Hewlett-Packard Co CEO Carly Fiorina, midway through a three-year plan to overhaul the second-biggest computer maker, faces increasing investor skepticism that she'll succeed.
Fiorina has come under fire as she struggles to finish the transformation she began in July 1999. Shareholders say they've started to doubt her ability to pull Hewlett-Packard out of a slump after missed sales targets, slow implementation of cost cuts and time spent on a failed multibillion-dollar acquisition.
"I'm not sure she's made the best decisions," said Christian Koch, an analyst with Trusco Capital Management, which owned 3.2 million H-P shares in June.
Before Fiorina's arrival, analysts had criticized the 63-year-old company for becoming sluggish and losing business to rivals such as Sun Microsystems Inc. Lauded early in her tenure for reviving sales, tightening coordination between divisions and finishing a spinoff of the testing-equipment unit, Fiorina's credibility has faded in the past year.
She predicted a 15 percent to 17 percent sales increase this fiscal year just as economic growth stalled. Analysts now expect a 7.4 percent decline.
She considered spending US$18 billion to buy the consulting arm of PricewaterhouseCoopers LLC, before negotiations ended in November. Investors largely opposed the deal, saying it cost too much and would be hard to integrate into the business.
The stock has dropped 24 percent this year, compared with an 11 percent decline in the Standard & Poor's 500 Index and a 24 percent rise for International Business Machines Corp.
Fiorina, 46, is a former executive from Lucent Technologies Inc. She has had a rough year. Hewlett-Packard will report fiscal third-quarter profit of US$0.4 cents a share on sales of US$10.2 billion, the average analyst estimates in a Thomson Financial/First Call survey. A year earlier, earnings were US$0.49 on sales of US$11.8 billion.
H-P had beaten earnings projections in four straight quarters under Fiorina when the streak ended in November with a US$0.10 miss. She's had to reduce targets mid-quarter in each of the three periods since then.
"I'd kind of given up on the continuing revisions of what the outlook should be for the company," Mike Holland, manager of the Holland Balanced Fund, said in June.
Fiorina isn't the only CEO forced to scrap projections. Sun's Scott McNealy wouldn't give a sales forecast for this quarter. Compaq Computer Corp's Michael Capellas has cut targets in the past four periods. Demand for computers, printers and storage gear has tumbled as consumers and businesses delay purchases during the economic slowdown. Fiorina contended in June that she was among the first to see the malaise spread outside the US, and analysts such as Salomon Smith Barney's John Jones say that may mean Hewlett-Packard will emerge from its troubles first. Still, investors said Dell and rivals took their medicine earlier than Fiorina, lowering targets and cutting jobs and costs sooner.
Fiorina said last month she'll fire 6,000 more workers, on top of cutting 1,000 people earlier this year. Compaq and Dell Computer Corp have been slashing the payroll since February. Dell has announced plans to cut as many as 5,700 people, as Compaq chops 8,500 employees.
"Carly is such a charismatic individual that there were huge expectations when she came in," said Michael Cohen, manager of the Alpha Analytics Digital Future Fund. "When you look at a company the size of H-P -- no matter how good you are -- it's very difficult for a single person to do that much."
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