In July 1999, HP appointed Carly Fiorina as CEO. Fiorina served as CEO during the technology industry downturn of the early 2000s. During her tenure, the market value of HP dropped by 50% many jobs were cut. I'll talk more about this later.
Once again from Forbes in 2000:
"That brings us up to the present. The modern Hewlett-Packard is a vast, wealthy corporation. But it is no longer Bill and Dave's company, literally, and perhaps spiritually. The company is now run by its first outsider CEO, Carly Fiorina, probably the most powerful woman in American business. Bill and Dave would have applauded the radical move of putting a woman at the helm. But they might also be a little disturbed by what she's done with the job.
You have seen Fiorina about as much as we reporters have. Access to the top of this once-open company is now tightly controlled. Fiorina only speaks to a select few publications and then only under considerable control. Instead, her primary public platform is that of the television commercial. Her co-star in those commercials? The Addison Avenue garage, which, through the miracle of FX, appears in settings all over the globe. The old garage has been expropriated by Fiorina not only as the new symbol of HP, but also apparently to give her the entrepreneurial spurs earned by Bill and Dave in the course of a half-century.
Perhaps it was inevitable. With the creators gone, great companies need touchstones to remind themselves of their own legends, their fables of founding. But what does it mean when you go from Bill and Dave in shirtsleeves sitting beside you on a bench in the company cafeteria to a ghostlike Carly floating on a television screen? And what does it do to the soul of a company--especially the soulful company--when it exchanges the primacy of its people for the symbolism of a rotting old garage? "
Shortly after being hired, Carly told CNET, "Urgency and speed are...things that everyone agrees." With 123,000 employees and $47 billion revenue in 1998, size had brought inertia. HP largely missed the first wave of the Internet boom, but Carly believed that her "e-services" initiative would be just the thing to take advantage of the second wave.
Although Carly publicly praised HP's management and employees, she told CNET "I think we have an opportunity to attract people from different industries and different backgrounds." The underlying philosophy was to replace HP's traditional leadership and values with outsiders. Carly was the antithesis of the HP Way. She was about style over substance. She took the corporate jets away from employees and gave them to her Executive Council. She implemented massive layoffs. She centralized many functions and exercised strong tops-down management. To pacify HP employees and appear to honor HP's heritage, Carly appointed Dick Hackborn (former long time HP executive) to be Chairman of the Board.
On September 3, 2001, HP announced that a $25 Billion agreement had been reached with Compaq to merge the two companies. In May, 2002, after passing a shareholder vote and surviving a contentious proxy fight with Bill Hewlett's son Walter, HP officially merged with Compaq. Compaq itself had bought Tandem Computers in 1997 (which had been started by ex-HP employees), and Digital Equipment Corp.in 1998. Following this strategy, HP became a major player in desktop computers, laptops, and servers for many different markets. The idea was to win through scale. The reality was that integration was far more difficult and expensive than anyone expected. Power struggles occurred at many levels of HP.
When HP announced plans to buy Compaq, HP was a very profitable and growing company. Adding Compaq into the numbers made HP become a mediocre company financially. Profit margins and earnings per share were hurt. Our printing business was forced to give larger and larger parts of our net profit to the corporation to prop up losing ideas elsewhere, and we were unable to invest for growth that was needed.
In 2005, the HP Board was unhappy with the erratic performance of the company and the failure of the expensive Compaq merger to deliver the results Fiorina promised. Carly was forced to resign. HP named CFO Robert Wayman as interim CEO with Patricia Dunn as Chairman of the Board. Ironically, Dick Hackborn was instrumental in getting Carly fired. The Carly ouster was filled with intrigue and scandalous HP Board behavior. Patricia Dunn would eventually be found guilty of leading efforts to spy on senior management.
Next: HP History: 2005-2010 - The Mark Hurd Years
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