Saturday, September 19, 2015

Cisco Intel and HP 2000-2005 fiscal years

The lasts post discussed START and END points, dating each to "the day" that Carly started, and the day she was fired--trying to get a 'fix' on the numbers being used on television in this silly season.

In fact, though, most analysts and business students agree that there is a certain period of time that is legacy from the last person.  A new person doesn't just sweep into office, and from that day forward, all good things (and bad) happen because of them.  Think of the baseball analogy--if the previous pitcher has loaded the bases, any of those folk who score are "earned runs" on his watch, not the reliever's.

Can this be quantified?  Probably not very well, but certainly there are valid reasons to "count" some performance for/against the last CEO.

In Carly's case, she came into HP on July 16, 1999, inheriting Lew Platt as Chairman, and his decision to divest the historic HP instrumentation business (which became Agilent Technologies on November 1, 1999).  It certainly seems reasonable to consider that Carly's influence for the next fourteen weeks on the stock price, revenue, and profit was minimal compared to what would happen if she hadn't arrived; Lew's decision to divest of course had lots of lost-opportunity cost as the company had to deal with myriad 'separation questions.'

At the back end of her reign (it still shocks me how easily it is to talk of "Queen Carly and her reign" compared to, say, John Young and his CEO tenure), she and her PC team had built considerable momentum,  integrating the Compaq and HP PC offerings, changing the dealer channel incentives to 'bundle PCs and printers' which had been hard with the LaserJet and ThinkJet turf wars that had boiled over.  Dell was, for the first time, showing signs of mortality.

Bob Wayman served as interim CEO for eight weeks, until Mark Hurd was hired and arrived in April.  By the end of the fiscal year (October), HP had caught Dell in growth rate, revenues and market share, and passed them in profitability,   Each quarter for the previous nine quarters had analogous momentum on market share gains, but the profit gain was only four quarters long--something she'd promised the Board and shareholders clear back in May 2002.

So, how much if any of these gains should/could be properly attributed to Carly's leadership?  Jeff Sonnenfeld and many shareholders would say NONE.  Less jaundiced observers might say six to nine months.  I am saying, in the slides below, YOU DECIDE.

The graphs below show HP share price compared directly, day by day, for six years with first, Cisco, and second, Intel.  The inset numbers show comparative "loss" of market value for each, one for Carly's last day (2/7/05) and the other for the end of the fiscal year she started (10/31/05).

The numbers aren't radically different, and the graphs are remarkably similar to each other in shape, bumps, etc.  It isn't intuitively obvious to me that HP's stock performance differed hardly at all from either of these companies at any time in the six years.  And yet, Craig Barrett and Andy Grove at Intel, and John Chambers at Cisco never had a dissenting board, or a disgruntled stockholder revolt.  Weird?  Did she bring this on herself by over-promising?  Or was the stock revolt merely a cover for 'the real reason' that the Board fired her?

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