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AnonymousInactiveThe Inside Story Of Carly’s Ouster
By the end of 2004, the pressure in Hewlett-Packard
Co.’s corner office was almost unbearable. With Chief Executive Carleton S.
Fiorina’s efforts to fix the $80 billion computing colossus stalled and tensions
building with the board, one of high tech’s most powerful executives began
mulling an exit plan.Around the
holidays, Fiorina held separate meetings with at least four high-profile chief
executives to glean advice on making a “graceful exit” from HP, according to
industry sources. These industry luminaries, approached by Fiorina at yearend
business conferences, included Cisco Chief Executive John T. Chambers and Intel
President Paul S. Otellini. During the conversations, Fiorina told the CEOs she
was feeling some pressure from HP’s board and inquired about face-saving ways to
leave the company should she decide it was in the best interest of shareholders,
according to the sources. Fiorina, Chambers, and Otellini didn’t return requests
for comment.It was a decision she didn’t get a chance to make. On the
evening of Sunday, Feb. 6, HP’s board hunkered down with Fiorina in an emergency
meeting held at Chicago’s O’Hare Hyatt Hotel. As a light rain drizzled outside,
the directors stewed over their star CEO’s failure to execute her ambitious plan
for the company. In addition, directors were concerned about the “board’s
inability to work constructively with [Fiorina],” according to an HP insider.
The next day, they asked Fiorina to step down. And on Wednesday, Feb. 9, at 5
a.m. Pacific time, HP stunned the world, announcing Fiorina’s dismissal, ending
her 51/2 year stint atop one of the legends of Silicon Valley.Despite
the surprise announcement, the board’s concerns about its chief had been
mounting for nearly a year. Sure, she had dazzled directors and many investors
with her passionate work in pushing through the controversial merger with Compaq
Computer Corp. in 2002. And the immediate integration of the two companies
bested expectations, silencing even her fiercest critics. But by late 2003,
investors began shifting their focus from the Compaq deal to HP’s ebbing
position against key competitors IBM and Dell . They bored in on the ragged
financial performance that led to the swooning stock price. “[Fiorina’s] good
with marketing; she’s a good speaker for the company,” says a former HP
executive. “But this is a company that doesn’t need a statesman. It needs a
hands-on operations person.”The tide really began turning against
Fiorina following HP’s massive profit shortfall in the third quarter of last
year. That marked HP’s second miss in five quarters and further damaged the
company’s credibility on Wall Street — a major issue, since HP’s stock has long
traded at multiples well below those of its competitors. Although Fiorina fired
three top sales executives for the miss, the board’s doubts about its CEO grew.
At the same time, the board’s proddings of Fiorina to bolster HP’s operations
talent went largely unheeded.As HP struggled to nail down its
operations, some directors were chagrined that Fiorina didn’t move more quickly
to strengthen HP’s position against Dell and IBM. For instance, although HP has
gradually built up its direct-sales efforts to better compete with
ultra-efficient Dell, some directors felt the company wasn’t moving fast enough,
according to the HP insider.In addition, HP balked at a major
acquisition to bolster its money-losing software business. In 2004, HP had
considered acquiring Veritas Software but didn’t move quickly enough, according
to current and former HP execs. In December, Symantec gobbled up the profitable
software company — leaving some HP directors unhappy. “Things needed to make us
more competitive in certain segments weren’t being done,” says the
insider.By November of 2004, HP’s directors began holding periodic
conference calls — without Fiorina — to discuss their CEO’s performance. And
by the time of the board’s January meeting in San Francisco, it enlisted three
directors to meet with Fiorina to discuss its concerns with her performance. The
trio produced a document indicating their concerns represented the consensus of
the entire board.The ensuing board meeting, which was supposed to be an
annual strategy review, became focused on the performance of Fiorina and HP. And
during the meeting, directors pushed forward a plan to distribute some of
Fiorina’s operating responsibilities to her key lieutenants. Sources familiar
with the reorganization plans say they are on hold because of the management
shake-up.It was a heavy blow to Fiorina’s credibility as the company’s
leader. Just weeks later, she was out. It had become increasingly clear that
HP’s need for a nuts-and-bolts operations whiz far outweighed the benefits of a
high-profile CEO. -
AuthorFebruary 12, 2005 at 10:42 AM
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