Bloomberg
By Danielle Kucera
Sept. 23 (Bloomberg) -- Meg Whitman, who built her career at companies that sell shoes, toys and Beanie Babies to consumers, may be ill-prepared to lead computer maker Hewlett- Packard Co. as it seeks to cater more to large corporations.
Hewlett-Packard named Whitman, former chief executive officer of EBay Inc., as CEO yesterday when the board fired Leo Apotheker after less than 11 months. Whitman, 55, is charged with using her experience at the helm of EBay, the largest online marketplace, to further Hewlett-Packard’s push to pare consumer businesses and concentrate on enterprise sales.
Shoring up investor confidence and fueling a rebound in shares that lost almost half their value in a year may prove difficult for an executive who lacks experience in corporate turnarounds or sales to multibillion-dollar companies, said Frank Gillett, an analyst at Forrester Research Inc. Hewlett- Packard’s annual revenue of $126 billion is almost 14 times EBay’s, and its businesses span printing, software, technology services, storage, personal computers and servers.
“It’s not like she’s going to bring some insight that HP doesn’t already have,” said Gillett, who has covered the company for more than a decade. “She doesn’t have the experience of turning around a large tech-industry conglomerate where she has to understand a complicated portfolio of services and a large base of customers.”
Recipe for Trouble
Whitman, who has served as a Hewlett-Packard director since January, may also be stymied by the elevation of Ray Lane to executive chairman, a more active role that may leave the two struggling to share responsibility, said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. Lane is also a managing partner at Kleiner Perkins Caufield & Byers.
“Naming Whitman CEO and Lane executive chairman is a recipe for trouble, because in effect you have co-CEOs, which never works,” Elson said. “Every time you have strong leaders trying to share responsibility at the top, it doesn’t work.”
Hewlett-Packard fell $1.18, or 4.9 percent, to $22.80 yesterday on the New York Stock Exchange. The company’s shares plunged 47 percent from Nov. 1 when Apotheker, 58, became CEO through Sept. 20, the day before Bloomberg reported that he may be ousted. That’s the steepest drop by a stock in the Dow Jones Industrial Average in the same period.
Consumer Career
Whitman spent at least $141.6 million of her own money in a losing bid last year to become governor of California. Before entering politics and her time at EBay, the Princeton University-educated Whitman worked as an executive at Procter & Gamble Co., toy company Hasbro Inc., floral service FTD Inc., footwear maker Stride Rite Corp. and Walt Disney Co.
While chief of EBay from 1998 to 2008, she oversaw the company’s expansion from 640 employees in 1999 to 15,000 in 2007, the year before she stepped down. Whitman pioneered a website that gave thousands of small businesses and individuals an online storefront to sell goods, changing the way people did business on the Internet. She boosted EBay’s sales to $7.7 billion in 2007 from $86 million in 1998 and increased operating income to $2 billion from $12.8 million.
She joined venture-capital firm Kleiner Perkins as a strategic adviser in March, working part-time to coach companies in its portfolio. In an interview yesterday, Whitman said her experience is enough to prepare her for taking over Hewlett- Packard, which has a market value of $45.3 billion.
Software Buyer
“I have run a large company -- not obviously as large as HP, but I have run a very large company,” Whitman said. “While I don’t have years of experience in an enterprise business, I bought a lot of software. I was one of the largest enterprise customers in Silicon Valley.”
Still, Whitman must revamp a company with revenue streams that dwarf those of EBay, which reported $9.2 billion in sales last year, mostly coming from Internet auctions and payments products, according to data compiled by Bloomberg.
She will also have to choose whether to persevere with Apotheker’s plan to make Hewlett-Packard, the world’s largest maker of personal computers, less reliant on those very machines. Before he was fired, Apotheker was steering the company toward more-profitable corporate businesses such as servers, software and network services -- areas in which Whitman has little expertise, said Gillett, who is based in Cambridge, Massachusetts.
Consistent Focus
Hewlett-Packard, which has lacked a clear sense of direction, must better define a vision for its enterprise and services units amid the shift away from consumer products, said Shaw Wu, an analyst at Sterne Agee & Leach Inc. in San Francisco. A quick and more consistent focus is imperative as Hewlett-Packard takes on technology veterans such as International Business Machines Corp., Oracle Corp. and Cisco Systems Inc., which has become more competitive on price, he said.
Whitman will have to decide whether to follow through with a possible sale or spinoff of the company’s personal systems group, including PCs, Wu said. Apotheker said in August the company was weighing options for the unit amid declining demand.
Whitman had a mixed track record at EBay, where sellers conduct auctions for all kinds of new and used products, from cars and electronics to sports memorabilia and Ty Inc.’s Beanie Babies stuffed toys. She failed in her attempts to reverse a 43 percent share slump at EBay during her last three years at the company, said Chuck House, who left Hewlett-Packard in 1991 after 29 years.
Hewlett-Packard’s directors turned to Whitman as concern mounted about the stock price and its lack of improvement under Apotheker’s leadership, a person familiar with the situation said. Some top Hewlett-Packard executives also opposed the $10.3 billion agreement to purchase Autonomy Corp., a deal pushed by Apotheker, according to a person close to the situation.
Autonomy, Skype
House compared the Autonomy deal to Whitman’s three-way bidding war with Google Inc. and Yahoo! Inc. over Skype Technologies SA in 2005. She paid $2.6 billion for the international calling provider, only to write down the value by $900 million in 2007 before selling a majority stake in it.
“She has almost no strength in any single aspect of HP revenue today,” House, now the chancellor of Cogswell Polytechnical College in Sunnyvale, California, said in a telephone interview. “When she ran EBay, she stalled out and ran it into the ground. Apotheker bought Autonomy, and she bought Skype.”
To be sure, skills honed during stints at Procter & Gamble and Disney prior to Whitman’s tenure at EBay will be advantages in leading Hewlett-Packard, said Terry Connelly, dean of the Ageno School of Business at Golden Gate University in San Francisco.
“You’re bringing in a seasoned brand manager to confront a quintessentially damaged brand,” he said. “She’s proven to be an excellent communicator. The question is, will she be a good formulator of strategy?”
--With assistance from Aaron Ricadela in San Francisco, Carol Hymowitz in New York and John Helyar in Atlanta. Editors: Jillian Ward, Marcus Chan
To contact the reporter on this story: Danielle Kucera in San Francisco at dkucera6@bloomberg.net
To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net
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