Can CEO Meg Whitman turn around HP?
Fresh off an unsuccessful and costly run for California governor, Meg Whitman last fall took the helm ofHewlett-Packard Co. as its fourth chief executive in little over a year.
The storied technology giant was in desperate need of a turnaround after a series of missteps and internal dysfunction. For Whitman, who failed to catch on with voters after spending $144 million of her own money, it was a chance to return to familiar territory in Silicon Valley, where she had first made a splash with auction site EBay Inc.
But six months into her tenure at HP, analysts say they’ve yet to see real improvement at one of the world’s largest computer makers. Many are concerned by Whitman’s assertion that it could take years.
“If we had to grade how she’s doing so far, I’d say it’s mixed,” said Shaw Wu, an analyst at Sterne Agee. “People aren’t really sure if she’s the one. She may be, but I think people want to see results more near-term.”
Whitman hasn’t impressed Wall Street yet. HP’s stock has fallen nearly 10% this year, while the tech-heavy Nasdaq has soared 18%. In February the company reported a 44% decline in profit and a 7% drop in revenue in its first full quarter under Whitman.
“The company hasn’t really articulated much of a strategy yet,” said Richard J. Kugele, a tech analyst at Needham & Co. “Meanwhile you have companies like Apple executing and eating their lunch in many markets.”
Whitman declined to be interviewed for this story. But the 55-year-old has been frank about the company’s troubles, telling analysts in February that “we underinvested in innovation for the last several years and we’ve been late to market too often.... The business is being pressured on multiple fronts.”
HP was founded in a Palo Alto garage in 1939 and today employs about 350,000 workers. In addition to its personal computers, servers and printers, the company became known for an egalitarian culture dubbed the “HP Way” by founders Bill Hewlett and Dave Packard.
But the firm has fallen behind its rivals in recent quarters. Profits and employee morale have slumped, and instability at the top has added to HP’s woes. Former CEO Mark Hurd, credited with rebuilding the company after the tumultuous tenure of Carly Fiorina, abruptly resigned in 2010 after accusations of sexual harassment and falsifying expense reports to conceal a personal relationship with an independent contractor.
Hurd was succeeded by an interim CEO. Then came little-known Leo Apotheker, who lasted 11 months. His time at HP was marred by unpopular decisions, including a plan to exit the company’s tablet and PC businesses, and reports of infighting on the board. HP shares plummeted 46% during his tenure.
After Apotheker’s ouster, HP turned to Whitman, a company board member. The billionaire had proved she could grow a business after joining EBay in 1998 and turning it from a start-up with 30 employees into an $8-billion household name with 15,000 workers.
“I’d bet on her over most people in the world to go fix something, but she didn’t take a slam-dunk for sure,” said longtime friend Maynard Webb, whom Whitman hired to be president of EBay Technologies in 1999; he later became chief operating officer.
Whitman’s hire divided analysts, however.
Some hoped such a high-profile executive could bolster confidence among investors and customers. Others criticized HP for not choosing someone with a hardware background and noted that despite Whitman’s successes as CEO of EBay, growth at the online auction site had stagnated by the time she left in 2008.
Since she took the job, Whitman has reversed some of the changes Apotheker introduced, most notably his plan to spin off the PC operations. She streamlined several business units and has pledged to release HP’s WebOS mobile operating system as open-source software by fall.
Whitman has also chipped away at the notoriously hierarchical culture that had uprooted the HP Way in recent years.
She set up an internal Bureaucracy Busters email account where workers can send concerns and got rid of so-called Executive Row at headquarters, an exclusive area that had featured a restricted parking lot with barbed wire, offices and a private lobby. Top managers now work in cubicles.
Despite her wealth, estimated to be $1.4 billion by Forbes, employees say she seems down-to-earth and personable, putting in considerable face time at HP’s offices in the U.S. and Europe, eating in the company cafeteria and mingling with lower-level employees over subpar coffee in a hotel lobby during a recent conference in Las Vegas.
In a survey of the top 25 CEOs released by Glassdoor.com last week, Whitman ranked No. 24 with an 80% approval rating — the only woman on the list.
“Through my experience as a mother and being in business, I think I have a ... good ability to bring people together,” she said at a 2010 campaign talk atCisco Systems Inc.Whitman has two sons, Griffith and William, with husband Griffith Harsh IV, a neurosurgeon.
Like many big-name tech CEOs, Whitman opted for a $1 annual salary. She also received stock options, currently valued at about $14.8 million, that hinge on her ability to improve the company’s performance.
“She’s come in and really made a concerted effort to bring back the HP Way,” said a business planning analyst in the company’s Cupertino, Calif., office. “Apotheker was a little back and forth about decision-making and ultimately that was to his demise, but she’s come in, she’s very straight shooting.”
A Princeton grad who got her MBA from Harvard, Whitman had hoped to become a doctor. Instead, she began her career at Procter & Gamble and later worked for Mitt Romney at consulting firm Bain; Whitman recently hosted a $1,000-a-plate fundraising dinner for the Republican presidential candidate. She has also held executive jobs at Disney, Stride Rite, FTD and Hasbro and is credited with spearheading the lucrative purchase of PayPal while at EBay.
But other buyouts she led, such as EBay’s $3.1-billion purchase of Skype in 2005, were deemed failures, and critics say spending in the final years of her EBay tenure grew out of control.
Although she’s been praised for being fair, she’s also said to have a quick temper that can flare under pressure. In 2007, while being prepped for an interview, Whitman became angry with a communications aide, uttered an expletive and shoved the young woman. The incident led to a confidential settlement in which the subordinate reportedly received $200,000.
Still, former colleagues say Whitman is intensely dedicated, lugging a sleeping bag to her office in the early days of EBay during a systemwide crash.
Webb, the EBay colleague, said he admired her determination to get things right, including moving to Shanghai during the summer of 2005 when EBay was trying to get its business off the ground in China. He also recalled waking up Whitman in the middle of the night whenever there was a problem with the site.
“A lot of people would say, ‘Let me know in the morning or send me an email,’ but she wanted to know,” he said.
Whitman will have some tough decisions in the months to come. HP’s disappointing earnings report and a soft outlook for the year have fueled speculation that she’ll have to announce layoffs.
“It’s a big, complex company and she’s fond of saying it took many years to get into this situation, it’s going to take time to get out,” said Henry Gomez, who worked for Whitman for eight years at EBay, was a senior advisor on her gubernatorial campaign and was recently hired to lead HP’s communications team. But “she understands the impatience everybody has to turn it around.”
Times staff writer Maria L. La Ganga contributed to this report.
