HP History: 2005-2010 - The Mark Hurd Years

After the HP Board got rid of Carly Fiorina in February 2005, they quickly chose another outsider, Mark Hurd, as CEO. Hurd had no track record in a company the size of HP, but he did have a reputation for reversing corporate direction and producing results. Those results at HP came on the backs of employees. The facts are that HP's stock price was $21.71 when Hurd joined HP in March 2005, and it was $46.04 when Hurd was fired in August 2010 after an internal investigation found Hurd guilty of expense account irregularities related to his relationship with a female staffer. HP stock had reached a high of $53.90 in April 2010 before the Hurd scandal began.

When the HP Board's pretexting scandal forced Patricia Dunn out, Hurd became Chairman and consolidated his power as both Chairman and CEO. This was the pinnacle of centralized authority in HP and represented a complete reversal of the HP Way. Mark Hurd ruled HP with absolute authority and power. He was rude, arrogant, and abusive to senior HP leaders. He imposed severe restrictions in order to cut costs and enforce his organizational design. I can't remember ever hearing an HP employee praise Mark Hurd.

But HP financial and market results were good during the Mark Hurd years. The New York Times said Hurd had "pulled off one of the great rescue missions in American corporate history, refocusing the strife-ridden company and leading it to five years of revenue gains and a stock that soared 130 percent". Under Hurd's leadership, HP became #1 in the laptop market in 2006 and in the desktop computer market in 2007. In 2008, HP also increased its market share in inkjet and laser printers to 46% and 50.5%, respectively.

In August 2008, HP bought technology services provider Electronic Data Systems Corp for $13.9 billion to compete better with IBM. Hurd then laid off 24,600 employees to cut costs. HP's strategy of winning through scale was reinforced, and the company became as dependent on services revenue as it always had been dependent on product revenue.

According to Wikipedia,

Hurd has a reputation for aggressive cost-cutting. He laid off 15,200 workers  — 10% of the workforce — shortly after becoming CEO. Other cost-cutting includes reducing the IT department from 19,000 to 8,000, reducing the number of software applications that HP uses from 6,000 to 1,500, and consolidating HP's 85 data centers to 6. Hurd imposed a 5% pay cut on all employees and removed many benefits. He himself took a base salary pay cut of 20%, although the compensation committee increased his bonus by the same amount. Following the acquisition of EDS, Hurd instructed that all EDS employees should have their salaries adjusted to match the salaries of their HP counterparts, with pay cuts of as much as 20%. He promised that those employees below scale would see their pay scales adjusted through an internal process that never materialized. He forecast that in 2009, HP's sales could drop as much as 5% in the midst of the recession, but its profit increased by nearly 6%.

In November 2009, HP bought 3Com for $2.7 Billion in cash to add a strong position in networking equipment. The goal was to become a one-stop shop for all corporate IT products and services. Internal and external company rhetoric now revolved around corporate IT. HP had mostly lost the image that consumers had loved as HP mostly yielded consumer markets to Apple, Samsung, Sony and others.

In April 2010, HP bought Palm for $1.2 Billion. Palm's WebOS was touted as the operating system of the future that would unify development and deployment environments from mobility through internet infrastructure. HP wanted to own that complete stack. Unfortunately, HP didn't maintain that commitment, and the WebOS team ended up being mostly destroyed.

When Mark Hurd resigned in August 2010, the HP employee based heaved a huge sigh of relief. The Hurd oppression was over at last.

Again from Wikipedia:

Hurd said he "realized there were instances in which I did not live up to the standards and principles of trust, respect and integrity that I have espoused at HP", and added that he believed it would be "difficult to continue as an effective leader at HP." In exchange for releasing HP from future litigation, Hurd received $12.2 million in severance, plus vested options and restricted stock for an estimated total of $34.6 million.

HP CFO Cathie Lesjak took the role of interim CEO.

Next: HP History: 2010-2011 - The Leo Months