“What’s reasonable to expect is something else: CEOs who make conscientious choices and diligently execute them, knowing that superlative results will happen only if a lot of things beyond their control fall into place too. Look at HP’s stock chart under Ms. Fiorina, who had the misfortune to arrive eight months before the tech bubble burst: It’s indistinguishable from Microsoft, Intel, Oracle, Cisco, etc…

…By the idiotic standard her critics apply, John Chambers is the worst CEO in history, since in 15 years he never made back the wealth Cisco lost in the crash.”, Holman W. Jenkins Jr., “CEO Fiorina Fought the Good Fight”, The Wall Street Journal, August 19, 2015

Opinion

CEO Fiorina Fought the Good Fight

No big-tech chief executive created value between 1999 and 2005. And Carly was one of them.

The Republican presidential candidate at the Iowa State Fair, Aug. 17.

The Republican presidential candidate at the Iowa State Fair, Aug. 17. Photo: Andrew Harrer/Bloomberg News

By Holman W. Jenkins, Jr.

If you’re a Republican-leaning voter, you might prefer Jeb Bush, a calm, shrewd, practiced decision maker, for the challenges ahead. If, in its death throes, the Putin regime tries to grab the Baltic states. If an opportunity presents itself to plug away at America’s long-term competitiveness problems: its tax code, its entitlement system, its health-care system.

But a reason not to reject Carly Fiorina is her mixed-bag tenure at Hewlett-Packard, which has lately been subjected to formulaic scorn by Donald Trump and business pundits.

People get the wrong idea about CEOs, mostly from the media. CEOs are supposed to be magical persons who transform opportunities invisible to the rest of us into unlimited wealth. If only GM, some pundits moaned at the time of GM’s bankruptcy, had a Steve Jobs who could combine steel, plastic and glass in a way that would perform all the functions of an automobile yet liberate its maker from the tyranny of costs and intense price competition with other manufacturers of automobiles.

This kind of thinking is nuts. Companies that were important in the PC age and earlier aren’t important now: Gateway, Data General, DEC. You could add Microsoft, Intel and IBM, which like HP are still alive but have been moved off center-stage by the Internet and mobile revolutions.

Big tech companies become big by birthing technology revolutions, but the next revolution usually comes from somewhere else. Google didn’t invent Facebook, Facebook didn’t invent Spotify, etc. Don’t make an expectation out of Steve Jobs’s improbable second act. His story only proves that, in our infinitely rich world, you can find one example of almost anything that isn’t proscribed by the laws of physics.

What’s reasonable to expect is something else: CEOs who make conscientious choices and diligently execute them, knowing that superlative results will happen only if a lot of things beyond their control fall into place too. Look at HP’s stock chart under Ms. Fiorina, who had the misfortune to arrive eight months before the tech bubble burst: It’s indistinguishable from Microsoft, Intel, Oracle, Cisco, etc. By the idiotic standard her critics apply, John Chambers is the worst CEO in history, since in 15 years he never made back the wealth Cisco lost in the crash.

Ms. Fiorina’s claim to infamy will always be the merger of HP and Compaq, two of the biggest companies in the then-important PC market, both of which saw PC margins shrinking, both of which hoped to follow IBM in developing a service offering to manage other companies’ increasingly complex PC networks, and both of which would be blindsided by the emergence of consumer electronics as tech’s cutting edge.

In the end, the HP-Compaq deal did not turn tin into gold. Most mergers don’t. HP survives and remains a big player, but its stock performance has made no one rich, and the company’s strategic wanderings, board chaos and legal travails have hardly been less under the two tech superstars, Mark Hurd and Meg Whitman, who’ve run the place after Ms. Fiorina was booted out in 2005.

But then the HP-Compaq merger she promoted was wildly controversial even at the time—with Wall Street, with shareholders, with the board.

What’s notable in this context is the grit with which she forged ahead. She was opposed by major charities that would have been the horror of any financial planner, over-concentrated in HP stock and freely admitting that their appetite for risk was less than a normal shareholder’s.

She was opposed by board member Walter Hewlett, who voted for the deal then became its chief critic. His ally of convenience was Wall Street, which long favored spinning off HP’s absurdly lucrative (because of ink refills) printer business to free it from the dragging tech conglomerate, a strategic option already rejected by HP’s board and many large shareholders.

Only belatedly and unconvincingly did Mr. Hewlett align himself with the printers-first alternative. But he didn’t nominate himself or any other likely candidate to lead the breakup. In the end, Ms. Fiorina prevailed not because investors thought she had all the answers, but because a plan (and CEO) beats no plan (and no CEO).

Still the shareholder vote was bitterly fought, though Ms. Fiorina managed to keep the battle just short of vitriolic. And her final gambit would have done LBJ proud: Deutsche Bank had voted no on behalf of its fiduciary clients but switched when she hinted that nonsupport would be remembered when future banking business was being doled out.

In politics, victory is often a form of disaster delayed. We mentioned LBJ: His great triumphs, Medicare and Medicaid, are now propelling the nation toward bankruptcy unless a conservative conservative like Jeb Bush or Carly Fiorina can set them on a sustainable path.

By conservative conservative, we mean not given to unrealistic dreams of a libertarian America. Everyone, Democratic and Republican, knows the problems. A way forward is better than no way forward. Missing has been leadership willing to tackle the challenge. In that sense, the HP battle ought to be seen as an argument in favor of Ms. Fiorina, not against her.

Posted on August 23, 2015, in Postings. Bookmark the permalink. Leave a comment.

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