For HP after Fiorina, execution matters

With Carly Fiorina out as CEO of Hewlett-Packard, the forthcoming leadership must make tough decisions on just what type of company HP is going to be, analysts say.

In deciding to replace Fiorina, the HP board considered lingering questions about the effectiveness of HP's acquisition of Compaq Computer in 2002. In contrast, they saw IBM decisively act in December 2004 to sell it's PC business to China-based Lenovo Group.

Missing from HP's strategy has been such a clear sense of execution and the board hinted at that in its announcement of Fiorina's removal.

"Carly Fiorina came to HP to revitalize and reinvigorate the company," said Patricia C. Dunn, an HP director since 1998, who was named non-executive chairman of the board. "She had a strategic vision and put in place a plan that has given HP the capabilities to compete and win. We thank Carly for her significant leadership over the past six years as we look forward to accelerating execution of the company's strategy."

One analyst also cited "execution" as a problem. "Under Carly, HP has made a number of acquisitions and developed some great products in the labs, but they don't seem to be able to bring those products to market," Illuminata analyst David Freund said. "A major part of execution is converting science to actual products, taking things out of labs and making successful products. That has not been HP's forte. So, it seems to be a matter of execution and I think that has frustrated both the board and HP's customers."

As Tom Krazit points out in an IDG News Service story, Fiorina's much publicized Compaq acquisition never took on the synergy anticipated for it.

"Fiorina believed that by acquiring Compaq's PC business and lifting HP into a virtual market share tie with Dell, the company could boost sales of higher-margin servers and services by selling complete packages of hardware to business customers," IDG News Service said. "A company that ranked first or second in market share in several different categories across the IT spectrum could provide a top-to-bottom portfolio of products for customers, she argued throughout 2001 and 2002.

"However, almost three years after the deal was completed, HP's PC business is barely profitable," IDG News Service continued. "The Palo Alto, Calif. company's PC business posted $6.5 billion in revenue during its third fiscal quarter but only $78 million in profits, which was its best showing in four years. By comparison, the company's printer business recorded the same amount of revenue but made $1.1 billion in profits."

While Fiorina combined the printing and PC business into one unit in January, it seemed a pale move by comparison to IBM's moves. The unit's future is unsettled, with some analysts saying the unit should be spun off entirely.