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.
Posted by Alan at Wednesday, February 09, 2005