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Meg Whitman must love a good challenge.

When the former eBay chief executive was named CEO of Hewlett-
Packard (HPQ, +0.70%)on Sept 22, 2011, its safe to say that she, along with
everyone else on the planet, knew it would be no walk in the park.

And it hasnt been. She took charge of a 72-year-old company famous for
making oscillators and other test equipment, printers, PCs, and computer
serversdepending on the era. But it was also a business that over the last
decade had suffered from competition with low-cost providers, a massive
change in how hardware and software was sold, and a series of management
miscues.

It fell to Whitman to evaluate the companys current course, modify it as


needed, and execute on those plans. Oh, and even after years of layoffs under
former chief executives Carly Fiorina and Mark Hurd, more cuts were needed.
Just after Whitman started, HP had 349,000 workers at a time when the
profit margins on the companys bread-and-butter PC, printer, and server
businesses were under stress. As of the end of its fiscal year in October, 2014,
the combined HP had 302,000 employees.

The companys annual report published in December 2011, put it pretty well:

growing demand for an increasing array of mobile computing devices and the
development of cloud-based solutions may reduce demand for some of our existing
hardware products.
Many in the technology industry would argue that Whitman took on one of
the two hardest jobs in the businessthe other being chief executive at IBM,
whose revenue has declined for 16 straight quarters.

But in an interview with Fortune last week just before her fifth anniversary as
chief executive, Whitman said she has no regrets.

Things are always more challenging than you think theyll be, but we
provided some leadership stability, she said. Job one was engineering some
trust and stability.

The Problem

Hewlett Packard (HPQ, +0.70%) , born in a Palo Alto, Calif. garage in 1939, is
a Silicon Valley pioneer. In the 1940s and 1950s, William Hewlett and David
Packard built the technologies and the engineering culture that came to define
the rapidly growing computer industry. For decades the company helped
dominate the technology industry and employed tens of thousands of people.

But the years after the deaths of HPs founders in 2001 and 1996, respectively,
were defined by large acquisitions (Compaq, Electronic Data Systems, Palm)
that didnt work out. In addition, there were what sports analysts would call
off-the-field problems like a 2006 pretexting scandal in which HP hired
private detectives to snoop on reporters in hopes of ferreting out corporate
leakers. (That particular debacle cost Patricia Dunn, HPs chairman at the
time, her job.)

The arrival of SAP veteran Lo Apotheker, Whitmans immediate predecessor,


in 2011 seemed to mark a new chapter in the companys history. Apotheker
launched an aggressive plan to turn HP, for much of its history a company
defined by hardware products, into a company focused on selling software to
large corporations.

His decision to buy Autonomy, an enterprise software company based in


England, for more than $10 billion to hasten that transition was perceived as
wildly overpriced. (He also pondered spinning off HPs well-known PC
business.) Apothekers moves left HPs employees, partners, customers, and
investors concerned about the companys strategy and future. And so, eleven
months after he replaced ousted chief Mark Hurd, Apotheker was shown the
door and Whitman, then a board member, was named chief executiveHPs
third in three years. (No wonder HP investors had heartburn.)

And so, Whitman took the corner office at a tumultuous time not only in the
companys history but in the technology industry at large. The lucrative
enterprise divisions of techs biggest players including IBM, Dell, and EMC,
were under tremendous pressure to move their products and services to a
cloud-based model. The rise of Amazon(AMZN, -0.47%) Web Services had
changed the way companies used and paid for technology. Why buy a fancy
HP server for your companys data center, technologists now asked, when you
could just crunch your numbers on a rented server in an Amazon facility, for
less?

The resulting modeldubbed the public cloudrepresented an existential


threat to any company selling hardware to large businesses. And HP, already
distracted by its own internal issues, had to confront it. The public cloud
taught the industry about simplicity and ease of use and a new consumption
model, Whitman said. It was both a technology and business model
innovation.

So Whitman mulled her five-year turnaround plan and got to work.


The Proposal

Whitman arrived in Palo Alto with a steady hand. (Some reporters privately
referred to her as the analyst whisperer because she seemed to soothe jittery
Wall Streeters on earnings calls.) She promised operational savvy thanks to
her eBay days. She urged patience for her multi-year turnaround plan. And
she acknowledged past missteps.

