stated “This is obviously of great importance to us as a company. It is of great importance to our ongoing relationship.”
After such coercion, Deutsche Bank’s commercial bankers intervened; apparently fearing lost business then, supposedly independent Deutsche Bank fund managers reversed their vote. This was immediately challenged in Delaware Chancery Court. The court saw the danger of such alleged vote-buying, but ultimately it allowed the deal.
In the 10 years since Fiorina’s ousting from HP, most of the acquired obsolete Compaq device businesses have been shuttered with the remainders divested this year. This Compaq “heavy metal” strategy was not even her expressed plan just months before the acquisition. Her stated goal was not to build up hardware but just the opposite, to emulate the revival of competitor IBM ramping up HP’s service revenues.
In 2000, Fiorina failed to close a deal with Pricewaterhouse Coopers consulting business worth $18 billion. A few months later, PwC happily sold the business for $3.5 billion to IBM ( IBM 1.29% ) . Interestingly, this deal was skillfully executed by IBM’s current CEO Ginni Rometty. To add to the irony, Fiorina’s doubling down into the device business took HP into the exact opposite direction of IBM. IBM was exiting this commoditized space, selling its laptops and ThinkPads to Lenovo.
The lost shareholder wealth and lost strategic direction at HP are only part of Fiorina’s legacy. Also lost during her reign were 30,000 U.S. tech jobs, the company’s revered employee morale, and the egalitarian, humble HP way culture. A new defensive, finger-pointing style of leadership led to waves of firing. Dissent was equated with disloyalty as discovered by Walter Hewlett, a board member and son of HP’s co-founder, when he questioned Fiorina’s misguided Compaq acquisition strategy and refused to be bullied into a board statement of unanimous consent, suffering legal and personal threats.
Despite such carnage, Fiorina pocketed over $100 million in compensation for her short reign—including a $65 million signing bonus and a $21 million severance. I have studied comebacks from adversity, but she’s not shown the required contrition nor earned the needed exoneration, and she’s not served as a CEO since. Upon leaving Taiwan Semiconductor’s board, the firm disclosed she only attended 17% of the board meetings. Under Meg Whitman’s brilliant leadership, HP’s character and performance have recovered, but we have not seen Fiorina’s parallel resilience just yet.
Everyone overlooks that the 3rd leg of that stool was Digital Equipment Corporation. It was Ken Olsen’s Mormon Management Cult that believed the future was in Corporate Networks run on Main Frame Computers. The idiots at HP shared the same philosophy. HP turned down the Altair from MicroSoft’s Paul Allen when they had first dibs on it. She didn’t get $100 million and she didn’t buy three Private Jets. She returned them. DEC management loved their toys. We had five helicopters at The Mill in Maynard.
I’ll take problem #2 any day. I have not seen much from the younger crowd as far as innovation. I do not call dart boards at work, BS meaningless apps that parrot 1000 other meaningless apps, and dead-end, feel good processes innovation. The generations prior to the last two put men in space, split the atom, created amazing medical devices, and created/improved computers, the last two use those inroads to make video games and Farcebook. They have not had any what I call “hard” achievements by comparison.
I'm sure she will. The fact remains, she didn't leave HP in better condition than when she found it. HP stock fell 50% during her tenure while the industry as a whole only fell 7%. HP stock jumped 6.9% on the news of her termination because she was widely regarded as bearing responsible for HP's declining earnings. That's her record. That's what we have to look at.
Bookmark.
OH WOW.
You’d think she could afford better ‘work’ with $100M. The angry look she’s got now isn’t a function of having aged, it’s just bad work apparently.
What did she accomplish at Lucent?
“Allow me to summarize: she fired 30,000 people, screwed the company and shareholders, was fired for her performance, and then walked away with $100 million dollar severance package and she hasn’t done anything meaningful since.”
In the grand GOP plan, pre Trump, Jeb was to be the nominee and Carly the VP. Carly’s trip through the primaries was all about getting her introduced to the public and ready for the fall 2016 campaign. The GOPe determined a female was needed on the ticket to counter Hillary playing the “war on women” theme. Jeb wouldn’t be able to attack Hillary directly but a female on the ticket could.
Now that Trump has spoiled the plan for Jeb, and Kasich has failed to gain traction as the Jeb alternative, the GOPe seems to be trying to position Florina as their “outsider” alternative to Trump.
Unfortunately Carly is the GOP candidate Sanders wants to run against. If she heads the GOP ticket she will lose to Sanders, Hillary, or Biden.
Such vendor financing deals would have much the same impact on the telecom industry that sub-prime mortgages eventually had on the housing industry. In both cases public companies extended loans to customers who were gambling that the good times would keep rolling (and who were especially glad to make those bets with the lenders’ money). In both cases the loans helped puff up lenders’ short-term financial results and stock prices. In both cases the market inevitably turned and the pile of debt collapsed. (PathNet, after taking on another slug of vendor debt from Nortel, filed for bankruptcy protection in 2001 as the industry collapsed.)
Doesn’t speak well of her. She is supposed to be gunning for Trump tonight. They all are.
She’d fit right in in fedgov then.
Only there they can print money till the cows come home. Or the currency crashes. Whichever comes first.
If he can crush one of them tonight, and successfully defend against the rest-he wins. If he crushes one of them bad enough, the rest of them will lose their order of battle. Carly wants to fight? I say take it to her.
The argument can be made that her business practices contributed to the tech bubble and subsequent collapse. I know plenty of people that lost their a55es when the tech bubble burst.
I’ll buy that. She certainly wasn’t the only one but her ‘management’ absolutely didn’t help any of these companies.
I’ve wondered if the bubble wasn’t deliberately fanned and used by big boys.
I had an idea for a Trump commercial, should they go that route:
You may remember when GHWB was running for a second term an advertisement said the following - ‘This was Barbara Bush before she married George (early photograhp). This is Barbara Bush now (then present day photograph).’ It was out of line, but because it was against a Republican, everyone was ‘okay’ with it.
Likewise, Trumps ad should say: ‘This was HP before Carly Fiorina was hired as CEO. This was the state of HP the day she was fired. Do you want Carly to do to America what she did to HP?’
If done right it could end up being mighty embarrassing for her. Just an idea in case anyone in the Trump camp is looking.
She also guided HP through the Tech Meltdown of 2000-01. 30,000 employees is a drop in the bucket compared to the layoffs that occurred at the time within the industry, and is less than other IT companies of comparable size - I can remember IBM firing 10's of thousands of employees at least twice (lived through one of the layoffs....).
Heck, I worked at a completely non-IT manufacturing company, and it laid off 10,000+ people at one shot in 2001 or 2002. The IT dept lost 10% of its workers, in one day. That wasn't any fun.
Frankly, IT never really recovered from the hit that it took in 00-01. Of course, it was ridiculously overblown at the time and needed to be pared back. But it never really recovered from the complete non-event that was Y2K.
And as for her severance package ... HP agreed to it. It's not like she forced them to offer at gunpoint.
I'm not an enormous Fiorina Fan, but smear pieces like this are just wrong.
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