Carly Fiorina's undoing was her inability to capitalise on the 2002 HP-Compaq merger, seen as her bet-the-company move. HP is on shaky ground at the moment because its product portfolio has become too large and diversified to manage, and lacks organisation-wide synergy. The printing and imaging business account for a disproportionate share of the profits, while its enterprise divisions lag. The options that stand before HP's board range from organisational restructuring, to a complete split of the company. Which of the many strategies is eventually adopted depends on the identity that HP decides to create for itself.Facts:
A few brief facts about the exit of Carleton S. Fiorina, 50, Chairman and CEO of Hewlett Packard, on Tuesday, the 9th of February 2005: Robert Wayman, the CFO of HP, has been appointed the interim CEO, and has made it to HP's board of directors. Wayman has been at HP for over 30 years now. Patricia Dunn, a board member since 1998, is now the interim non-executive Chairman.
Carly Fiorina contends that disagreements with board over how to execute the company's strategy led to her ouster. In a statement, she said "While I regret the board and I have differences about how to execute HP's strategy, I respect their decision."
Wall Street reacted favorably to the news, with HP's stock rising $1.36, or 6.8%, to $21.50 in midday trading on February 9. [18]
HP said that it would start looking for a CEO immediately. The top contenders within the company appear to be Vyomesh Joshi, executive VP of the recently-combined printer and PC business, and Ann Livermore, executive VP of the Technology Solutions group.
What did Carly do wrong?
For all the post-mortem analysis that has been done over the exit of Carly Fiorina, one conclusion that everyone seems to have made is that she lacked vision and focus. The focus part is readily seen, given the huge and diverse range of products, services and markets that HP's been saddled with after the Compaq merger. Further, all agree that it would be the success or failure of the Compaq deal which would eventually decide Carly's fate. Carly managed the Compaq acquisition brilliantly, but was unable to leverage Compaq's precence in the PC business into increased sales for the new HP.[15]
HP had entered the high-end computing market only a year before the Compaq merger. Carly claimed the Compaq merger would give the company an edge over Dell in the low-end PC market. This was clearly an attempt to dominate the entire range of the computing equipment market, all at once. Far too ambitious. Also the merger increased HP's dependence on the high-volume, razor-thin margin PC business, and brought it into direct competition with Dell [14].
So did HP's merger with Compaq successfully propel it to the number one position in the PC market? Look at these figures[16] for the answer:
2000 Market Share:
Compaq: 13.1%
Dell: 11.5%
HP: 7.8%
IBM: 7.4%
Fujitsu-Siemens: 5%
2004 Market Share:
Dell: 17.9%
HP: 15.8%
IBM: 5.9%
Even before the Compaq deal, the company had tried to acquire PricewaterhouseCoopers Consulting division, but when the price balooned to $18 billion, HP gave up. A couple of years later, IBM successfully acquired the same divison for $3.5 billion. That failed acquisition, followed by the ease with which IBM managed the same thing, did not reflect very well on Carly's leadership skills. Analysts have often termed her a great manager, but a poor leader.
Now again, HP combined its PC and printer business in 2005 to be able to sell complete "digital imaging solutions", as its Pavilion range of computers advertises. The PC business is a notoriously low-margin, slow-growth market - PC market growth is slated to fall below 10% this year.[15] Tying the printer business to the PC one does not make good business sense for the former, because the growth opportunities for HP's printer business are immense, as we shall see later in this article.
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