Chapter 55 Section 3 Most Controversial CEOs

Many people think that Kelly Fiorina is the worst CEO in the history of HP.I'm not sure about this, but there's no question that Fiorina is the most controversial and high-profile CEO in HP's history.As a career woman who broke down two of the world's largest technology companies (AT&T and HP) in five years and presided over two huge business mergers (a joint venture between Lucent and Philips and an acquisition by HP and Compaq), Fiorina's achievements or crimes are already difficult for any professional manager to compare.Therefore, Fiorina is undoubtedly the object of media attention, and of course she herself likes to show off in the media.

Fiorina started from the bottom of AT&T and became the senior vice president of AT&T in just 15 years, which should be extraordinary.Perhaps HP considered this before inviting her to be the CEO, but it turns out that Fiorina's excellence may just be to express herself and let the outside world and her boss notice her. In 1995, she became executive vice president of AT&T and oversaw the separation of AT&T and Lucent.After the separation, she became Lucent's second in command.Next, she presided over the Lucent-Philips joint venture, a $6 billion joint venture between the two that failed without even hearing a buzz. In 1998, Fiorina was named the most powerful woman in business in the world by Fortune Magazine.When HP was looking for someone to spin off its instrumentation division the following year, she was the natural choice.Sixty-year-old Hewlett-Packard ushered in its first and so far only female CEO.

As soon as Fiorina took office in June 1999, she spun off the instrument department and went public. Since then, there has been one more Agilent company in the world.That was the craziest era in the U.S. stock market. Agilent’s stock price rose from the initial price of 19-22 dollars per share to 26-28 dollars, and was finally set at 30 dollars just before listing, raising nearly 2 billion dollars. On November 17th, Agilent was listed on the New York Stock Exchange, and it grew by 40% that day, with a market value of 20 billion US dollars (more than 13 billion US dollars today), of which more than 80% of the shares are in the hands of HP.What was ridiculous at the time was that HP's stock also jumped 13% that day.This phenomenon is absurd to the investment master Buffett. Agilent's skyrocketing price means that HP has lost money, and HP should fall.However, in the crazy era of the stock market in 1999, such irrational things always happened.So far, Fiorina is working fine.

Hewlett-Packard got a handsome amount of cash from Agilent's listing, and this cash helped HP tide over the difficulties after a few years.Now, Fiorina must show real skills to do a good job of slimming HP.It is a pity that under her leadership, HP's core business is Wang Xiaoer's Chinese New Year, which is not as good as every year.It was so far behind Sun in the workstation business that it dropped out of the race altogether.In the field of microcomputers, the gap between it and the leader Dell is getting wider and wider, and it shows no signs of turning around.In the printer business, its wishful thinking of selling printers to earn ink cartridges has not worked at all (we will analyze the reasons later).In the printer market, although HP is the largest company in the world, its market share is constantly being eroded by Japanese companies Canon and Epson.

To regain market share, the most fundamental way is to transform itself and improve competitiveness. IBM's Gerstner and Intel's Grove, including Hewlett-Packard's later CEO Hurd, did just that.However, this requires real skills.The easiest and fastest way is to buy the market, that is, buy a company.Fiorina is an expert in corporate mergers and acquisitions. She took a fancy to Compaq, which still had the second largest market share of microcomputers at that time, but was in decline.Fiorina's proposal was opposed, including by the families of HP's two founders.Many shareholders are worried that HP, which is already making poor profits, will eventually bring down HP with a loss-making Compaq.At that time, Dell accounted for 31% of the US microcomputer market, while Compaq and HP accounted for 37%.Fiorina's wishful thinking is to create the world's largest microcomputer company through mergers, forming an advantage over Dell.In fact, the fundamental reason why HP is at a disadvantage in the competition with Dell is that HP's problem is that the capital turnover is not fast enough. Dell's capital can be turned over more than twice a year, while HP only has one.In other words, even if Dell's profit margin is only half that of HP, it can also earn the same profit as the latter.In this way, there is a lot of room for Dell computers to cut prices, and it is easy to occupy the market.Obviously the acquisition of Compaq will not solve this problem.

Fiorina's merger plan was unanimously opposed by the second generation of the H and P families in the board of directors.In order for the plan to be passed, it must be approved by the general meeting of shareholders.Fiorina did a lot of work to mobilize small and medium shareholders to vote and promote the proposal. Finally, shareholders approved the acquisition of Compaq by 51% to 48%.Among the 51% of the votes in favor, a considerable proportion of the votes were drawn by Fiorina. In 2001, on the eve of 9/11, the largest acquisition of 25 billion US dollars in HP's history was finally completed.Shares in the new HP fell nearly 20% on the day the deal closed, as Wall Street generally looked down on the deal.A few days later, the terrorist attacks of 9/11 occurred, and the economic situation in the United States took a sharp turn for the worse.Business at the new HP plummeted. In 2002, HP suffered its first huge loss in more than a decade.

After being merged into Compaq, HP did not get the expected market share of Compaq and HP. In 2002-2003 when the market share was the lowest, it barely maintained Compaq's original share.In the history of business, similar things often happen. After the merger of two companies that are at a disadvantage in the competition, not only do they not get the accumulated market share, but they only get the smaller share before the merger.The reason is simple, a company that is at a disadvantage in the competition must have its management problems.If these issues are not resolved, the post-merger problems will double, leaving them at a further disadvantage to the competition and further losing market share.It is as if several lumps of coal put together make a pile of coal instead of shining diamonds.Hewlett-Packard under Fiorina's leadership already had a lot of problems, and with the addition of Compaq with even more problems, the piles of problems had already exceeded her ability to handle.Originally, Fiorina should have focused on solving internal problems, if she had the ability to solve them.However, she was so overjoyed that she chose a road of quick success and instant benefit and walked into a dead end.Fiorina defended the merger at length in her autobiography, attacking the Hewitts and Pucketts and blaming the media.But the public didn't buy it. In fact, angry stockholders took her to court a few days after the merger.

During Fiorina's next five years at the helm of HP, Fiorina transformed from a technology company to an electronics company.It originally competed with technology companies such as GE, IBM, and Sun, and now it has degenerated into low-margin general appliance companies such as Dell, Sony, Canon, and Epson.During Fiorina's tenure, she made frequent appearances in various media (of course, she explained that the media was looking for her.) But HP, the most historic company in Silicon Valley, is gradually being forgotten.It lost out to Dell in personal computers, to Canon, Nikon, and Sony in digital cameras, and to Epson and Canon in printers.