Fiorina falls victim to HP's Switzerland syndrome

Fiorina falls victim to HP's Switzerland syndrome

Summary: Nice guys finish last. Of course, in the case of HP's now ex-CEO Carly Fiorina, maybe that should be "gals.

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TOPICS: Tech Industry
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Nice guys finish last. Of course, in the case of HP's now ex-CEO Carly Fiorina, maybe that should be "gals." Actually, HP is the guy and, in addition to a recent story in Fortune

Topic: Tech Industry

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  • Deja vu

    Sounds EXACTLY like DEC before it disappeared. Bet the farm on a new processor (Alpha), support multiple OS' (VMS,Ultrix,OSF1,Tru64), have a strong consultancy, and have (un)healthy infighting. DEC's strategy was to force its customers to a new platform AND OS without a migration plan, and HP's strategy is to force customers to a new platform - HOWEVER the Itanic is backward compatable with HP's stuff, so the old code should run albeit more slowly on the new platform. DEC had a vision (a really great one!) and no plan to get there (build it and they will come). HP has a plan to get there (backward compat), but no vision! I wonder if EITHER of these business models will succeed . . .
    Roger Ramjet
  • Good comment.

    Question: why a commodity pc business?
    (I'm contrasting this with the 64 decision.)
    Anton Philidor
    • Commoditization

      Are you recommending proprietary platforms when the world is looking for Open Systems ?? Look what hanging onto SPARC did to Sun. How much revenue do you think Compaq (DEC) got from the Alpha processor? I would bet you'd be looking a negative numbers.

      IBM's Power chip is killer, but without ISV support you get locked in to IBM's stack (which is actually a huge portfolio of unrelated software packages never remotley designed to work together.)

      Sure being Switzerland means not having huge cash-cows to lock in IT departments, but it would seem HP has enough loyal customers who buy their kit based on quality and innovative engineering. That and the fact they sell everything from clients through mainframes with high-end storage and let's not forget Open View.

      Where are the other Tier-1 vendors whe it comes to clearly superior technologies like Opteron? What was the last innovation you recall coming out of Dell's extensive R&D labs ???

      I think the hardest thing for HP to live with is the fact that that they are expected to innovate on the order of IBM and sell the results for less than Dell charges. That's a hard model to maintain.

      If all technology companies danced to Wall Street's tune, we'd be hanging it up and buying our innovations from China.
      bjohns
  • Isn't HP still profitable?

    While Sun has been losing money for almost 4 years (and starting to turn things around a bit), HP has remained profitable, AFAIK. Thus, with Berlind saying HP is stinking while Sun is one of the competitors that has it going on, the claim rings hallow. The proof is in the pudding.

    That said, HP did most certainly blunder with IA-64, no doubt about that. They also blundered with thinking they could easily merge Tru-64 and HP-UX. And the Compaq buyout hasn't panned out as well as hoped. They do need to do something to differentiate themselves from their competitors, and come up with something compelling.
    boobasaurus
    • Compaq buyout didn't pan out for a simple reason:

      There were too many vested interests in HP who didn't want it to. Carly paid a boatload of money for strategic Compaq assets like x86 servers, Tru64 Unix, enterprise servers, SANs, even services. Then she let the HP middle management slowly discard piece after piece of the Compaq stuff and run off most of the good technical guys. The final straw was the abandonment of Tru64 clustering, which was the most reliable OS short of the horrendously expensive nonstop systems.

      HP now has two strikes against it: the period of time where the "HP Way" allowed no-op managers to hide and suck the vitality out of the company, and the failure to keep the good and through out the bad from the Compaq merger. Make that 2 1/2 strikes: the failed attempt at acquiring PWC.

      What's left? Hire another charismatic CEO who is lulled to sleep by the ever-flowing inkjet profits while the other divisions piss it all away? A hatchet-man who carves the company up for the stockholders? Or maybe someone who can drive a true transformation like Gerstner did to IBM?

