If Wall Street Knew What HP Knows (Fiorina Despised by HP Rank-and-File, Merger Doomed)

How bad is it? Fiorina goes to HP divisions to talk up the merger. Instead of going through the front door and mingling with employees, her staff -- citing security concerns -- slips her in through a side door. She gives her stump speech and then she is whisked out again. In a December visit to the large Vancouver division, she was so paranoid about the rank and file that her security people had all the china cups and metal silverware replaced with styrofoam and plastic. Chairs were strapped together with cable ties. When this happens on an airplane, it's sad. When it happens at an American corporation, it's a joke. When it happens at Hewlett-Packard -- a company known for friendly relations between management and employees -- it's pathetic.

How bad is it? Fiorina's quarterly announcements are regularly ignored. Anything she says is considered suspect. Many HP employees speak of opposing the Compaq deal in large part to vote against Carly. This adds a different spin when Fiorina claims to "know the people of the new HP."

Lest anyone think this is due to the proposed merger or the sour economy, it is not. This is a direct response to the policies Fiorina has pursued since her arrival. She has squandered all the good will she was afforded on her arrival. She has turned believers into cynics; optimists into pessimists. Fiorina has been very vocal about what the HP Way is not, but she has been relatively quiet about what the HP Way is. Let me share the best definition I have heard. The HP Way is based on an assumption: "I assume that you want to do a good job and will do so given the right tools and environment." CEOs make this assumption about staff. Staff makes this assumption about management.

Unreasonable? Hardly. Silicon Valley culture is based on this assumption. Outdated? Never. Yet from her arrival, Fiorina's policies have violated this basic assumption. In her statements and actions, she let it be known that she considered much of the HP staff to be slackers who had to shape up or get kicked out. This is why her layoffs have elicited a much stronger reaction than the 20% layoffs experienced by the HP spinoff, Agilent Technologies.

The problem with Carly Fiorina is that as a medievalist she talks like Henry V, but thinks like Marie Antoinette. At the same time that she was cutting travel funding for staff and eliminating staff use of corporate jets, she was purchasing three Gulfstream jets for HP executives -- the largest for her exclusive use. She clearly can't stand HP culture. From her garage ads featuring a fake shell resembling the original Addison Street garage to her hollow promises to return HP to its inventive roots, Fiorina has shown her leadership to be a sham, a facade -- and the vast majority of HP people despise her for it.

Don't be fooled by articles saying that HP people are split on the deal. Talk with people inside HP and you will find that the sentiment is almost entirely against the deal. Upper level managers are ordered not to speak against the deal. Employees are told not to speak in public about it -- with one exception: Fiorina's staff has scoured the company to find people willing to speak in favor of the deal. Fliers have gone up in divisions asking for volunteers willing to speak on camera for TV ads. If you want to understand how open this process is, just note that it is only the people speaking in favor of the deal who allow their names to be used. Those speaking in opposition to the deal keep their anonymity in fear for their jobs.

What this means for people who hold HP stock is that the merger -- if attempted -- is almost certainly doomed to failure. Fiorina's inability to lead HP guarantees that.

Here's a win-win scenario. Fiorina leaves HP and becomes CEO of Compaq. This gives Fiorina a corporate culture she likes. Michael Capellas gets a chance to work for Fiorina. And it gives the people of HP -- make that Hewlett-Packard -- a chance to get a leader that they can respect.

Now that the "battling letters" have been launched. It's time for the "rest of the story."

You have my permission to copy or retransmit this at your discretion.

I preface my comments by telling you that I was an AT&T (Western Electric) employee before I was an HP employee. (Lucent is Western with a new name) I have been an AT&T stock holder longer than an HP stockholder and held Lucent stock longer than Agilent stock. And I pay attention to my investments. For example, today I am voting my proxy for John A. Young to serve a second term as a Lucent director. How ironic. Too bad it's not baseball, we might want a trade. Let me begin.

The letter from Walter Hewlett and Edwin Van Bronkhorst.

Walter may not be the "best qualified" to review this merger but he has been very close to the electronics and computer industry since his days at Harvard. The cosigner Ed Van Bronkhorst is clearly the best qualified financial expert to assess the value of this deal. Ed was with HP during good times and bad, and always was considered a leader in the industry. Bob Wayman (the former cost control accountant from hp's Loveland division) can't get a ticket to hear Van talk to industry leaders about what to do in this economic environment. I also direct your attention to two of the Packard Foundation directors who are critics of the deal. Do the names Lew Platt or Dean O. Morton ring any bells? A look at the other non-family members of the foundation will show that this is not just "the kids." Industry leaders who understand the danger in this deal are dead set against it. Take the time and look at those people and then look at the gang who spent stockholder money to try and sell this "bad used car deal" with the letter telling us not to listen to boy Walter.

The Board of Directors letter statement of " vision, experience, and wisdom. Let's look at the people who signed that masterpiece.

Carly Fiorina- A product of the Lucent Technologies success story. Carly was honing her managerial skills when Lucent was a wholly owned subsidiary of AT&T.They had NO marketing department and their sales reps ran from one AT&T division to the other to find out what production schedule to keep MA BELL happy. As soon as they had to actually talk to a customer about buying something they fell on their ass. And of course they have done such a great job in R&D that they just own the communications market. (right)!

