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Even in a belly-baring, hip-hugging plaid suit, singer Gwen Stefani couldn't save Hewlett-Packard CEO Carly Fiorina. Neither could U2's the Edge, Sheryl Crow, Alicia Keys, Ben Affleck or Matt Damon, who talked about his production company's use of HP technology and joked, "I think I'm married to Carly, I've thanked her so much today." These stars all made appearances over the last two years during Fiorina's public speeches, as part of an effort to sprinkle Hollywood glitz and rock-star cool on her company, a Silicon Valley pioneer associated more with pocket protectors than celebrity schmaltz. Fiorina set out to prove that the high-school nerd really could hang out with the cool kids, and for a few years, at least, it seemed to work.
But it didn't last. The HP board of directors asked Carly Fiorina to resign last week, ending the six-year reign of the highest-profile woman in American business. HP's dismal financial results provide the easiest explanation for the dismissal: while its revenues are climbing slowly, its stock is down 50 percent since her tenure began, and her poorly conceived and contentious takeover of Compaq has done little to strengthen HP's balance sheet. (The poor performance perhaps justified the board's particularly harsh public statement, which didn't contain the usual excuse of a suddenly demanding family.)
But the problem wasn't just the substance of Fiorina's leadership--it was also her style. She had plenty of it. Fiorina brought panache to HP: she combined the showmanship of Steve Jobs with a dash of Donald Trump's ostentatiousness. Instead of working quietly for the first few years to fix the company, she believed that building buzz for herself--including appearances in early TV ads--was key to re-energizing staff and exciting customers. Tech CEOs named Jobs, Ellison and Gates can get away with this; as founders, they seemingly have more leeway in cultivating a cult of personality. But Fiorina's style clanged dissonantly off HP's wonky products and the staid corporate culture that HP founders Bill Hewlett and Dave Packard initiated 65 years ago in a Palo Alto, Calif., garage. Some employees loved her--but many disliked her and were no doubt glad to see her go. Last week, interim CEO Robert Wayman told NEWSWEEK that senior executives "were very pleased with the reaction of the employees to all the communication. They were way more comfortable than [senior execs] had worried they would be."
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With the benefit of hindsight, Fiorina's outgoing approach seems like the wrong strategy at the wrong time. But back in 1999, it was exactly what the HP board of directors wanted. At the time, the Asian financial crisis had wrecked HP's bottom line and the company had missed out on the Internet boom. The board decided that HP needed a bomb thrower. They tapped flashy 44-year-old marketing and sales whiz Fiorina, who, one director said at the time, "has an exceptional track record of accelerating growth in large technology businesses." For leaving AT&T spinoff Lucent to take over HP, they paid her $69 million in signing bonuses and stock grants.
Fiorina immediately did what she was asked to do, transforming all aspects of the company. Along with streamlining how the company was organized, and instituting large bonuses for sensational employee achievement, she bought a corporate jet, a first at the company. She also placed her own portrait alongside those of the founders in HP's main lobby and made the infamous ads, featuring herself, speaking in front of the garage where HP was founded--only it was a fabricated look-alike, because camera crews couldn't get access to the original. Employees felt their sacred culture was being corrupted.
The new parade Fiorina tried to lead quickly began to lose followers, including her own board. The directors endorsed a 2001 takeover of the consulting arm of PricewaterhouseCoopers that would have helped HP compete with IBM, then changed its mind and withdrew the offer (IBM later bought the consulting unit). --They also approved Fiorina's 2002 bid for ailing PC company Compaq, but then director Walter Hewlett backtracked, leading to a destructive yearlong proxy and legal battle. "The board never really got back in sync," says Brian Sullivan, CEO of executive-search firm Christian & Timbers, which brought Fiorina to HP. (Sullivan now admits, "Perhaps there was an error in judgment as to what skills were needed at HP.")
When results from the Compaq takeover fell short of her projections, Wall Street gave up on Fiorina. She crisscrossed the country, explaining her strategy of leveraging HP's disparate technologies into a more comprehensive pitch to customers. But Wall Street concluded the acquisition did little more than give away part of HP's valuable printer business to Compaq shareholders. Its brutal voting mechanism--HP's stock price--was relentlessly down. Kevin Rendino, a portfolio manager with Merrill Lynch Asset Management who backed the deal in 2002, now says, "I don't know anyone who has any faith in her."
The sagging stock led to questions about whether Fiorina had the time and skills necessary to oversee the day-to-day details of the 151,000-employee firm. Her board didn't think so; it wanted her to bring on a strong lieutenant, the kind Bill Gates has in Steve Ballmer. But Fiorina thought she could do it all: run the company and jet to give speeches at global confabs like the World Economic Conference in Davos last month. That began to look bad when the financial results got worse and customers noticed problems, like the shipments of HP servers and storage products delivered late to customers last summer when the company was having software problems related to the merger.
In the end, Fiorina may have suffered in part from bad timing. While a high-powered marketing whiz seemed like the answer for HP back in 1999, the post-Enron, post-dot-com business environment appears better suited for low-profile, operationally minded chief execs who leave grandstanding to the quirky entrepreneurs, like the Google guys. The HP board now has to flip its old formula around and seek a quieter CEO with a better record at long-term stock growth. One thing is for sure: no singer or actor can help HP now.
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