Sun, Feb 20, 2005 - Page 12 News List

Fiorina shows the profitable way to ruin two companies and net a US$21 million payoff


Don't cry for Carly Fiorina. She may have lost her job running Hewlett-Packard, but she's leaving with a severance package worth at least US$21m. She'll probably make lots more money in the future, having become famous as the world's most powerful businesswoman.

Also, having worked with Arnold Schwarzenegger's transition team in California, she has an outside chance of becoming America's first female president, if Hillary Clinton screws up.

Whether we should cry for Hewlett-Packard is another matter. Fiorina may be leaving the wreckage of not just one but two great companies behind.

In her six years at the top, Fiorina made an impact on the computer business. First, she changed the culture of HP, the company that was the foundation stone of Silicon Valley. Second, she bought Compaq, the former PC industry giant. But it is not yet clear whether either was a good thing.

HP's culture came from its founders, Bill Hewlett and Dave Packard, who believed people wanted to do their best, and it was management's job to help them. This required a manager "to have a genuine and thorough understanding of the work", as Packard wrote in his book, The HP Way.

Fiorina didn't seem to have it. In fact, she didn't seem to have much of a clue about the way the computer business works. She was a supersmart saleswoman brought in from AT&T/Lucent to run a company of engineers, and some of them did not like it.

As for the US$19 billion Compaq takeover, Fiorina wanted to "bulk up" HP to compete with IBM in servers and services, and with Dell in PCs.

This doesn't sound a bad idea in the abstract, but the nitty gritty looks terrible. HP was already struggling with too many of its own operating systems and chip families. Buying Compaq more than doubled the size of that problem, because Compaq had already taken over Digital Equipment Corporation, a leading minicomputer manufacturer, and Tandem.

The takeover was opposed by many HP staff and the founding families, led by Walter Hewlett, HP's largest shareholder and son of its co-founder. Fiorina won -- the shareholders voted in favour by 51 percent to 49 percent, and Hewlett was booted off the board -- but the battle left a lot of bitterness behind.

HP's board now says that Fiorina's removal does not herald a change in structure or strategy, like splitting the company in three.

Apparently, it's all about operations. "Looking forward, the CEO job is very reliant on a hands-on execution and a new set of capabilities is called for," said the chairman, Patricia Dunn.

Someone like Lou Gerstner, perhaps? He was the outsider who turned loss-making IBM around, without becoming a celebrity or jetting around the world giving speeches. And while Fiorina talked about almost nothing but vision, Gerstner said vision was the last thing IBM needed. His main idea was to focus hard on delivering what customers wanted. If you really want to succeed in business, that is probably a good way to go.

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