Ten catastrophes: All-time worst tech industry executive decisions

Ten catastrophes: All-time worst tech industry executive decisions

Summary: IT, software and computer companies are certainly not without their share of poor executive decisions and mismanagement. While dozens of notable examples could have made our list, these were by far the top top 10 worst in the history of the technology industry, causing many billions of dollars of lost revenue or resulted in the downfall of entire companies.

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  • Yahoo! grew rapidly during the early 1990's as one of the first search engine companies and went on a steady path of acquiring smaller Web companies and offering other Internet portal services such as financial news, web and image hosting (such as Flickr) but its failure to adapt to competitive forces, notably the rise of Google and FaceBook, caused the company's revenue to go into decline as it was unable to monetize these properties effectively. 

    Looking to expand its online presence, Microsoft made an unsolicited offer to purchase Yahoo! Inc. In February 2008 for approximately $47 billion. CEO and co-founder Jerry Yang, playing hard-to-get, formally rejected the bid, stating that it "substantially undervalued" the company and was not in the interest of shareholders.

    Weeks of back-and-forth of highly publicized  meetings between the two companies resulted in a standoff.

    Shareholder and Yahoo! investor Carl Icahn attempted to patch things up in a last ditch attempt to get the Redmond-based software giant to come back to the table and attempted to force Yang out via a board room coup, but Microsoft CEO Steve Ballmer had enough and walked away completely exasperated, directing his company to create its own search engine and web properties under the Bing and Windows Live brands.

    The company entered a round of heavy layoffs in 2008 following the failed merger attempt with Microsoft, and the market value of the company went into steep decline. As of September 2011, the market capitalization of Yahoo! Inc. has plunged to a low of $17.66 Billion, a far cry from Microsoft's original offer of $47 Billion.

    Jerry Yang eventually found himself ousted and replaced with the very dynamic and outspoken CEO Carol Bartz in 2009, who ironically ended up entering a partnership agreement with Microsoft in a 10-year deal to use Bing as the search engine for Yahoo!.

    Carol Bartz tried desperately to improve Yahoo's business, but was unable to turn the company around, whose initiatives had little support from her Board, and her tenure was marked by yet another round of heavy layoffs.

    On September 6, 2011, the Yahoo CEO picked up her iPad and sent a broadcast email her employees, notifying them that the Chairman of the Board of Directors had just fired her via prepared company statement during an impersonal, cowardly phone call.

    While Steve Ballmer and Microsoft's investors are probably quite happy in retrospect that they walked away, for Yahoo, it will always permanently scar the company for what might have been because Jerry Yang decided to play hard-to-get -- and it is questionable at this point the the company will ever recover.
     

  • In September of 2006, When Hewlett-Packard Chairwoman Patricia Dunn resigned after being involved a highly-publicized ethics controversy, the company sought to rebuild its reputation with the media and with stockholders. Mark Hurd, a member of HP's board of directors was selected to take Dunn's place.

    With over 25 years of industry experience at NCR and two years spent as the company's CEO marked by strong leadership and improving the company's efficiency and net income, Hurd was thought to be HP's white knight.

    Up until August of 2010, Hurd's tenure at HP was indeed a model one -- it remained the #1 vendor of desktop PCs and laptops, as well as maintaining its lead in consumer and enterprise printer market share. Hurd was also a major cost cutter, but this came at the expense of at 10% workforce reduction at the company, arguably a difficult decision for any CEO to have to make.

    Under his leadership, the company also acquired EDS, a large IT services player, which would make HP on par if not a larger company than IBM, its largest competitor.

    Additionally, with Hurd at the helm, HP also acquired Palm Computing for $1.2 Billion, which would enable the company to compete with Apple and Google in smartphones and tablets.

    Things were looking up. At least until Hurd started prioritizing his activities as CEO with his other head.

    Following an internal investigation of sexual harassment and misconduct with an HP contract employee, former reality TV actress Jodie Fisher, Hurd resigned in disgrace, only to land a job at Oracle, run by his close friend Larry Ellison, where he now leads what remains of Sun Microsystems.

    Thrown into complete disarray, in September of 2010, HP's board of directors decided to recruit an outsider to run the company, Leo Apotheker, a former SAP executive. Apotheker's first ten months as CEO were largely uneventful, but things would soon change.

    During the July 4th holiday weekend of 2011, HP's TouchPad tablet computer, the first product of the Palm acquisition engineered by Mark Hurd (who had resigned just under a year before) was finally released for $499 to highly unfavorable reviews. HP quickly attempted to price adjust by discounting the product $100, in the hopes that consumers would latch on.

