Wednesday, February 09, 2005

More on Carly

Interesting comment on the post below. I'm responding here so that I can upload a graphic. The view posted is that Carly F did nothing for the business whilst she was there and, worse, destroyed as much as £25bn of value. The stock has meandered along during her reign. The graph below, from bigcharts, shows the last 3 years for HP stock (the symbol for which is HPQ - if you try just HP you get a very different company that's actually performed quite nicely over the time shown). I've compared HP to IBM, Intel and Microsoft. I hope it's clear enough - I struggled to get it to the right size to fit (still fiddling with Mac software that I don't understand). The picture is far from pretty - but, in fact, HP looks to have outperformed all 3 of them. The merger vote for Compaq/HP was in March 2002 so a 3 year chart looks reasonable. Picking a 5 year chart is not too different, but IBM comes out clearly ahead in that timeframe.
So, why do I say Carly is smart? The first reason is that I've met her and I was hugely impressed. This is a lady that definitely knows how to control a room when she's in it. She's articulate and well briefed across a range of subjects. In a world of CEOs of Enron, Worldcom, Tyco etc I think she's honest with an agenda to achieve, but not to the point of self-enrichment (although I'm sure some of that came along, it wasn't through fraud) The second reason is that Compaq was a basket case before the buy. The purchase of DEC by Compaq rescued another basket case - they hadn't had a hit product since the end of the 80s, the Alpha was going nowhere. But what it did get Compaq was a large number of highly skilled engineering consultants - which is what they were after: a service business to take them out of the low margin PC business, with the potential upside in the server space from DEC machines and perhaps Alpha. The third reason is that something had to be done. There were other choices - spin off the printer unit, focus on servers and ditch consumer perhaps. We're seeing IBM do this now with them selling their PC line to Lenovo (assuming the US politicos let that through) - something that I think will store up pain for the future. Merging with Compaq should have brought scale in a tough business and should have bolstered other product lines - e.g. giving them access to the Ipaq which still, I think, leads PocketPC technology (although it's a while since I've had one). Carly alone carried the merger vote - and that took superhuman effort. Was it the right vote? Well, if it wasn't, folks shouldn't have voted for it and should have sided with old Walter Hewlett. I wonder what he's done with the money he got from selling all of his stock - he sold out after the merger was approved. Last, revenues have grown - last year up 9% to $80bn, net income too, 38% growth in 2004 versus 2003. In the end though, the merger hasn't worked so far; money has been destroyed and it's hard to see what customers have got - that's all fair comment. I don't think anyone could have given it a better shot and I'd argue that Carly was let down by some of her lieutenants - the ones that she has already let go and some that are still there. I've met a bunch of those guys and been singularly unimpressed with them all - and it was they that were supposed to run the business. As the PM said only the other day, "delegation is such an important part of the job". And when that doesn't work, the chief carries the can - which is what has happened. Capitalism in perfect action, right? Meanwhile, the Register publishes a good version of the key events.

5 comments:

  1. Anonymous12:55 am

    Someone is smart because they lost your money slower than other companies would have done, hmmm.

    But for $20Bn+ you bought a CEO who could chair a meeting, spin a line of patter, was attractive (power
    aphrodisiac) to you, and a poor manager of 2nd rate staff - 3 ticks out of four I guess.

    Sounds like technical Viagra speaking and Walter has a quiet smile on his face.

    BTW - if you don't own an iPaq, which other HP kit do you use now being best of breed?

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  2. Like I said, fair comment that the merger hasn't worked. Few companies at this end of the market have done well since the end of 2000 though, they've all lost your money slowly over a 5 year period. If you'd put your money into a 1001 others, you'd be sitting on no money versus flat (ish) money (e.g. Worldcom, Enron).

    Big mergers rarely work. Big mergers in tech work even more rarely. Should she have tried? Given the shareholder vote was touch and go, maybe not. But Bush won the first term by only a few votes and he gave it a go. Oh, hold on, look what happened then.

    Hope you didn't lose too much money on your HP stock. I run a couple of HP printers and a tablet PC for my part.

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  3. And am I perhaps write in thinking that you don't think she's smart because she held you up against a wall and took your money - maybe you were one of those second rate staff that she ousted? or didn't she oust you fast enough? or was it just that a powerful woman is too intimidating for a 2nd rater? I don't think viagra helps with that kind of thing; there are probably other therapies. Or maybe you didn't mean any of that, just asking.

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  4. Anonymous10:10 pm

    verdict?

    www.worldbankpresident.org/archives/000119.php

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  5. Anonymous10:16 pm

    www.economist.com/printedition/displayStory.cfm?Story_ID=3723497

    So what might Ms Fiorina imply? She has no real experience in development and, save for a stint advising Arnold Schwarzenegger, little in politics. Her marketing talents would be useful: largely, the World Bank job is a bully pulpit. But her record at HP calls into question her ability to run a sprawling institution. HP's merger with Compaq seemed flawed from the start, and HP's share price fell during her tenure. That need not rule her out. Ms Fiorina's reputation at HP was not unlike Mr Wolfensohn's at the Bank: a leader with a big vision who could not manage. Who knows? Maybe Ms Fiorina would push through a merger with the IMF.

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