Carly Fiorina’s tenure at HP, in Perspective

carlyfiorina
Carly Fiorina, former CEO of HP. Source: The Daily Beast

“A problem solver, with the track record to prove it” reads one of the sections of Carly Fiorina’s official 2016 campaign website, the latter clause bolded, as if subliminally aware of the eyebrows being raised in response. The section’s side panel attempts to defend this assertion, postulating that, under Fiorina, HP had “doubled revenues,” “more than quadrupled its growth rate,” “tripled the rate of innovation, with 11 patents a day,” “quadrupled cash-flow,” and “moved from 28th to 11th largest company in the United States.” However, these supposedly concrete assessments of Fiorina’s tenure HP stand in stark contrast to the words of her detractors and much of the mainstream media. In a particularly damning article from Fortune Magazine, a publication that, in 1998, placed her on the cover of its magazine as “No.1 on its first ever-list of the Most Powerful Women in Business.  Carly Fiorina only achieved these figures “through a massive, ill-conceived, controversial acquisition of Compaq Computer in 2002” and “did nothing to increase profits over her five-year term, with the S&P 500 showing net income across enterprises concomitantly up 70%.” The article’s attack is one of many, culminating with a devastating cleanup hitter: “the lost shareholder wealth and lost strategic direction at HP are only part of Fiorina’s legacy. Also lost during her reign were 30,000 U.S. tech jobs, the company’s revered employee morale, and the egalitarian, humble HP way culture.”

But for all the potentially partisan vitriol poured on Fiorina, it is important to keep in mind that Carly Fiorina presided over HP during the Dotcom crash from March 11, 2000 to October 9, 2002. With this in mind, we took a cue from Becky Quick, a moderator for CNBC during Wednesday’s Republican presidential debate who declared the stock market as a “fair indicator of the performance of a CEO,” to find ways to look at Carly Fiorina’s record through a more nuanced, objective manner. The visualization below shows Hewlett-Packard’s absolute stock performance from 1995 to 2010.

 

hpabsolute

The two green absolute lines denote the beginning and end of Carly Fiorina’s tenure at HP (from July 1999 to February 8th, 2005) as CEO, while the dashed blue absolute lines denote the beginning and end of the Dotcom bubble (from March 11, 2000 to October 9, 2002). The one red absolute line is at September 3rd, 2001, the date of the merger between HP and Compaq. *

Although the decline in Hewlett-Packard’s stock obviously falls squarely within the time period of the Dotcom crash, we can further evaluate Carly Fiorina’s tenure at HP in the context of the Dotcom crash by comparing the performance of HPQ (Hewlett-Packard’s stock symbol) and the performance of other leading technology companies during the same time period. While the first visualization was a graph of the value of HPQ from 1990 to 2005, the next is a ratio of HPQ to a sum of stocks belonging to Apple, Dell, IBM, Intel, Microsoft, and Sony over the same time period (these stocks were not cherry-picked, they were the only ones belonging to top technology companies whose stocks were publicly available from 1995 to 2010).

hprelative
(The y-axis is labeled “HPQ/(stocks from other industry leaders)”)**

The visualizations reveal that, relative to other industry leaders, Hewlett-Packard was already on a fairly precipitous path before Carly Fiorina was named CEO and that, despite performing poorly relative to other leading technology companies during the DotCom bubble, the company’s performance was able to track those of its competition immediately afterward.

An examination of ratios of HP to the stocks of individual PC manufacturers during the same timeframe is even more telling:

Here is HP versus Sony:

 HPQSNE

And HP versus Dell:

HPQDELL

However, as information was not gathered on PC manufacturers like Gateway or Toshiba (since their stocks weren’t available during the same timeframe), there is a chance that the stocks chosen for comparison are skewed toward more successful PC manufacturers. We can also look at HP versus Microsoft, as market trends affecting all PC manufacturers specifically would similarly affect the company behind every single PC’s operating system.

hpmsft

This shows roughly the same trend as that seen in the second visualization. Nevertheless, even when normalizing for the performance of other large tech companies during this time, the surge in HP’s stock price following Fiorina’s departure remains. This can be interpreted as an indictment of her leadership of the company; however, relations on the executive board had always been nothing less than acrimonious, so a change of leadership could also be a result of a pre-existing conflict of personalities. According to an article from Vox, “what we do know is that the board that fired Fiorina proved to be highly dysfunctional. After Fiorina’s departure, the board become embroiled in allegations that it had used legally dubious means to obtain people’s phone records in an effort to determine the source of the leaks that had occurred in the run-up to Fiorina’s firing.” Also worth noting is the fact that the merger between HP and Compaq, Carly Fiorina’s signature achievement as CEO, did not visibly affect the company’s stock performance, negatively or positively, in any of the visualizations. 

When we look at criticisms levied against Carly Fiorina during her time at HP, ranging from the time Donald Trump commented that Fiorina “ran HP into the ground” to the time Ariana Packard, the granddaughter of HP’s founder, said “I know a little about Carly Fiorina, having watched her almost destroy the company my grandfather founded,” it is difficult to get anything but the impression that she was a terrible CEO. The fact of the matter is that she took charge of the company when it was already going downhill, and, on top of that, presided during the DotCom bubble. Does this absolve her from the words of her critics or, perhaps, vindicate her as a true “problem solver, with the track record to prove it?” That much is too difficult to conclude from the information available for several reasons. The stocks give off the impression that, for the most part, HP treaded water while Fiorina was CEO. However, as a general rule, we can only use the value of a company’s stock as an approximate proxy for the company’s performance. Investors are legally not privy to much of what goes on internally and, even as an aggregate, may not assign a value that accurately reflects a company’s worth at any given time. Because of this, it’s impossible to conclude much besides the fact that HP took a disproportionately large hit from the Dotcom crash and that, possibly as a result, investors were pleased by Fiorina’s firing.

 

*I created all visualizations in this article using .csv files of historical stock data pulled from Yahoo! finance.

**I apologize for the blurriness of the visualizations caused by WordPress.