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A file photo of Carly Fiorina. Photo: Reuters
A file photo of Carly Fiorina. Photo: Reuters

Parsing Carly Fiorina’s leadership years at HP

Fiorina was fired from HP because she did a bad job; she also hasn't held a major corporate position since she was pushed out of the company in 2005

Carly Fiorina officially launched her presidential campaign with an appearance on Monday on Good Morning America and a video called “Meet Carly" that she published on her website.

Fiorina doesn’t have a long political track record, aside from a failed run for the US Senate in 2010. So she’s running on her record as a business executive at AT&T and Lucent, and later as the chief executive officer of Hewlett-Packard.

To cut to the chase: Fiorina was fired from HP because she did a bad job. She also hasn’t held a major corporate position since she was pushed out of the company in 2005.

Fiorina is spinning a story that she was a victim of sexism at HP. In a recent interview with the Hill she wouldn’t say outright that she was fired because she’s a woman. But she said that there’s “no question that women in positions of authority are scrutinized differently, criticized differently and characterized different."

Fiorina also noted in the interview that “Men understand other men’s need for respect, but they don’t always understand women’s need for respect." She went on to imply that she was fired because she threatened certain badly behaved male board members when they got the message that she was “a leader would not tolerate that conduct."

Don’t buy that line. It’s not true.

There’s a distressing and unjust abundance of sexism in tech—some of which Fiorina surely faced—but that doesn’t magically turn her flawed tenure at HP into a successful one. Fiorina’s male successor, Mark Hurd, was canned just as unceremoniously as she was. And HP has never seemed to shy away from female executives. Fiorina beat out another woman to run the company, a widely respected internal candidate named Ann Livermore. Meg Whitman, the former eBay chief, currently runs the show at HP.

Fiorina has made much of the fact that during her tenure, from 1999 to early 2005, HP’s revenue nearly doubled, rising to $87 billion from $44 billion. She created a huge, leading PC-maker with a large workforce that also added some jobs while she was in control.

There’s truthiness in the numbers that Fiorina presents. But they don’t tell the whole story.

HP’s revenue doubled during Fiorina’s tenure because she decided to buy a rival PC company, Compaq, in 2001. When the deal was announced, the New York Times reported that the companies would have combined revenue of $87 billion. (When the companies reported their final numbers for 2001, Compaq had revenue of over $33 billion and HP had revenue of more than $45 billion.)

The HP-Compaq merger was a bet that the combined company could beat IBM, then the largest PC maker. It had gotten tougher for all companies to make money in the hardware business, so the merger logic suggested that size and scale mattered. HP compromised its very profitable printer business in order to dive headlong into the PC market (a market with declining margins). IBM, however, saw what the business was facing and sold its PC division in 2004 to Lenovo. It was a smart move that allowed IBM to focus on its more lucrative services and consulting units.

HP became mired in the aftermath of the merger—a deal that board member Walter Hewett castigated. (The boardroom brawl that broke out over the deal is another story altogether.) Fortune’s Carol Loomis wrote the definitive story about how the deal failed to create value for shareholders and how it left the company in a weakened state.

Loomis’ analysis presaged Fiorina’s ouster:

The fundamental and overpowering problem here is that HP’s shareholders paid $24 billion in stock to buy Compaq and in exchange got relatively little value. In fact, so little value was secured that accounting rules could force HP to write off a chunk of the $14.5 billion in goodwill assets it set up on its books after the deal… a write-off of goodwill at HP would say as clearly as anything can that, financially, this merger has been a lemon.

Fiorina’s poor assessment of the PC market forced her to eventually preside over so many layoffs at HP that my Bloomberg colleague Peter Burrows said she was dubbed “chainsaw Carly." (Former employees haven’t forgotten, including one who is using the carlyfiorina.org URL to remind us how many people she laid off while HP’s CEO.) Soon after Fiorina was fired, HP employees and shareholders debated whether or not the company should spin off its PC business, essentially undoing Fiorina’s big wager. Current HP CEO Meg Whitman eventually did exactly that.

Fiorina’s failures didn’t stop there. She also misjudged her ability to run HP and manage its board.

In the video she released Monday to announce her campaign, Fiorina asked viewers if they’re tired of “the vitriol, the pettiness, the egos, the corruption" of politics. It’s a good question because she wasn’t particularly adept at handling her own vitriolic and petty board.

HP’s board was famously dysfunctional, a group that fought over the Compaq acquisition and, later, what to do about HP’s flagging stock price. As the Wall Street Journal’s Pui-Wing Tam reported at the time, HP’s directors had presented Fiorina with a management reorganization plan a few weeks before they fired her. The idea was distribute some of her power over key operating units to other executives in a bid to even out HP’s spotty financial performance. The company at that point was thought of by investors as bloated and ineffectual.

The idea that her ouster came as a surprise, which Fiorina has asserted, is in and of itself a surprise. Bruising boardroom battles. A floundering stock. And a board that wanted to limit her power. How could she not be aware that her job was on the line?

The Wall Street Journal’s detailed report about the boardroom talks, which had been private, ambushed Fiorina on her way to Davos. In a lengthy New Yorker article in 2007, the writer James Stewart noted:

The next day, Fiorina convened a conference call with all the board members … and demanded a confession from any director who had spoken to Tam or any other reporter… she asked the board’s nominating and governance committee to order an investigation by the company’s outside counsel, Lawrence Sonsini, to identify the leaker.

Clearly there were board members who were leaking confidential information to the press and then denying it, a situation that Fiorina said in her book, “Tough Choices," made her feel violated. But as then-board member Tom Perkins told the New Yorker, “Leaks don’t happen in stable, happy companies. They’re a steam valve. People talk. They’re a symptom of something else."

HP’s directors were violating their responsibilities to the company and its board, which was inexcusable. But for her part, Fiorina was completely unable to manage HP’s business, its tricky challenges or its board. It’s hard to imagine the same person managing the vicissitudes of a divided Congress as the government tries to work through complicated issues that often lack clear mandates.

In an interview last month with the Center for Strategic and International Studies, Fiorina said that leadership is about two things: unlocking potential in others and changing the order of things for the better. By that definition, Fiorina’s time at the top of HP was a disaster. Bloomberg

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