Stakes Just Got Higher for Fiorina
Is Hewlett-Packard Co.’s proposed takeover of rival Compaq Computer Corp. a daring strategic move or a play by beleaguered HP Chief Executive Carly Fiorina for more time to turn her company around?
Either way, Fiorina, 46, has taken on the biggest challenge of her career at a time her performance was in serious question. She has attracted wide attention since becoming HP’s chief executive in July 1999, making her the first woman to lead one of the blue-chip companies constituting the Dow Jones industrial average.
Fiorina quickly became an articulate and stylish spokeswoman for American technology. She wooed customers, flying to Seattle and coming back triumphant with a deal to sell computers to Internet retailer Amazon.com.
But her attempt to radically overhaul tradition-bound HP was complicated by the steep industrywide downturn and her own missteps.
And Fiorina has come under fire from some investors who doubt her ability to reverse falling demand for Hewlett-Packard products, ranging from printers to computer servers.
“Carly went into a very difficult situation, a company with an entrenched culture,” said Bear Stearns analyst Andrew Neff. Two years later, “it doesn’t seem like they have clear priorities about what they have to do.”
In planning to acquire Compaq, Fiorina is making by far her biggest bet for HP’s future. Even her detractors on Wall Street and in Silicon Valley say she thrives on high stakes.
“In blackjack, you double down when you have an increasing probability of winning,” she told HP employees six months ago.
The early returns aren’t promising. On Tuesday, HP’s stock fell 19% to its lowest price since 1996.
Many stockholders have been pressing in recent months for HP to get out of the personal computer business, in which the firm has been losing money.
Instead, Fiorina has just engineered the purchase of the world’s second-biggest PC maker.
Fiorina’s bets haven’t always paid off. Early this year, she was projecting that HP’s sales would climb 17% for the year, projections that she later had to retract.
A year ago, Fiorina announced grand plans to buy PricewaterhouseCoopers’ consulting business for about $17 billion, yet she was forced to abandon the plan after investors balked.
Before the Compaq deal, Silicon Valley financiers were speculating that Fiorina had one or two more quarters to show real progress or be shown the door.
Whether HP’s board likes the Compaq deal, analysts said, it will be reluctant to jettison the deal’s architect, who has the clearest vision of how the difficult merger can succeed.
“Now she’s got another year,” said J.P. Morgan analyst Daniel Kunstler.
The criticism of Fiorina, before and after the Compaq bid, is in marked contrast to the accolades she received when she became the first outsider named CEO at the distinguished company.
Fiorina, who was born in Texas, earned a degree in philosophy in medieval history at Stanford. She dropped out of law school and earned an MBA.
She was hired from Lucent Technologies, and she pledged to reinvigorate the cautious, consensus-driven HP culture.
Best known for her sales and marketing skills, Fiorina spent more than $100 million on a new HP ad campaign with the slogan “Invent.” And she put herself in the company’s television commercials.
She also tried hard to woo HP employees, winning early improvements in morale.
Flying around the globe to meet with HP’s far-flung work force, she criticized the sprawling old HP structure that had created more than 80 largely independent product divisions.
Not infrequently, a handful of HP sales staffers, all hawking different goods, would meet one another for the first time at a customer site.
But analysts say Fiorina may have gotten too ambitious. She decided to fix everything at once, embarking on one of the broadest reorganizations of a major company in recent years.
Fiorina combined the scores of business units into just 17. And she made salespeople responsible for all the needs of specific clients, instead of having several salespeople handling various product lines.
Even that wasn’t enough.
At the same time, she told Wall Street, she was aiming for annual sales and profit growth of more than 15%. Instead, HP’s earnings have fallen in each of the last four quarters, and the company is laying off thousands of workers.
“She may have been aggressive in what she had promised [Wall] Street,” Merrill Lynch analyst Tom Kraemer said.
In response to criticism about her leadership, Fiorina said at a recent analyst gathering that she is in the difficult middle period of her three-year plan to change the way Hewlett-Packard does business.
On Tuesday, some frustration was already apparent on Wall Street.
Asked whether he would rather see HP led by Fiorina or Compaq CEO Michael Capellas, one analyst asked for anonymity, then groaned.
“Those are my only choices?” he said. “I pick [IBM CEO] Lou Gerstner.”
