“We doubled the size of the company,” Mrs. Fiorina said in last week’s debate. “We quadrupled its top-line growth rate. We quadrupled its cash flow. We tripled its rate of innovation.”
But much of that growth resulted from the Compaq acquisition. Profits as a percentage of revenue in the six years Mrs. Fiorina served as chief executive declined about 40 percent. The stock price fell sharply. Mrs. Fiorina blames the burst of the dot-com bubble for the drop, but HP shares fell by more than the stocks of competitors like Dell, IBM, Intel and Microsoft.
Mrs. Fiorina’s political rivals have also highlighted that she ushered in a period of corporate scandal, including public clashes with members of the Hewlett family. Fired in 2005, she left with more than $42 million in severance, stock options and pension.
So, let's take a look at the 'all-important' stock prices. First, look at HP vs. Intel and Microsoft. Intel and Microsoft, you might recall, were building 90+% of the chips and the software operating system for PCs of the era.
The curves for all three companies are practically mirror-images of each other. So, yes, for the day she left, Intel and Microsoft were "better" but very few shareholders would be thrilled with any of the three. Is -37% lots better than -43% or -46%? And for the day, it was very important to all three how the Dell vs. HP/Ccompaq play--Carly's bet--was progressing. And it had been progressing nicely, underneath 'the covers.' In fact, by the end of the second quarter (recall that Carly was fired at the end of the first quarter, and HP had no CEO, or actually the interim CFO, Bob Wayman) for the second quarter, HP's improving fortunes were clearly visible without any of Hurd's help.
And by the end of the year, HP was clearly beating Dell in the marketplace--which took three years to consolidate, but the trends (see a later post) were clear by mid-2004 to the dealer channel. By October, HP stock prices are significantly better than either Intel or Microsoft (neither Intel nor Microsoft moved 3%; HP improved 22%) . Short-termer's (and most of Wall Street traders are such) gave Hurd credit instead of realizing that Fiorina's fundamentals drove this.
Hard for me to agree thus with Hardy or Chozick. Hardy covered HP during this period; he knows this, and he was very selective in the NY Times article. Notice he didn't do the other Valley companies--Oracle, Agilent, Cisco, or even Apple. The first three did even worse than HP; Apple had one great quarter (next post) due to initial reaction to the i-Pod, which disappeared soon after.
As for Corporate Scandal, HUH? I'll take this up in the next post.
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