      Only time (and the board) will tell.
      terry flores
    • Only because of the printer business

      The printer business is such a huge cash cow that it is keeping the whole company afloat. HP has been able to make mistakes that would have sunk another company because of that one very profitable division.
      GrumpyOldMan
  • You got one thing wrong --

    Carly Fiorina can hardly be considered a "nice person". Ask any of the thousands of former HP employees who have had their jobs offshored in order to manufacture the profits that Fiorina and the rest of HP management used to justify their bloated salaries and bonuses. Not to mention all the real assets -- in the form of talented engineers, that were misused, and mostly run off for what? By the way, I'm not an irate former HP'er. I've never worked for HP, but I had a lot of respect for what the company USED to represent in th pre-Fiorina days. It's kind of ironic, but Fiorina spun off Agilent because she felt that the electronics business would siphon off too much profit, when in fact, it's her lamebrained strategy for her precious commidity PC buisness that is killing the company.
    kribor_z
  • The trends make me wonder

    I wonder if the Compaq/HP merger wasn't the best thing that ever happened...

    ...for Dell! Prior to the merger, Dell was growing, but a bit more slowly while it waged a war for market share on two fronts. Granted the HP front took much less in resources, but the competition was still there.

    Once the merger went through, Dell was able to capitalize in two ways. First, they were able to take the lull in the war, while Compaq/HP integrated the new company, as an opportunity to really push their wares and increase their dominance. Second, by only having one "enemy" out there to out market, it made Dell's war much more winnable. Instead of having to come up with strategies to combat two distinct sales teams, their task is greatly simplified by having only one. What works just works now, where before they might have had a strategy that worked against HP, but not Compaq (and vice versa).

    With HP now losing more ground all of the time, and the only other player, IBM, really just using their competing hardware as deal sweeteners not a true competitive offering, you have to wonder if Dell is not uniquely positioned to become the Microsoft of the commodity hardware space.

    As Dell continues to increase market share, they wield more power in the industry and become the 500 pound gorilla that can use all of that to their advantage when buying parts to assemble their systems. Those deals, if they are sharp enough, actully hurt HP too because they cannot then deal as sharply. A company has to maintain a certain profitability. If I need a 3% margin on my part to make money as a manufacturer, and I sell to Dell for a 2% margin, then I may have to sell to HP at 4-5% to make up the difference. This widens the gap even further for cost. Now HP must either price themselves potntially out of the market, or sacrifice profit for the war effort. Any company that sacrifices profits for extended periods will not remain a company long.

    These pressures may make HP want to get out of the commodity hardware business at some point. When/if they do, this basically ceeds the entire market, with little or no IBM competition, to Dell.

    It is really interesting to me that the Proprietary Model (SW and HW) tends to drive commodity products toward consolidation which limits choices. The Open Source Model (for SW at least) tends to diversify commodity products offering more choice.

    Interesting at least.
    Mack DaNife
    • Slow on the uptake

      Good insight Mack, but it's been said by every pundit from a year before the merger until last week. Carly has to be a really amazing person to have gotten where she's been, but the Compaq/HP merger was never a good plan, and the combined company doesn't have the chops to compete in the combined area. They needed to fix their culture and managment structure a long time agon, and they still do. Only now there's more places for squirrels to hide.
      billbab
      • Thanks...

        I am sure i am not the first to realize any of this, and I have read a few things on Dell vs HP that are similar to mine, but the thing that really struck me ans caused me to write anyway, was the dicotomy between Proprietary's consolidation response to commodities and OSS's dispersal response to commodities.

        Thanks anyway though.
        Mack DaNife
  • Why was everybody so anxious to get rid of Carly at HP.?

    My response to my friends question:
    Well, I don't know exactly, but having been the expellant of one of HP's bulimic purges I won't shed any tears. How's that for a mental picture? I trust that the 20+ million package she received will help ease the pain of her transition somewhat. Of course, it could be the fact that a couple of years ago the stock was above $70, and at $21 the stock is exactly where it was six months ago. Stagnant stock prices make investors nervous and makes borrowing money even harder.

