The Fiorina years are over at Hewlett-Packard and the post-mortems are underway, with the key issue being a $19 billion acquisition that became a monkey on her back
Carly Fiorina is catching some flak as the autopsy is carried out on her five-and-a-half-year tenure as head of Hewlett-Packard (HP).
During her time in charge, she saw her leadership scrutinised on a daily basis and seemed to be placed more firmly under the microscope than most other CEOs in the tech industry. While an accumulation of factors resulted in Fiorina’s departure on 9 February, the single defining moment of her spell at the helm was without question 2002’s acquisition of Compaq Computer.
The divisive $19 billion mega deal was the cornerstone of Fiorina’s strategy to create a tech behemoth that would boost overall performance and enable HP to tackle arch rival Dell in its PC playground. This was to be the bedrock of Fiorina’s future strategy, but only time would tell if it would be viewed favourably or not.
As it turns out, the deal appears to have been a monkey that Fiorina could never quite get off her back and drove her into a damaging PC price war with Dell.
Fiorina must take credit for taking an idea and running with it. She backed the deal all the way, even though it caused a high profile and messy dispute with Walter Hewlett, the son of the firm’s co-founder Bill Hewlett. Fiorina saw the acquisition as the catalyst for the HP of tomorrow, while Hewlett saw it as a pricey mistake that could chip away at his father’s legacy. She managed to squeeze the deal past HP shareholders with barely a blade of grass between those for and against. Fiorina nailed her colours to the mast of the Compaq deal and when the colours started to run, the detractors were laying in wait.
IDC analyst Roger Kay says: "The merger between HP and Compaq was a mashing together of two fairly like companies, so a lot of trimming was required. The PC business has not benefited, nor have servers ultimately, although the Compaq legacy is mainly responsible for HP’s current lead in x86 servers. At the moment, the server business is a weak giant, ready to be picked apart by Dell and IBM. But essentially, the deal has been a long and progressive unravelling."
For all the criticism over the Compaq purchase, Fiorina’s position was really compounded as she found herself with a lack of backing at crucial moments. "She was isolated from the troops and thus had no allies when she needed them," Kay adds.
To this end, former Compaq boss Michael Capellas’s decision to leave his post as president of HP shortly after completion of the deal, to join telecoms firm MCI, added to the pressure on Fiorina. For those who saw her as a slick personality-driven leader rather than an inspired executor, Capellas’s loss was significant. Indeed, he has been mentioned firmly in dispatches as Fiorina’s possible successor.
For the moment, however, the company lies in the hands of CFO Robert Wayman, named interim CEO, and board member Patricia Dunn, now non-executive chairman of the board.
The appointment of the next CEO is likely to be one of the most important in the firm’s history. Technology research firm Gartner sees it as crucial. It says: "If HP doesn’t succeed in bringing in a new leader who can force better execution, it will be unable to inspire Wall Street and its workforce, or gain against competitors such as IBM and Dell."
As for the post-Fiorina era, well, the nature of it seems to be anyone’s guess at the moment. The possibility of a break-up of the business remains with the sale of the PC unit a favourite, while the idea of spinning off its profit centre printing business has its supporters among Wall Street analysts.
However, the HP board has stressed its support for Fiorina’s overall vision as it looks to "accelerate" execution at the Silicon Valley icon.
