HP Sacks CEO Fiorina
When the performance of a worker is inadequate, management fires him. When a manager screws up, the company “lets him go.” When a CEO blows it, her “resignation is accepted.” Why the change in sex of the pronoun? The CEO who blew it was Carly Fiorina, former the only woman to run a Dow Jones Industrial component (Hewlett-Packard), and now, an out-of-work executive. The $21 million exit package including stock options may help cushion the blow, but she got fired for not delivering.
Ms. Fiorina’s departure caused HP stock to rise 10.5% intraday and settled 6.9% higher than its previous close. That is a measure of just how disliked she was by shareholders. Not because she was a bad person, or told inappropriate jokes. Shareholders only care about returns. The increase in stock price on the news of her departure means that investors thought she was a huge negative for the company. It’s now back were it was before HP decided to buy Compaq in September 2001.
Or more accurately, it’s where it was before Ms. Fiorina decided HP would buy Compaq. There was a huge kerfuffle over the decision, and the Hewlett family, heirs of one of the founders, went to war in one of the ugliest proxy fights in recent memory. While it is perfectly reasonable for a CEO to take on shareholders regardless of their surnames, when that surname is on the product, any CEO who goes against their wishes had better get it right.
Fortune magazine summed it up in its current issue, “"Buying Compaq hasn't paid off for HP's investors. And there's no easy way out.” But there are ways out even if they aren't easy, according to analysts who follow the industry. HP could sell off printer and imaging operations or split itself into a consumer-focused entity and a corporate one. Ms. Fiorina is on record as saying the company has considered these or similar options on three different occasions and decided not to implement them. Perhaps, the rest of the board needs to reconsider its employment opportunities if that is so.
Dell Computers currently trades at 26 times its earnings forecast for the year. IBM, the big blue dinosaur, manages a 17 times forecast earnings price. HP can only muster 13. The new CEO will succeed or fail measured not against market share or rebranding but against that integer – “13.” Good luck.
© Copyright 2005 by
The Kensington Review, J. Myhre, Editor. No part of this publication may be reproduced without
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