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Business politics

Carly Fiorina Was a Terrible CEO

Square Pegs
Square Pegs

Speaking of Carly Fiorina and her disastrous regime at HP (and Lucent), here is a good overview of some of the details I only vaguely remembered…

Jeffrey Sonnenfeld, senior associate dean of Leadership Studies and Lester Crown Professor of Practice Management at the Yale School of Management, writes, in part:

Here are the facts: In the five years that Fiorina was at Hewlett-Packard, the company lost over half its value. It’s true that many tech companies had trouble during this period of the Internet bubble collapse, some falling in value as much as 27 percent; but HP under Fiorina fell 55 percent. During those years, stocks in companies like Apple and Dell rose. Google went public, and Facebook was launched. The S&P 500 yardstick on major U.S. firms showed only a 7 percent drop. Plenty good was happening in U.S. industry and in technology.

It was Fiorina’s failed leadership that brought her company down. After an unsuccessful attempt to catch up to IBM’s growth in IT services by buying PricewaterhouseCooper’s consulting business (PwC, ironically, ended up going to IBM instead), she abruptly abandoned the strategic goal of expanding IT services and consulting and moved into heavy metal. At a time that devices had become a low margin commodity business, Fiorina bought for $25 billion the dying Compaq computer company, which was composed of other failed businesses. Unsurprisingly, the Compaq deal never generated the profits Fiorina hoped for, and HP’s stock price fell by half. The only stock pop under Fiorina’s reign was the 7 percent jump the moment she was fired following a unanimous board vote. After the firing, HP shuttered or sold virtually all Fiorina had bought.

During the debate, Fiorina countered that she wasn’t a failure because she doubled revenues. That’s an empty measurement. What good is doubling revenue by acquiring a huge company if you’re not making any profit from it? The goals of business are to raise profits, increase employment and add value. During Fiorina’s tenure, thanks to the Compaq deal, profits fell, employees were laid off and value plummeted. Fiorina was paid over $100 million for this accomplishment.

At the time, most industry analysts, HP shareholders, HP employees and even some HP board members resisted the Compaq deal. (Fiorina prevailed in the proxy battle, with 51.4 percent, partly thanks to ethically questionable tactics, but that’s another story.) But rather than listen to the concerns of her opponents, she ridiculed them, equating dissent with disloyalty. As we saw during the debate when she attacked me, rather than listen to or learn from critics, Fiorina disparages them. She did so regularly to platoons of her own top lieutenants and even her board of directors—until they fired her.

These facts have been documented, both with quotes from her own board members and leadership team and with raw numbers in such revered publications as Forbes, Fortune, Business Week, the New York Times, the Wall Street Journal and leading tech industry journals. I also have extensive first-hand knowledge of this situation, having spoken at length with two of Fiorina’s successors, past and present HP board members, fellow CEOs and scores of HP employees—including many of her own top lieutenants who contacted me directly, such as her head of employee relations.

And I have to point out the obvious: If the board was wrong, the employees wrong, and the shareholders wrong—as Fiorina maintains—why in 10 years has she never been offered another public company to run?

(click here to continue reading Carly Fiorina 2016: Why I Still Think Carly Fiorina Was a Terrible CEO – POLITICO Magazine.)

Calumet 5-6969
Calumet 5-6969

and on the topic of Lucent:

Yet her celebrated tenure at Lucent has been clouded by what happened two years after she left in 1999. The once-highflying business worth more than $250 billion at its peak nearly collapsed in the face of an accounting scandal and the telecommunications bust. The company laid off 50,000 employees in 2001 alone. Today the company, after merging with Alcatel of France, is worth only about $10 billion.

Lucent, like some its rivals, artificially burnished its financial performance through vendor financing — lending money to customers so they could buy its products. In 2004, the company settled charges brought by the Securities and Exchange Commission that accused it of perpetrating a $1.1 billion accounting fraud.

“It’s unlikely she would have been considered for the HP job once it became clear that Lucent’s success had more to do with loose credit terms and creative accounting than any reinvention of the company as the Second Coming of Cisco,” Rakesh Khurana, a Harvard professor who studied Mrs. Fiorina’s tenure, said in “Backfire: Carly Fiorina’s High-Stakes Battle for the Soul of Hewlett-Packard,” a book by the financial journalist Peter Burrows.

Still, Scott Woolley of Fortune magazine wrote a deeply reported story in 2010 during Ms. Fiorina’s unsuccessful Senate campaign in California that detailed a questionable deal she championed. Mr. Woolley focused on a vendor-financed transaction with a small company, PathNet, a sale that was valued at as much as $2.1 billion, though PathNet had only $1.6 million in annual revenue. It later filed for bankruptcy.

And Ms. Endlich Heffernan’s book connects Mrs. Fiorina to two other failures while she was at Lucent. In one, Mrs. Fiorina was assigned to run Lucent’s consumer products business. Perhaps that division was always destined for failure — it included Lucent’s handset business just as the world was pivoting to mobile communications. But Mrs. Fiorina orchestrated a joint venture with the Dutch electronics giant Philips Electronics that turned out to be a mess, one that she later told The Wall Street Journal was the biggest mistake of her career.

Then there was Lucent’s 1999 acquisition of Ascend Communications for more than $22 billion. That deal may go down in history as one of the worst. Again, however, Mrs. Fiorina wasn’t in charge at Lucent. Was she consulted on the transaction? Yes. But she didn’t try to object to it.

(click here to continue reading The Influence of Fiorina at Lucent, in Hindsight – The New York Times.)