Lets now look at Director Phil Condit. His solution to Boeing's problems a couple of years ago was to buy (merge) McDonnell Douglas so that their combined strength would dominate the airplane industry. That's why they are crashing faster than the aircraft they make while Airbus is getting all the business. Boeing's only hope is that the war effort will use up enough aircraft, so the Air Force will have to replace some. He is a real expert on mergers, this clown. Not a clue about the computer or electronics industry and his only merger deal in the toilet. This is the vision, wisdom and experience we are told to trust.

Now look at Sam Ginn, Vadafone AirTouch Plc . Why don't we ask Sam to explain why the U.S. Justice Department filed an antitrust action against Vodaphone, Bell Atlantic, and GTE. And the slimy deals they were a part of and how they screwed the public and stock holders. More wisdom and experience. This stuff is public knowledge, but nobody looks at it when making important decisions.

And let's have Mr. Keyworth give us his latest theory from the Progress & Freedom Foundation. This "Foundation" is a lobbying group in DC whose President is Jeffrey Eisenach. Described as Libertarian wacko policy wonk, Jeffrey, with pony tail flying is banging heads with the FCC to get total deregulation of the communications industry. He is quoted as blaming the FCC for the many business failures in the Industry. SURE! Failures like Lucent are the governments fault.

Or maybe the bankruptcy of Covad Communications is FCC's fault. You ask who is Covad? Why let's ask Robert E. Knowling about them since he was the CEO when they went BUST. Covad came out of bankruptcy on December 20, 2001, by settling for 19 cents on the dollar to bondholders. And that eliminated $1.4 Billion of debt. You know what stockholders got. The current CEO is quoted as saying "major steps have been completed in the revitalization of Covad" which translates to "we got rid of Bob, but lost your $ Billion, sorry". More wisdom, and experience.

Richard A. Hackborn, the survivor. The only one left of the HP people on the Board, because he wouldn't take the retirement offer. It was his big chance, because he couldn't cut it when the capable group was still there. He is Carly's mentor.

Let's do a quick count:

Carly Fiorina, sharpened her skills at Lucent, has no engineering or computer background.

Phil Condit, persuaded Boeing to buy McDonnell-Douglas the dying aircraft giant, and still thinks bigger is better.

Sam Ginn, got GTE in hot water with the Justice Department over a merger that screwed all GTE and Bell Atlantic customers.

George A. Keyworth II, whose lobbying group is buying Senators to get the FCC off the backs of the telecommunications companies, so his friends like Sam Ginn and Bob Knowling can rip off more stock holders and customers in the name of progress.

Bob Knowling, with the Covad deal behind him and the money in the bank wants to get a shot at a bigger deal.

Robert P. Wayman, the hotshot financial guy from the Loveland Instrument Division. How come Ned Barnholdt didn't grab Bob for Agilent. My guess is Ned wanted someone more like Van Bronkhorst. Wouldn't you if you knew both. Ned took Bob Walker, proven an excellent choice.

Folks, this is the group with the "wisdom, vision, and experience" they want you to believe will make merger work.

The first sentence of page four of their letter say's all you need to consider. The print is small but it has a big message. "The letter contains forward-looking statements that involve risks, uncertainties and assumptions." Read the next line for yourself. The rest of that paragraph is the "out clause" These folks have invoked the out clause before. Do you want them to "out clause" your future?

Keep in mind that the people who will try to do this rape are the executive committee. Log on to hp.com and look at some of the bios. of people like Susan Bowick. High school teacher, personnel clerk at Loveland Division will terminate 15, 000 hp-ites. She was the leader in the Apollo Computer employee mess.

I've got a Kmart wall and a Lucent wall in my bathroom, I don't want an hp wall. If you get the chance to kill this deal study backgrounds of the people for and against and make an informed choice.

Art Somers, hp 1957 to 1990

HP's been doing a death spiral since the John Young days. Carly F. is the culmination of the diversity crusade that began in the late 1980's - early 1990's and the loss of focus that began in the early 1980's.

The "HP culture" was doomed before an outsider was promoted to CEO. But that may have been the coup de grace. It is perhaps the case that there is or was some deadwood at HP. However, putting an outsider at the front of HP and making her a crusader for re-invention ... there is no way that that would not ruffle a lot of feathers with the rank and file.

Hackborn, whatever else might be said about him, did provide the company with (printer) profits for many of the years that it lost its way and didn't know it. If he says the Compaq merger is the way to go, I would be reluctant to disagree.

Perhaps part of the problem is Carly's style and her outsider status. Some people say she hasn't gone far enough in internal changes. I do think her style would be altered for the better had she come up through rank and file learned what the "HP Way" is from experience rather than reading a glossy brocure on her jet to P.A.-- it's something that the commoners always look for in leadership and cheer to no end when they actually see it there in action. Too bad.

I think Wall Street probably views the merger as does Hackborn, something along the lines of one inevitability of a succession of steps needed to make HP profitable in the future. Internal employee contentedness (or well being, for that matter) counts for zilch (at least, until it is too late).

If so (crystal ball time), there will be a brief spike in stock price when the merger is approved, another when the inevitable post-merger layoffs are announced, and otherwise slow decay if/when the reality hits the air conditioning unit.

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"If Wall Street Knew What HP Knows"