Fiorina's Confrontational Tenure at Hewlett Comes to a Close

Illustration by Nick Bilton
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By JOHN MARKOFF

Published: February 10, 2005
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Andreas Meier/Reuters
When Carleton Fiorina was asked last month to describe her relationship with Hewlett-Packard's board, she said, "excellent." This week, after six years as chief executive, she was told she had to go.
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AN FRANCISCO, Feb. 9 - It came as an icy moment in an already tense news conference last month during the annual World Economic Forum in Davos, Switzerland.
Asked to describe her relationship with her board, Carleton S. Fiorina, the Hewlett-Packard chief executive, replied with a single word: "Excellent." Perhaps she was in denial, or just out of the loop, but Ms. Fiorina's confrontational tenure as chief executive of the world's second-largest computer company was unraveling. Back in the United States, the company's board, which had brought Ms. Fiorina in with great fanfare in 1999, had begun discussing ways to limit her power and give more day-to-day authority to several of the operating executives. She was told point-blank by three directors at a Jan. 12 meeting in San Francisco that she had to change her style. "The board told her in no uncertain terms that she needed to open up the office of chief executive and share operational responsibilities," said Rob Enderle, principal analyst with the Enderle Group, a research firm in San Jose and a longtime Hewlett observer. "She adamantly refused and drew a line in the sand." Concerned about her refusal to budge, directors convened a special board meeting beginning on Sunday evening at a hotel near O'Hare International Airport in Chicago. At the meeting, Thomas Perkins, a former board member and a legendary Silicon Valley venture capitalist, was asked to rejoin the board after discussions with another candidate fell through. The meeting continued into the next day. While she was staying nearby, Ms. Fiorina was excluded from the discussions. On Monday, the board told her that they wanted her to resign. She was stunned, according to one person familiar with the discussions. "I think she made a calculated bet the board would not let her go, but the board was clearly adamant," Mr. Enderle said. It was an ignominious end to a six-year run that began when Ms. Fiorina was made chief executive - and the first woman to head one of the nation's 20 largest public corporations - as part of an effort to shake up a slow-moving corporate culture. Back then, she was the subject of frequent and flattering magazine cover stories, in which she was lauded as a supersaleswoman who had excellent communication skills, was tough as nails and understood technology to boot. Her status blossomed to that of a rock star in the computer world. Ms. Fiorina became the public image of the company, starring in television advertisements showing her visiting the legendary garage in Palo Alto, Calif., where the company began. She also became a globe-trotting evangelist for Hewlett-Packard's leadership in digital convergence, and its drive to be all things to all people. She engineered the Compaq merger against big odds, and then drove Hewlett-Packard into toe-to-toe competition against I.B.M. in corporate services, Dell in personal computers, Kodak in digital cameras and Xerox in copiers. Her personality and management style ultimately led to her demise. She used hardball tactics to suppress the opposition to the 2002 Compaq merger by Walter Hewlett, the company's largest shareholder and the son of the founder William Hewlett. She even twisted the arms of fund managers to vote their shares in favor of the merger, leading to regulators fining Deutsche Bank $750,000 to settle accusations that it failed to disclose a conflict of interest related to its role in the merger. Last year, when the company's struggling corporate computer division failed to meet its sales growth targets, she fired three top executives in what many people, both inside and outside the company, saw as a public hanging. In the end, her superstar status was also her undoing. The board concluded that she was spending too much time on the road, neglecting the nuts-and-bolts execution of her own strategic ideas. According to a person familiar with the board's decision, "It's all about performance." The depth of Ms. Fiorina's crisis became apparent to Davos attendees the day after her press conference. She attended the Information Technology Governors meeting, a panel that includes the world's top technology chiefs, in the afternoon. But Ms. Fiorina skipped the glamorous reception and dinner that followed. "In the past she would always attend and hold court," said an executive who was at the event. "She didn't want to look us in the eye." Though her fall seemed precipitous, a person with knowledge of the board's concerns said directors' worries deepened in the second half of 2004. In September, the board asked Ms. Fiorina to implement a more accelerated strategy for change at the computer maker. Ms. Fiorina resisted. The dispute escalated on Jan. 12 when three board members met with Ms. Fiorina, showing her a document that stressed the entire board's pessimism about the company's performance and its inability to compete with Dell and I.B.M. Her dramatic departure mirrors her rapid rise to the position as the number-one woman in American business six years ago. She had been known as a top-notch sales executive at Lucent Technologies, the maker of telephone network equipment, and she brought to Hewlett-Packard a luster and a sense of corporate style the firm was badly lacking at the height of the dot-com era. "This was someone who was planning for the year beyond tomorrow and was not immersed in the here and now," said Jeffrey A. Sonnenfeld, associate dean at the Yale School of Management.
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