Now Seeking White House, Fiorina's HP CEO Tenure Was Stormy
SAN FRANCISCO (CBS/AP) — In her quest for the Republican presidential nomination, former tech CEO Carly Fiorina boasts about her experience running Silicon Valley computer-maker Hewlett-Packard as evidence that she's "a problem solver, with a track record to prove it."
What her campaign literature doesn't highlight is that she was fired from that job in 2005, after a stormy tenure.
Fiorina has blamed her ouster on a sudden showdown with HP directors, but most of her six years as CEO were contentious. She cut more than 30,000 jobs and undertook a massive merger with rival Compaq, which sparked a messy battle with the families of HP's founders. The company missed some key financial targets and, from her hiring to her firing, its stock price fell more than 50 percent.
"I got fired in a boardroom brawl over a two-week period because when you challenge the status quo you make enemies," Fiorina said Wednesday night at the Republican National Committee's spring meeting in Arizona.
To be sure, HP's board hired Fiorina as an outsider with a mandate for change, which often requires unpopular decisions. And today, many analysts say her move to buy Compaq, in a $25 billion stock deal, put HP back on track as an industry leader in subsequent years. But as CEO, she alienated employees, influential shareholders and her own board, which ultimately hired someone else to make the Compaq deal work.
"The day she was fired, the market responded and HP's stock shot up 7 percent," said Jason Burnett, a grandson of co-founder David Packard. "That's a clear signal."
Burnett faults Fiorina for a steep drop in the company's stock value, and for layoffs that he said crushed the morale of a company that pioneered Silicon Valley's benevolent, laid-back corporate culture. Fiorina has said the job cuts were necessary after the tech industry bubble collapsed in 2001.
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"When you manage through a very tough recession there are some tough calls required as well," she said at a recent conference. "Everyone else in the technology industry had to make some of those same tough calls."
Though she worked briefly as a secretary, Fiorina rose through management and was president of AT&T spinoff Lucent Technologies when HP named her chief executive in 1999. HP, based in Palo Alto, California, had been known for tech innovation, but its growth had slowed. "It was stuck in the mud and it wasn't moving," said Rob Enderle, a longtime industry analyst.
The new CEO cut a compelling figure, appearing on magazine covers and hobnobbing with celebrities. Detractors say Fiorina was imperious and even harsh with subordinates, while supporters suggest she raised hackles as a woman in a male-dominated industry. Either way, her first big move fizzled: She tried to buy the tech consulting arm of PricewaterhouseCoopers for $18 billion, then cancelled the deal after Wall Street balked at the price.
When Fiorina turned to Compaq in 2001, she ran into opposition from a faction of her own board, led by Walter Hewlett. The son of retired co-founder William Hewlett argued that Fiorina was paying too much for a low-profit PC operation that would dilute the value of HP's more lucrative printer business. Fiorina prevailed only after a bruising proxy battle and an equally bitter court challenge.
HP's sales doubled during Fiorina's tenure, rising to $80 billion a year thanks to the addition of Compaq, which had $40 billion in annual sales before the merger. Profits plunged after the 2001 dotcom bust, although they eventually returned to 1999 levels. But HP's stock lagged far behind rivals Dell and IBM.
By early 2005, HP's board wasn't satisfied. Fiorina had reorganized the company to centralize her authority. By several accounts, directors pressed her to share more power with other executives. Fiorina has said she agreed to changes but was outraged after word leaked to the press, sparking a showdown that led to her firing — and a $21 million severance package.
HP thrived under Fiorina's successor, who boosted profits and the value of HP's stock. New CEO Mark Hurd cut costs deeper, while also using the combined size of Compaq and HP to negotiate lower prices from suppliers and to sell businesses a broad range of computer products.
In 2008, former Compaq Chairman Ben Rosen wrote that Fiorina was the merger's architect but "she simply did not have the skills" to make it work. "The merger wasn't the problem; it was the management," Rosen wrote. He said Hurd "took the pieces assembled by Fiorina ... and created a growing, profitable and increasingly valuable company." HP has again struggled in recent years, in part because the PC business as a whole has slowed.
Enderle, the industry analyst, credits Fiorina with laying the groundwork for HP's rebound before she was fired. But by that time, she had alienated even her original supporters on HP's board, as well as employees and shareholders, said Jeffrey Sonnenfeld, senior associate dean at Yale's School of Management, who has called Fiorina's leadership a "colossal failure."
Others are more charitable. Fiorina antagonized workers with "draconian" layoffs, said Charles House, a former HP executive and co-author of a book about the company. But he believes the cuts were needed. "The world had changed. Whoever was in that seat would have been subject to much of the criticism she got."
Fiorina hasn't been a corporate executive since leaving HP, although she has served on company boards and chaired several nonprofits.
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