Square Pegs
Speaking of Carly Fiorina and her disastrous regime at HP (and Lucent), here is a good overview of some of the details I only vaguely remembered…
Jeffrey Sonnenfeld, senior associate dean of Leadership Studies and Lester Crown Professor of Practice Management at the Yale School of Management, writes, in part:
Here are the facts: In the five years that Fiorina was at Hewlett-Packard, the company lost over half its value. It’s true that many tech companies had trouble during this period of the Internet bubble collapse, some falling in value as much as 27 percent; but HP under Fiorina fell 55 percent. During those years, stocks in companies like Apple and Dell rose. Google went public, and Facebook was launched. The S&P 500 yardstick on major U.S. firms showed only a 7 percent drop. Plenty good was happening in U.S. industry and in technology.
It was Fiorina’s failed leadership that brought her company down. After an unsuccessful attempt to catch up to IBM’s growth in IT services by buying PricewaterhouseCooper’s consulting business (PwC, ironically, ended up going to IBM instead), she abruptly abandoned the strategic goal of expanding IT services and consulting and moved into heavy metal. At a time that devices had become a low margin commodity business, Fiorina bought for $25 billion the dying Compaq computer company, which was composed of other failed businesses. Unsurprisingly, the Compaq deal never generated the profits Fiorina hoped for, and HP’s stock price fell by half. The only stock pop under Fiorina’s reign was the 7 percent jump the moment she was fired following a unanimous board vote. After the firing, HP shuttered or sold virtually all Fiorina had bought.
During the debate, Fiorina countered that she wasn’t a failure because she doubled revenues. That’s an empty measurement. What good is doubling revenue by acquiring a huge company if you’re not making any profit from it? The goals of business are to raise profits, increase employment and add value. During Fiorina’s tenure, thanks to the Compaq deal, profits fell, employees were laid off and value plummeted. Fiorina was paid over $100 million for this accomplishment.
At the time, most industry analysts, HP shareholders, HP employees and even some HP board members resisted the Compaq deal. (Fiorina prevailed in the proxy battle, with 51.4 percent, partly thanks to ethically questionable tactics, but that’s another story.) But rather than listen to the concerns of her opponents, she ridiculed them, equating dissent with disloyalty. As we saw during the debate when she attacked me, rather than listen to or learn from critics, Fiorina disparages them. She did so regularly to platoons of her own top lieutenants and even her board of directors—until they fired her.
These facts have been documented, both with quotes from her own board members and leadership team and with raw numbers in such revered publications as Forbes, Fortune, Business Week, the New York Times, the Wall Street Journal and leading tech industry journals. I also have extensive first-hand knowledge of this situation, having spoken at length with two of Fiorina’s successors, past and present HP board members, fellow CEOs and scores of HP employees—including many of her own top lieutenants who contacted me directly, such as her head of employee relations.
And I have to point out the obvious: If the board was wrong, the employees wrong, and the shareholders wrong—as Fiorina maintains—why in 10 years has she never been offered another public company to run?
(click here to continue reading Carly Fiorina 2016: Why I Still Think Carly Fiorina Was a Terrible CEO – POLITICO Magazine.)
Calumet 5-6969
and on the topic of Lucent:
Yet her celebrated tenure at Lucent has been clouded by what happened two years after she left in 1999. The once-highflying business worth more than $250 billion at its peak nearly collapsed in the face of an accounting scandal and the telecommunications bust. The company laid off 50,000 employees in 2001 alone. Today the company, after merging with Alcatel of France, is worth only about $10 billion.
Lucent, like some its rivals, artificially burnished its financial performance through vendor financing — lending money to customers so they could buy its products. In 2004, the company settled charges brought by the Securities and Exchange Commission that accused it of perpetrating a $1.1 billion accounting fraud.
“It’s unlikely she would have been considered for the HP job once it became clear that Lucent’s success had more to do with loose credit terms and creative accounting than any reinvention of the company as the Second Coming of Cisco,” Rakesh Khurana, a Harvard professor who studied Mrs. Fiorina’s tenure, said in “Backfire: Carly Fiorina’s High-Stakes Battle for the Soul of Hewlett-Packard,” a book by the financial journalist Peter Burrows.
…
Still, Scott Woolley of Fortune magazine wrote a deeply reported story in 2010 during Ms. Fiorina’s unsuccessful Senate campaign in California that detailed a questionable deal she championed. Mr. Woolley focused on a vendor-financed transaction with a small company, PathNet, a sale that was valued at as much as $2.1 billion, though PathNet had only $1.6 million in annual revenue. It later filed for bankruptcy.
And Ms. Endlich Heffernan’s book connects Mrs. Fiorina to two other failures while she was at Lucent. In one, Mrs. Fiorina was assigned to run Lucent’s consumer products business. Perhaps that division was always destined for failure — it included Lucent’s handset business just as the world was pivoting to mobile communications. But Mrs. Fiorina orchestrated a joint venture with the Dutch electronics giant Philips Electronics that turned out to be a mess, one that she later told The Wall Street Journal was the biggest mistake of her career.
Then there was Lucent’s 1999 acquisition of Ascend Communications for more than $22 billion. That deal may go down in history as one of the worst. Again, however, Mrs. Fiorina wasn’t in charge at Lucent. Was she consulted on the transaction? Yes. But she didn’t try to object to it.
(click here to continue reading The Influence of Fiorina at Lucent, in Hindsight – The New York Times.)