[NY Times business writer Lawrence M. Fisher, in Salon]: Hewlett-Packard’s ousted CEO Carly Fiorina destroyed a great company’s creative soul and trashed its business.
Quoted at at length here not to pile on HP (disclosure: my company has worked with HP, producing their first corporate citizenship report
and other strategy work), or onto Carly (though there certainly seeem
to be ample reasons to), but because Fisher’s post-mortem gets at
qualities that are emblematic of the illness of short-term,
narrow-focus, devil-take-the-hindmost profit maximization fashion that
has American ‘capitalism’ in its thrall, to the detriment of
shareholders and society alike.
Yet Carly and the HP board chose to
dump this profitable business to concentrate on commodity products like
printers and PCs. Why? The answer at the time was that securities
analysts accustomed to following straightforward companies such as Dell
Computer really couldn’t understand a complex business like test and
Undaunted, in 2002 Carly moved to
acquire Compaq, which was bleeding market share to Dell and losing
money at an even faster rate than HP’s PC business. Never mind that no
big merger in the history of high tech had ever really worked; never
mind that Compaq itself had already made two big acquisitions —
Digital Equipment Corp. and Tandem Computer — that had failed to add
any value; never mind that Dell rapidly seized on the inevitable
uncertainty to take even more customers away from both HP and Compaq.
Even the pointed opposition of founder’s son Walter Hewlett didn’t
dissuade Carly and the HP board from this historic blunder….
So why did she do it? For one reason:
Wall Street loves big mergers. The investment banks collect immense
fees for their roles as advisors, regardless of the ultimate soundness
of the deal. And their securities analysts all write positive reports,
which prompt a lot of rubes to buy shares, which generates a flood of
trading commissions. Big mergers and acquisitions are almost always a
net negative for the companies and communities involved, but a win-win
for the bankers, lawyers and other deal makers.
(It’s a marvel that boards and investors so rarely consider the dismal
success rate for such mergers — estimated at as low as 2-20%.)