(Digital Journal) — Oh, how the mighty have fallen. This week was a told-you-so moment for many tech insiders when Hewlett-Packard’s board forced the resignation of high-profile CEO Carly Fiorina. The former cover face of Fortune magazine issued barbed farewell words in a statement, saying, “While I regret the board and I have differences about how to execute HP’s strategy, I respect their decision.”
It was a decision born from bad news. In the business world, that means shrinking profit margins and ineffective strategies, most notably mergers that create more liability than benefit. When HP merged with Compaq Computers in 2001 for $20 billion (US) a workable synergy didn’t emerge; instead, as University of Toronto business professor Joseph D’Cruz so aptly put it, “It was a stupid deal that intended to bring two struggling giants together. All they made was one big, weak giant.”
The numbers don’t lie: HP shares are down 55 per cent since Fiorina arrived in 1999, and last year HP’s computer division made a profit of $210 million (US), representing less than 1 per cent of HP’s total sales. Responsibility now sits on the shoulders of interim CEO Robert Wayman, a 30-year HP veteran, and it will be interesting to see how far the company strays from Fiorina’s vision
However ambitious that vision might’ve been, Fiorina will be remembered for her unwavering desire to shape HP into more than just a printer maker. She unofficially asked her shareholders: Why not challenge Dell and IBM in the PC industry? The criticism poured in, often with embarrassing results — at a special shareholders’ meeting in March 2002, Fiorina was booed so badly she could’ve been proposing a money-burning initiative.
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Despite the controversy sparked by the merger, and despite the negative press that contrasted sharply with the previous articles of adoration, Fiorina preferred a vague perspective — the merger with Compaq Computers. |
She might as well have torched some greenbacks. By being a complete computer maker and services company, HP reached out to a thin-margin industry, and failed to take advantage of a merger’s goal — combining different business models and customers that can feed off each other. Overlapping product lines and similar distribution outlets made the HP-Compaq merger look like a snap decision gone bad. In fact, some companies prefer to pull out of the PC industry: IBM is planning to offload its computer business to a Chinese company, perhaps realizing what HP now knows too late.
Despite the controversy and negative press sparked by the merger, Fiorina preferred an ambiguous perspective: “[The merger] has been called one of the best ever — and a failure,” she said recently. Sitting on the fence, refusing to take responsibility, qualifying demise with a patch of good news — these were all clues leading up to HP’s executive shake-up, while at the same time teaching a valuable lesson on how to track what emerges from Pandora’s Box…if you dare open it.
Fiorina was one of the few female CEOs in the tech industry, and throughout her term, received high levels of media attention — she graced the top spot five years out of six in Fortune magazine’s annual Most Powerful Women in Business, and she regularly starred in HP’s TV ads. Perhaps what makes one blind to criticism is a voracious ego fed by slobbering mass media — celebrity status can easily distract someone from more pressing duties. As Corporate America’s poster girl, Fiorina’s kryptonite could’ve been hubris wrapped in flattering packaging.
Also, falling from grace seemed to trickle down to affect consumers. HP unveiled products loaded with hype but fraught with bland ideas. Most printers and computers revolved around a dull grey design that looked great in the 1990s but failed to attract a generation hunting for the “cool factor” to go along with efficiency. iPaq PDAs never stood a chance to the ubiquitous BlackBerry, and their notebook PCs paled in comparison to the sleek look of an iBook or ThinkPad. Ask the average person what HP is known for, and I bet most would say, “Printers. That’s all they do, right?”
In 2005, Fiorina will finally be able to turn down photo shoots and media queries, instead enjoying the $21 million (US) severance package offered by HP. It’s a deep pay cut from the $160 million (US) she earned between 1999 and 2003, but casual observers may see that multi-million dollar severance and whistle in admiration. Those same observers may want to cast their sights back to HP stocks, too, which rose 7 per cent at the news of Fiorina’s departure.
So the woman born Carlton Sneed (no joke) is leaving the public eye…for now. Rumours swirl around her political ties, since she was seen as a Republican candidate for governor of California before Ah-Nold came along. Some speculate she will hold a sub-cabinet position in the Bush administration. That doesn’t matter to most people because Fiorina has always been tied to technology, for better or worse. Her absence invites intriguing possibilities for HP, who may have seen Fiorina as more of an albatross than a saviour. Interim CEO Wayman now has the opportunity to keep the ship sailing smoothly and steer attention back to what has made HP the 11th largest company in the United States.