    Weeks went by without any news of the product's sell-through, until Mid-August, when it was reported that Best Buy had only sold about 10 percent of its inventory.

    During HP's 3rd-quarter earnings call, and less than two months after the TouchPad's launch, Apotheker dropped a bombshell -- that it would be scuttling HP's mobile hardware division which produced the TouchPad, Pre and Veer WebOS devices, and would be looking for an alternative strategy for the mobile OS.

    In addition, HP was announcing its intention to leave the PC hardware business, in hopes of becoming a more streamlined enterprise software and services company like IBM.

    Whether it was Apotheker's intention all along to scuttle the last remaining vestiges of Mark Hurd's legacy is unknown, but many have speculated that he wanted to clean house since he started, and had been attempting to reverse over a decade of the company's mismanagement, starting with the Compaq merger completed by Carly Fiorina in 2002.

    Unfortunately, Apotheker could not reverse the tide which was flowing against him. The reaction to scuttle the WebOS division and commit infanticide on the TouchPad and the new Pre phones was received overwhelmingly negatively, causing a race to the bottom when the company had a $99.00 per unit fire sale of all of its tablet computer inventory.

    In the middle of September 2011, HP began a mass employee termination at the Palm division of approximately 500 employees. HP's stock continued to plunge, and it became evident that the Board of Directors needed to do something drastic.

    On September 22nd, 2011, HP fired Leo Apotheker, and installed eBay founder and HP board member Meg Whitman as CEO, with the hopes of returning the company to a pattern of stable management and restoring the company's market value.

    It's hard to say how Meg Whitman will perform as CEO, as she doesn't have the experience in managing a company the size and scope of HP, this despite having some background in consulting at Bain.

    Will she continue the commitment to spin off HP's PC business? Will she sell WebOS or continue to develop it, with the hope of licensing it? Will the $10 billion purchase of Autonomy also proceed as planned? It's too early to tell, but something tells us the ride is far from over.

  • Which of these rank as the worst tech executive decision ever? Take our poll

Topics: Banking, CXO, Enterprise Software

About

Jason Perlow, Sr. Technology Editor at ZDNet, is a technologist with over two decades of experience integrating large heterogeneous multi-vendor computing environments in Fortune 500 companies. Jason is currently a Partner Technology Strategist with Microsoft Corp. His expressed views do not necessarily represent those of his employer.

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  • So, what goes down as the all time worst?

    I picked what I thought were the all-time worst decisions in the history of the technology industry. But maybe I missed a few key ones. What other ones caused billions of dollars of lost revenue or sank entire companies?
    jperlow
    • RE: Ten catastrophes: All-time worst tech industry executive decisions

      @jperlow What about Excite's George Bell turning down Larry Page's and Sergey Brin's offer to sell Google to them for $1M in 1999?
      jim.mcmaster
      • It gets worse than that...

        @jim.mcmaster : if you trust wikipedia's recount of the story, Vinod Khosla had decreased the amount to $750K but George threw him out of the office, thinking he had wasted both men's time.

        George is now a venture capitalist with General Catalyst and still talks about his tenure at Excite@Home.

        http://en.wikipedia.org/wiki/Google#Financing_and_initial_public_offering

        http://www.generalcatalyst.com/team/george-bell
        cosuna
    • RE: Ten catastrophes: All-time worst tech industry executive decisions

      @jperlow

      Xerox's decision to sideline it's PC development then allowing Apple and Microsoft to basically walk in and take whatever they wanted from it at a minimal cost.

      The rest is history.
      bannedagain
      • 'Allowing' was different, though: Apple paid with its shares, and Microsoft

        @bannedagain: ... paid nothing.
        DDERSSS
      • RE: Ten catastrophes: All-time worst tech industry executive decisions

        @bannedagain Xerox's PARC (Palo Alto Research Center) was a great incubator of future new technology breathroughs for many others - not for themselves. Besides Steve Jobs grabbing the mouse GUI technology for Apple, Bob Metcalfe - a PARC engineer, invented Ethernet and walked out to start his own company 3Com. Xerox would just say, we are a "document" company.
        jcruns26
      • RE: Ten catastrophes: All-time worst tech industry executive decisions

        @bannedagain

        I knew a lady who worked at Xerox. She almost wept when talking about the stuff tha the research division came up with, but the suits basically gave away for peanuts reasoning that there was no market for it.
        dsf3g
      • RE: Ten catastrophes: All-time worst tech industry executive decisions

        @bannedagain Yes, the Xerox PARC thing has to be the worst fiasco of all time. They had everything, GUI, OOP, TCP/IP, etc., and basically gave it away.
        rm.hutchings@...
      • RE: Ten catastrophes: All-time worst tech industry executive decisions

        @bannedagain Xerox did not have PC development, they had own personal computer line.