Categories
Books Business politics

Carly Fiorina, HP, Compaq and My Favorite Parenthetical Statement

Cafe Bernard Loading Zone

Contained in this article about how poorly Carly FIorina ran HP is the following parenthetical statement, one of my favorite asides in a news article, maybe ever…

The centerpiece of those deals was the company’s $24.2 billion merger with Compaq Computer, which divided the HP board and greatly increased the company’s work force, size and breadth of products.

The deal was so personal to Mrs. Fiorina that she referred to HP as “Héloïse” and Compaq as “Abélard,” a pair whose romantic letters became treasures of medieval French literature, which she studied at Stanford. (Abélard was eventually castrated after fights with Héloïse’s family, a detail Compaq executives were unaware of at the time.)

But the merger, which was announced just before the Sept. 11, 2001, terrorist attacks and amid the dot-com downturn, also led to painful consolidation, cost cutting and layoffs that later haunted Mrs. Fiorina’s Senate race.

(click here to continue reading As Profile Rises, Carly Fiorina Aims to Redefine Record as a C.E.O. – The New York Times.)

Ha! I’m not sure who is Astrolabe in this metaphor, btw.

Compaq logo old.svg
Compaq logo old” by Original uploader was Koman90 at en.wikipedia – Transferred from en.wikipedia; transfer was stated to be made by User:koman90.. Licensed under Public Domain via Commons.

 

Abelard and Heloise

If college has been a long time ago for you too, here is context:

Peter Abelard (1079 – 21 April 1142) was a medieval French scholastic philosopher, theologian and preeminent logician. He was also a composer. His affair with and love for Héloïse d’Argenteuil has become legendary. The Chambers Biographical Dictionary describes him as “the keenest thinker and boldest theologian of the 12th Century”

(click here to continue reading Peter Abelard – Wikipedia, the free encyclopedia.)

Héloïse (1090?/1100? – 16 May 1164) was a French nun, writer, scholar, and abbess, best known for her love affair and correspondence with Peter Abélard.

In his Historia Calamitatum, an autobiographical piece written around 1132, Abélard tells the story of his seduction of Héloïse, whom he met when in 1115 he himself, like Fulbert, became a canon in Paris.

It is unclear how old Heloise was at this time. She is described as an adolescentula (young girl), and so it is often assumed that she was about seventeen at the time, having been born in 1100-1. More recently, however, Constant Mews (and subsequently David Constant) have suggested that the age of seventeen is a seventeenth-century fabrication with no supporting contemporary evidence, and that she was probably as old as 27 at the time. The main piece of evidence for this is that in a later letter, Peter the Venerable writes to Heloise that he remembers her when he was a young man and she was a woman; this, they suggest, implies that Heloise was at least as old and possibly older than Peter. Given that Peter was born in 1092, it would mean that Heloise would have been nearer 27 at the time of the affair. They suggest that this makes more sense of Abelard’s later comment that he sought to seduce Heloise because she was the most famous woman in France for her studies – because, as they suggest, she would have been unlikely to have acquired this reputation by the age of 17. More tentatively, the extent of Heloise’s accomplishment in Greek and Hebrew, and her mature response to the relationship, might indicate someone older than 17.

Abelard tells how he convinced Fulbert to let him move into his house, telling Fulbert that he could not afford to live in his current house while studying, and offering to tutor Heloise in return. Abelard tells of their subsequent illicit relationship, which they continued until Héloïse became pregnant. Abelard moved Heloise away from Fulbert and sent her to his own sister in Brittany, where Heloise gave birth to a boy, whom she called Astrolabe. It is almost unknown what happened to Astrolabe in later life. He is never mentioned by Heloise in her letters to Abelard, and Abelard’s only reference to him outside the Historia Calamitatum is in the verses of advice addressed to him, and thought to have been written about 1135. His death-day is recorded in the necrology of the Paraclete as 29 or 30 October, but no year is given. He is mentioned only once in a later letter, when Peter the Venerable writes to Heloise: “I will gladly do my best to obtain a prebend in one of the great churches for your Astrolabe, who is also ours for your sake”.

Abelard agreed to marry Heloise to conciliate Fulbert, although on the condition that the marriage should be kept secret so as not to damage Abélard’s career; Heloise was initially reticent to agree to the secret marriage, but was eventually persuaded by Abelard. Heloise returned from Brittany, and the couple were secretly married in Paris.

Fulbert, however, began to spread news of the marriage, in order to punish Abelard for the damage done to his reputation. Heloise attempted to deny this, but this ongoing situation eventually caused Abélard to place Heloise for her own safety in the convent of Argenteuil, where Heloise had been brought up. Fulbert and his friends, however, believed that Abelard had simply found a way of getting rid of Heloise, by making her a nun. So, to punish Abelard, a group of Fulbert’s friends broke into Abelard’s room one night and castrated him.

After castration, filled with shame at his situation, Abélard became a monk in the Abbey of St Denis in Paris. At the convent in Argenteuil, Héloïse took the habit at Abelard’s insistence and much against her own wishes. She eventually became prioress there, but she and the other nuns were turned out in 1129 when the convent was taken over by the Abbey of St Denis. At this point Abélard arranged for them to enter the Oratory of the Paraclete, a deserted building near Nogent-sur-Seine in Champagne which had been established by Abelard himself in 1122 (though he had subsequently moved to become Abbot of Saint-Gildas-de-Rhuys in Lower Brittany). Héloïse became abbess of the new community of nuns there.

(click here to continue reading Héloïse (abbess) – Wikipedia, the free encyclopedia.)