Would A GOP White House Offer Failed Businesswoman Carly Fiorina A Cabinet Post? How About An Ambassadorship?
The elites who make up the Republican Party Establishment have good reason to fear Donald Trump. After all, Mitt Romney was just one of many, many Republicans who gave Trump credibility when it appeared to help their own cause. He had been widely quoted saying, "There are some things that you just can’t imagine happening in your life. This is one of them. Being in Donald Trump’s magnificent hotel and having his endorsement is a delight. I am so honored and pleased." That played right into Trump's lifelong strategy of building himself up and putting himself in position to play the world for a sucker, the basis of his "success."
Republican rubes in the sticks who cheer Trump's declarations of wealth and his unadulterated self-aggrandizement need to watch the documentary he fought so hard to suppress. (Watch it here before he sues to get it taken down.) But Trump isn't the only Republican whose self-awareness is primarily guided by delusion. At the Koch Summit Saturday, also-ran Carly Fiorina was whining about Hillary, babbling her hate-filled nonsense about how "track records matter." Well, she's right; track records do matter. And Fiorina's is a clear case of failure writ large, enormously large. In theory, she could be viewed as an inspirational success story. She was, after all, a woman CEO at one of the biggest tech companies in the world, Hewlett-Packard. The business world, however, viewed her time at Hewlett-Packard as a gigantic, costly failure.
She was the first Hewlett-Packard CEO ever fired. And the firing was abrupt and public. 60 Minutes did a story on it.
Walter Hewlett was right.
Walter Hewlett, you may remember, was the low-key, cello-playing scion of the Hewlett family who fought HP's then-CEO, Carly Fiorina, over her planned $25 billion merger with Compaq, which was announced 10 years ago next month.
Hewlett's point was simple: Just maybe it's a really bad idea to double down on a low-margin business like PCs.
Of course, we all know what happened. Hewlett's opposition was no match for the publicity-savvy Fiorina and her team of brass-knuckled marketers, who seemed a better fit for politics than the high-tech industry. (Which explains Carly's second career as the Republican loser in the race for one of California's seats in the U.S. Senate.) Hewlett folded his cards, went back to his quiet life, and Fiorina got fired three years after the merger because she was better at selling an idea than running a really, really big company.
Now HP is trying to get out of the PC business.
...But even after Fiorina got canned, her apologists stuck to their guns. Her ideas were sound, you see, but her execution admittedly lacked. Then HP's board brought in Mark Hurd, who executed with the ferocity of Patton relieving the troops at Bastogne. He cut, cut, cut. He cut R&D. He put workers on unpaid furloughs, he tried to automate consulting services, and Wall Street loved him. Just look, they said, HP dominates store shelves at Best Buy. It's No. 1 in PC sales! It's the biggest computing company on the planet!
Then Hurd got fired, generally because he managed his personal behavior with the ineptitude that Fiorina had applied to managing the company. It's a funny thing with these HP CEOs--they have a habit of self-destructing. That said, if you think Hurd merely inherited Fiorina's business model and didn't really believe in it, guess again: He was the guy who agreed to buy Palm for $1.2 billion, apparently for the thrill of competing for the fifth position in the mobile operating system stakes. That was just a few months before he got canned.
Now Leo Apotheker, the latest CEO, has quite a mess on his hands: A company without focus dominating a market that isn't what it used to be. He wants out; sell the PC business, dump the products based on Palm's WebOS, and figure out if there's anything that can be done with the mobile OS (hint: don't bet on it). Seems like he wants to create IBM West. Nice idea, but it's a doozy of a challenge, as Larry Dignan at our sister site ZDNet points out.
It bears repeating: Just maybe, doubling down on a low-margin business that even 10 years ago looked like a tough place to make a profit was a bad idea. The thinking behind Fiorina's plan was that HP needed to achieve some sort of massive scale in order to make its PC business work. Voodoo economics, as the elder Bush once said? Sure sounded like it. Problem is, having a big position in such a tough market makes you vulnerable to cost-cutters and innovators. The margin for error is incredibly thin. You never know when something new is going to come along and disrupt your business. HP, meet the iPad. It's your official disruptor.
That was Hewlett's point. Why would you spend billions to get more of a risky market? Today, Oracle and IBM have 45 percent and 20 percent operating margins, according to The Wall Street Journal. HP has an 11 percent margin, dragged down by the 6 percent margin of its PC business. Turns out the "dilettante," as many called Hewlett, had a better understanding of the dynamics of the computer industry than the savvy executives working for Fiorina.
So what was that last decade at HP all about then? Beats me. Maybe it was about making mistakes. Maybe it was about a big company flailing as smaller companies innovated around it. Whatever it was, it was a terrible waste.
Asked why the board fired her, Fiorina tells Stahl, "You know, Lesley, I wish I could answer the question: 'Why did the board fire me?' I can't. They never had a conversation with me."Last May, the Washington Post's Fact Checker column awarded Fiorina 3 Pinocchios for the twisted lies she's told about her track record, which she summed up on her website like this: "Under Carly’s leadership, great things happened at HP: Doubled revenues; more than quadrupled its growth rate; tripled the rate of innovation, with 11 patents a day."
"It was just (clap) out the door," Stahl asks?
"That's right," Fiorina replies.
"It was that cold?" Stahl asks?
"That's exactly what happened," Fiorina says.
She says she felt devastated and hurt by the sudden firing.
..."In the book you said, 'The board did not have the courage to face me. They did not thank me. They did not say goodbye.' Do you think it was nasty? Mean? Meant to hurt?" Stahl asks.
