IT & Network Infrastructure : HP Struggles to Throw Off Image of Stumbling Tech Giant
Party Like Its 1999
HP in 1999 tapped former Lucent sales executive Carly Fiorina as CEO of a technology company that makes computers, servers, printers, data storage, etc. Really? Her tenure was highly controversial and short-lived, which set a trend for HP CEOs for the next decade.
HP Buys Compaq
Fiorina and her board set their sights on PC maker Compaq for $25 billion. An eight-month proxy fight ensued, as many shareholders agreed with former board member Walter Hewlett that combining the companies would dilute the company's high-flying printer business and leave HP with a low-margin PC business. Fiorina won, but did going against the company founders invite bad karma? Feels like it.
After HP fired Fiorina in 2005, Mark Hurd came aboard and quickly streamlined operations. Unfortunately, former HP Chairperson Patricia Dunn engaged pretexting on a farcical scale to spy on journalists, employees and other directors for information leaks. Pretexting is a social engineering technique in which an individual lies in phone conversations or other electronic communications to induce people to divulge private information about themselves or another. Dunn is shown the door after the company faces investigations and litigation.
Fast Forward 5 Years
Hurds cost-cutting generated strong earnings at HP for several years running. But his personal conduct and apparent lack of integrity cast HP in a negative light. The board fires Hurd over expense report issues that led to allegations of sexual misconduct. These allegations were not proven. The board ripped Hurd's conduct in public, but hands him a golden parachute of between $30 million and $40 million. Hurd goes on to join HP archrival Oracle, whose CEO, Larry Ellison, publicly zings the board for "shooting itself" in the foot. HP sues Hurd for joining Oracle, but backs off, with egg on its face.
In a move viewed as incredibly misinformed or daring depending on whom you ask, HP in September 2010 hires former SAP CEO Leo Apotheker, an enterprise software big-wig from Germany, to run HP. Again, we ask: Really? Apotheker jettisoned board members to add former Oracle President and CEO Ray Lane and Whitman.
Starting Off Good
Apotheker keeps his head down and was rarely seen in public for several months after his hiring mainly because Oracle was trying to haul him into court to testify in a copyright and patent infringement lawsuit against SAP, his former employer. In March 2011, Apotheker said HP wants to get webOS running on 100 million devices a year, including Windows PCs. Sounds good to us.
Here's what we meant by "Really?" By August, Apotheker breaks bad. After the TouchPad and early webOS HP phones such as the Veer fail to sell well, Apotheker decides to cease selling HP webOS smartphones and the TouchPad tablet, which was designed to help the company compete versus Apple, Google, Microsoft, RIM, Nokia and others for a stake in the burgeoning mobile computing sector. He also talks about shedding the company's legacy PC business. Remember, the board hired an enterprise software vet, where there is some serious money to be made. But this is HP. You can't remake a 72-year-old company into SAP or an IBM clone overnight, which is what Apotheker seemed to be leaning toward in acquiring enterprise software company Autonomy and making the webOS cuts. HP saw its stock price plunge by as much as 47 percent while it cut revenue forecasts at least three times.
After a serious backlash to his ill-advised plans to shed the PC business and webOS, the board fires Apotheker in September after just less than 12 months on the job. Apotheker was fired because of "his poor execution and a lack of leadership," according to the Wall Street Journal. The news came two days after HP announced that it had started laying off as many as 500 workers in its webOS division, the very group Apotheker shuttered with his decision to kill webOS smartphones and the TouchPad.
With Whitman, HP's board installed a CEO whose experience is in running consumer-oriented e-commerce company eBay. This is the same Whitman who couldn't get Skype to integrate properly with eBay, an auction powerhouse. Whitman in October reverses Apotheker's decision to sell HP's PC business. HP, which also wrote off $3.3 billion in charges related to shutting down its webOS hardware business, is still debating what to do with its webOS software. Reuters said HP is evaluating a potential sale of its webOS software platform for less than the $1.2 billion the company paid for Palm.
HP reported overall Q4 revenue of $32.12 billion, which worked out to 12 cents per share. Earnings per share would have been $1.17 if not for the company's exit from its mobile hardware business. A consensus of Wall Street analysts had projected EPS of $1.13 on revenue of $32.05 billion. Whitman said on the company's Q4 earnings call Nov. 21: "I know we didn't live up to our expectations in 2011," Whitman said. "We need to be simpler, clearer and more consistent. No more surprises." That includes no more big deals for now. HP also has to clarify its cloud computing strategy, which was broad and deep under Apotheker. We'd be surprised if there were no surprises when it comes to HP and its board. It hasn't shown us otherwise since at least 1999.