    Part of the announcement that most people will skip over due to being unaware of the implications is the appointment of Thomas Perkins back to the board of directors. Tom Perkins is a senior partner at the venture capital firm of Kleiner-Perkins-Caufield-Byers. Their investments are legendary for their return on capital, having funded such notables as Genentech...Compaq Computers...and Tandem Computers (Tandem -> Compaq -> HP). My hope in all this is that the CEOs of certain major purchasers of the Tandem brand of computers put pressure on one Tom Perkins to step up and rescue the technology. Its wishful thinking on my part but I hope not.

    There might be a second scenario in this. Kleiner-Perkins is also noted for their sale/breakup financing of companies. They were instrumental in the sale and closure of a couple of Tandem subsidiaries in the past, and the most notable ouster of the Tandem President and founder and subsequent sale of Tandem to Compaq. My speculation is that possibly he was brought in to advise the board in a breakup of HP into separate companies (Printing and Imaging, Spin off PCs, High-end Servers, and Services division). That would garner the highest return in the short run, make some new multi-multi millionairs and fatten Tom's bank account even more. (Did you ever hear of Tom's 350 foot yatch? Its like a small cruise ship!)

    But all the above is speculation bordering on sour grapes. (part of the healing process due to the expellation noted above)

    Other speculation has it that she was too divisive. Maybe she stacked her high end officers with too many women (feminazi-ation). And maybe she tried to change the corporate culture too fast (she did NOT follow the HP way. The Book the "HP Way" is a veritable bible and cult of HP culture). Its all speculation and I really don't give a rat's patoot just as long as it makes the stock price go back up before my now worthless options expire in 2-1/2 years.

    -Joe

    Ps. I really shouldn't gloat. I really shouldn't. But it is hard not to. Its called schadefraud.
    jocrazy0
    • actually, it's "schadenfreude"

      (German for paradoxically finding happiness in another's sad situation)

      Interesting speculations, though.
      jklincewicz
  • What Happened ?

    Wasn't anyone listening to Mr.Hewlett ? Compaq was a failing competitor of HP's, and what do they do next, buy Compaq. Dell could not have been happier.
    Hope Mr. Job is paying attention. Ipod's are going out of style yesterday, then what ? Solution ? Apples running windows, why not, all other PC makers compete on form factor, bells and whistles, and in my opinion, nobody beats Apple for that.
    zeferino
  • Carley made two big mistakes

    She burned a lot of bridges and used a lot of good will pushing the merger through. Her ruthlessness made it a sink or swim situation for her, and she sank.
    Her second mistake was getting deeper into the PC business at all. The PC was a commodity driven by price long before the merger. HP should have ben extracting itself from the PC market, except for possibly high end workstations, servers or performance gaming machines. In the past the HP name has stood for performance, innovation, quality and price. The first three overcame the fourth, but with commodities nothing overcomes the fourth.
    She may have had a vision, but it w2asn't the right vision for the times or that company.
    don3605
    • New HP MOTTO:

      We put the "NOT HERE, ED" in "INVENT".

      When so many corporate cultures are merged so rapidly in to one megalith, the acquiring company culture circles the wagons and excludes the very ideas that they purchased in the aquired company.

      So in defense AND damnation of Carly's leadership, she failed to prevent the HP culture from sinking the technology and ideas that could save the HP brand.
      jocrazy0
    • In the past...

      > In the past the HP name has stood for performance, innovation, quality and price.

      Currently in the end user PC space all they seem to have is price.
      mespoppa
  • Original Problem

    If you want to go back to who created Switzerland in the first place, look at former HP Exec, Rick Belluzzo.
    Right before the explosion of the dot-com era, (where Sun made so much money on Unix) he gutted the funding for HP-UX, pouring that money into "Industry Standard" Windows servers. This line was of course tossed aside later in the Compaq acquisition.
    rudsaki