"I think the way this was handled was heartless in some ways and disrespectful in other ways," Fiorina replies.
"Almost as if they meant to take you down a peg or two, that kind of thing," Stahl asks.
"Well, if that was there intent, they certainly succeeded in that. Maybe they took great pleasure in seeing me beat up publicly for weeks and weeks and weeks. I don't know," Fiorina says.
"We took a company and doubled it in size to almost $90 billion."
This is figure based on revenue. According to the company’s annual 10-K filings with the Securities and Exchange Commission, net revenue was $42.37 billion in 1999 and $86.7 billion in 2005.
That’s certainly double, but the key factor for the jump in revenue was Fiorina’s decision in 2001 to merge HP with a rival company, Compaq. In that year, Compaq had revenue of $33 billion and HP had revenue of $45 billion, or a combined total of $78 billion.
Moreover, the statistics don’t tell the story about how difficult the merger was. (For some fascinating-- and critical-- history, read this Fortune magazine article from 2005 titled Why Carly’s big bet is failing.) Fiorina pushed the merger to make HP the dominant maker of personal computers-- just as PCs began their long decline. HP announced in 2014 that it would spin off its PC and printer business, signaling that it was giving up on Fiorina’s gambit.
"We took the growth rate from two percent to nine percent."This is an astonishingly cherry-picked figure. Fiorina was named HP’s chief executive effective July 17, 1999. HP operates on a fiscal year that ends Oct. 31, so the third quarter ends on July 31.
The Fiorina Super PAC initially said it was comparing first quarters of 2000 and 2005, which didn’t make much sense, except for the fact that she was forced out in the first quarter. Then officials compared a year to year growth for the second quarter (ending April 30) in 1999, which was 2 percent, to the full year figure for 2004.
Yet given that Fiorina started on July 17, using the third quarter probably makes more sense. The net revenue growth in that quarter was 12 percent, not 2 percent. In other words, growth can vary from quarter to quarter, making it a misleading metric for evaluating a nearly six-year tenure.
Annual revenue comparisons make the most sense. Fiorina only headed HP for three months in the fiscal year of 1999, so that year is an appropriate base. The net revenue growth in 1999 was 7 percent, according to the 10-K. Fiorina only headed HP during the first quarter of 2005, so let’s use the growth figure for fiscal year 2004. The 10-K says revenue growth was 9 percent, but much of that was due to currency exchange rates, so on constant currency basis the revenue growth was 3 percent.
Thus, apples to apples, revenue growth went from 7 percent before she started to 3 percent when she left-- not from 2 to 9.
"We tripled the rate of innovation to 11 patents a day."Patents are the lifeblood of the technology industry. As evidence of this claim, the Fiorina Super PAC points to the fact that the 2005 10-K says that HP’s patent portfolio was over 30,000 as of Oct. 31, 2005, while a news article from 1999 quotes her as saying the company had 10,000 patents.
That is certainly a tripling of patents, but the statement was about the rate of patents a day. That 1999 article quotes Fiorina as saying that patents were growing at a rate of five patents a day, so that should be considered the base for comparison.
The gap between the two statements is almost six years (Dec. 1999 to Oct. 2005), so 20,000 additional patents indicates a growth rate of 9 patents a day. (The campaign counts it as five years, for a rate of 11 a day.) Either way, that a doubling of the rate, not a tripling.
Also, the purchase of Compaq added to HP’s patent portfolio. While we could not determine a precise number for Compaq patent portfolio at the time of the merger, HP’s 2003 10-K suggests Compaq added about 3,000 patents. So that takes off about a patent a day, resulting in an innovation rate of about 8 patents a day.
In a 2002 speech, Fiorina bragged about HP obtaining 1,000 patents in 2001-- which is a rate of three a day.
No matter how you slice it, there’s no way the rate of creating new patents tripled under Fiorina. It is probably a stretch to say the rate doubled.
"We grew jobs."This statement is based on the fact that the number of employees was 84,800 in 1999 and 151,000 in 2004, according to the 10-K reports. On paper, that certainly looks like an increase in jobs.
But before the merger with Compaq, HP had 86,200 employees and Compaq had 63,700 employees. That adds up to 149,900. HP’s filings show that the combined company had 141,000 employees in 2002 and 142,000 employees in 2003. By 2005, the number was 150,000. In other words, the number of employees barely budged from the pre-merger total–and people lost jobs as a result.
The Los Angeles Times, evaluating Fiorina’s record when she ran for the Senate in 2010, noted that during her tenure HP also acquired more than a dozen other companies with at least 8,000 employees. Indeed, Fiorina has acknowledged firing more than 30,000 workers in the wake of the Compaq merger.
"It is true, I managed Hewlett-Packard through the worst technology recession in 25 years," she told Fox News Sunday in 2010. "And in those tough times, we had to make some tough calls."
Given these facts, it’s a stretch to say she "grew jobs."
Every politician tries to put a gloss on their record, but Fiorina’s claims about her business success are questionable in almost every respect. Her statements either lack significant context or resulted from a creative cherry-picking of the facts. She earns Three Pinocchios.
Fiorina wants to be vice president or get a cabinet position. She's offering herself up as a rabid female attack dog against Hillary Clinton. And the Koch network loves it-- even if they don't see her in the VP slot, which they want to give to Marco Rubio once they've secured the GOP nomination for Scott Walker. Must be frustrating for them to have Trump roiling the waters, though!