        PC was IBM's own personal computer line and it lost it to PC-clone manufacturers who it had licensed PC BIOS and because it did not buy PC-DOS from Microsoft but just licensed and allowed Microsoft to license it to PC-compatible personal computer manufacturers (later made PC-clone personal computers).

        Even today Xerox Star GUI is awesome. They had everything correctly then and if Xerox would have continued and pursued that, they would have own the world and today we would have much better tech industry and better personal computers at home and work instead what Microsoft and Apple has come up even today (OS X 1.6, iOS 5, Windows 7, Windows 8, Windows Phone).

        Thanks to IBM who invented the PC at 1981 as without it, we would have now incompatible personal computers (if not counting what Xerox was doing).
        Fri13
      • RE: Ten catastrophes: All-time worst tech industry executive decisions

        @bannedagain
        Maybe it was the best decision for us - users. Ideas are not worth much without implementation.
        paul2011
    • RE: Ten catastrophes: All-time worst tech industry executive decisions

      @jperlow great article but how did you leave out Xerox PARC? If you calculate the value to computing of Ethernet, the mouse and the GUI interface, three developments that were born at XEROX PARC and walked righgt out the front door, I think this closely parallels the Microsoft -IBM blunders.
      whooizit1
      • RE: Ten catastrophes: All-time worst tech industry executive decisions

        @whooizit1 Xerox PARC is a big time blunder, but the company was never really serious about creating a PC industry or being a real computer company. It was pure research. For the money they put into these technologies compared to some of the other catastrophic losses we're talking about on this list, it's probably not on the same order. Had they continued to develop it and make a real business out of it and ship the Alto in numbers (remember the early graphical workstations they made in limited quantities cost a fortune) they may have created something wonderful and made a lot of money, but I have difficulty quantifying "losses" with PARC per se. There is no question that Apple was able to capitalize on PARC, but it wasn't until years later when the board electronics could be miniaturized and the costs could be brought down to produce the first Mac.
        jperlow
      • RE: Ten catastrophes: All-time worst tech industry executive decisions

        @whooizit1 I don't get author's rationale ("research entity") excluding Xerox given their colossal blunders. Another missed opportunity... Adobe founders are also PARC alumni.

        Xerox's workstations were still being produced (and pricey - $12k) a few years after the Mac's intro.
        UnCommonCents
    • Microsoft's decision to make Ballmer CEO

      @jperlow ... the personal loyalty of one man to another has cost shareholders untold money, and humbled a once vibrant and powerful company.

      Microsoft 1995: Toyota
      Microsoft 2011: Kodak
      HollywoodDog
      • HollywoodDog

        @HollywoodDog

        HollywoodDog 1995: John Travolta
        HollywoodDog 2011: Gilbert Godfried.

        Oh, that's not tech related. Wow, just like you. ;)
        William Farrell
      • HA!

        @HollywoodDog ... That's a good one, thanks.

        When they make the movie of my life, I was rather hoping for Richard Gere, not Gilbert Godfried.
        HollywoodDog
      • RE: Ten catastrophes: All-time worst tech industry executive decisions

        @HollywoodDog

        Didn't Richard Gere get a hampster shoved up his butt?

        hmm... nice ambition
        UrNotPayingAttention
    • RE: Ten catastrophes: All-time worst tech industry executive decisions

      @jperlow I see that there are already numerous replies regarding Xerox, but I wanted to cast one more vote. They invented the GUI, mouse, laser printer and Ethernet and gave it all away. They virtually help Apple steal the Mac technology and never received a dime from it, then they tried to sue Apple 10 years later.

      Read the book "The Billions Nobody Wanted" which is about the copier industry and then contrast it to what Xerox did with all the brilliant ideas that came out of PARC.

      Obviously as hot button of mine as an ex-Xeroid!
      adolimpio
      • RE: Ten catastrophes: All-time worst tech industry executive decisions

        @adolimpio I think ncr had some horrible blunders too but don't recall them.
        LarsDennert
      • RE: Ten catastrophes: All-time worst tech industry executive decisions

        @adolimpio
        if xerox PARC is unforgiving we won't have a vibrant tech industry. luckily they forego greed for the benefit of the US of A, kudos to them and many thanks.
        kc63092@...