Fiorina the bad

Information Age (London, UK), April 28, 2003

Hewlett-Packard's takeover of Compaq Computer was a world record. Not only did the $20 billion price tag make it the technology sector's biggest ever deal, the proxy battle to get the merger approved ended up costing a colossal $111 million.

The fight, between HP CEO Carly Fiorina, backed by her board, and Walter Hewlett, son of Bill Hewlett, one of HP's founders, lasted nearly a year and was on the front pages of the business press for most of that time. Little wonder, then, that the contretemps should end up spawning a book.

There are, in fact, two new books purporting to offer the inside track on the battle for the control of HP from two long-term media commentors: Perfect Enough - Carly Fiorina and the Reinvention of Hewlett-Packard by George Anders, a senior editor at US magazine Fast Company; and Backfire - Carly Fiorina's High-Stakes Battle for the Soul of Hewlett-Packard by Peter Burrows, a technology journalist for Business Week.

Both books, understandably, devote the bulk of their pages to the intricacies of the takeover, and there are some jaw-dropping disclosures. Between them, for example, Walter Hewlett and HP spent more than $100 per shareholder in a bid to win their support, some 40 times what was spent per voter in the 2000 US presidential election campaign. Yet, admits HP's proxy solicitor, the impact of all that effort was minimal. "We probably changed people's minds in only a small percentage of calls," he said.

While the books share many facts and anecdotes, Anders and Burrows come at the topic from very different angles. A bit like the proxy battle itself, one is for Fiorina, the other is against her.

Backfire by Peter Burrows is more meaty, more colourful and generally a much more enjoyable read. While it covers much of the same ground as Perfect Enough, the book also goes much further, assessing Fiorina's management skills and the impact of her changes on HP, as well as the technology and financial problems the company faces.

Perhaps the reason for this is that Burrows had no cooperation from Fiorina. In fact, he admits that she will have nothing to do with him. Fiorina stopped granting interviews to Burrows after he wrote a story saying that the merged HP Compaq would not be able to hit its financial targets the day before the crucial shareholder vote.

That has forced Burrows to seek out a much wider range of sources, including many former HP staffers, ex-Lucent colleagues and even fellow college students.

However, it is also clear that he has a bit of an axe to grind. In the early pages of the book, for example, he spends rather too much time going through the family history of Carly Fiornia (ne Carleton Sneed), dragging up as much dirt as he can. He notes that John Beal Sneed, Fiorina's great-uncle, had his wife committed to a sanitorium when he found out that she was having an affair, and then shot the father of the adulterer. In fact, he seems to have spent considerable time collecting quotes and anecdotes that seem to do little except undermine Fiorina's character.

The overall picture the reader is left with is that Fiorina is a ruthless, ambitious saleswoman who will do anything to get what she wants. "The things she says are warm and disarming. The things she does can be very different," notes one former HP staffer.

She is also full of chutzpah. A fellow student at MIT is quoted as saying, "Her main secret was her confidence. She may not have had a clue about the subject, but she addressed it with such confidence that you would never know." That view is echoed by a number of HP employees: "She speaks very well but she has no idea what she is talking about."

It is clear that Burrows believes it is that oratory and self-promotional capability that helped Fiorina get to the top, rather than her business acumen. Fiorina was seen as a "star that could do no wrong" at Lucent, the company she worked for prior to HP, but Burrows sets outs to debunk that myth. Fiorina, he says, presided over a catastrophic takeover and was fortunate to get out before the company collapsed.

Indeed, he claims that it was Fiorina that championed Lucent's aggressive vendor-financing initiatives that ultimately led to the downfall of the company. In March 1998, he says, she oversaw Lucent's first big vendor finance transaction, advancing a $200 million loan to Advanced Radio Technology. By the time she left for HP in July 1999, he concludes, Lucent had a reputation for its willingness to float the biggest loans in the industry, and to float them to some of the iffiest credit risks.

Others share that view. For example, Backfire quotes Harvard professor Rakesh Khurana who says, "It's unlikely she [Fiorina] 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."

So how did Fiorina end up at the helm of HP? It was a catalogue of errors, according to Burrows. The search process was assigned to an inexperienced headhunter who made many mistakes. Despite contacting, or attempting to contact, a number of high-profile candidates, such as Sam Palmisano, now CEO of IBM, Ray Lane, former COO of Oracle and Intel's heir apparent, Paul Otelini, the eventual shortlist had few committed, viable candidates. One by one, says Burrows, nearly all of the shortlisted candidates pulled themselves out of the running, leaving Fiorina as the only outsider willing to take the job on.