We havent done anything stupid in the last four years, she noted on a
September 2015 analyst call, and we dont intend to do anything stupid in the
future. (These remarks came four years and one month after HP announced
the Autonomy deal.) HP insiders still refer to August 18, 2011, the date that
the Autonomy deal was announced, as a dark day in the companys history.

Whitman did not immediately repudiate that deal when she took the reins.
But by November 2012, she said Autonomy executives had misled HP about
their business and called for a fraud investigation. At about that time, HP said
it was taking an $8 billion write-off related to Autonomy.

It was a difficult dance, said one former HP executive. I dont blame her for
not raising questions earlieryou cant have management publicly
disagreeing on strategy right out of the box, he said. Still, Whitman was on
the board that approved the Autonomy deal. This former exec nonetheless
gives her high marks on her stewardship. Im not sure anyone could have
done better.

Whitmans five years have been marked by repeated rounds of layoffs and
reversed product decisions. HP first sought to double down on tablet
computers, which were then considered the next great computing platform; it
then quickly changed course.
Whitman began her tenure with a pledge to retain HPs printer-and-PC
business, which Apotheker wanted to jettison; three years later, responding to
what she called an industry changing at lightning speed, she changed her
mind. In November 2015, Hewlett Packard cut itself in half: HP Inc., led by
Dion Weisler, would focus on printers and PCs while Hewlett Packard
Enterprise (HPE, -0.46%) , led by Whitman, would pursue cloud computing,
data center hardware, and software.

That bifurcation would make both companies more nimble, Whitman argued
then and now. HP Inc.s recent acquisition of Samsungs printing business
would never have happened with a combined company, she said. Wed have
never paid a billion dollars for that printing business, she said. But HPI paid
a billion to consolidate the laser printing industry and that is genius for
them. (Whitman is chairman of HP Inc.s board.)

Critics say the moves reveal a lack of direction; boosters say its pragmatism
on Whitmans part to change course when conditions themselves shift.
Whatever the case, changes continue at Hewlett Packard Enterprise, or HPE.
Last May the company executed a spin merge of its enterprise services
business into CSC (CSC, +0.00%) . Earlier this month it did the same thing
with its software business,offloading most of its lineupincluding
Autonomyto Micro Focus. The moves reduced HPEs annual sales from $50
billion to $28 billion but give HPE shareholders 50% ownership in both CSC
and Micro Focus. Meanwhile HPE shareholders will get a total of $4 billion in
cash from the two deals.

In every business, we will benefit from a smaller number of product offerings


that we can invest in, Whitman reportedly said at an analyst meeting in 2012.
Or a smaller number of businesses altogether.
Whitmans continued slimming of HPE has stoked talk that it could now be an
attractive acquisition target for private equity companiesthat have been
emboldened to spend big money on technology providers. (Apollo Globals
recently announced plan to take Rackspace private in a $4.3 billion deal is a
recent example.)

The Results

Investors should be pleased with Whitmans unraveling of the former Hewlett


Packard. Last Thursday, shares of her Hewlett-Packard Enterprise hit a 52-
week high of $23.53, up just over 62% from $14.49 per share when HPE
started trading on Nov. 2, 2015. Meanwhile HP Inc. has been trading at
around $15, up slightly over its $13.83 price on the day of the split.

Indeed, much of what Whitman has accomplished over the last five years
involved reversing what her predecessors didor unlocking value, as so many
financial analysts call it. What remains to be seen is whether Whitman can
turn HPE into a force of its own. As early as 2012 HP said it would take on
Amazon directly with a public cloud of its own, but dropped those plans last
year.

On the one hand, Whitman inherited a huge messAutonomy, the services


business, the software business, said one longtime HP watcher who
requested anonymity. But her cleanup of that situation hides HPEs impotent
cloud effort. She stuck with a bad strategy and bad executionprivate cloud
and a small bonsai public cloudbefore pulling the plug, he said.

Others say Whitman has managed a tough transition well. Dana Gardner,
principal analyst with InterArbor Solutions, a research firm that also consults
for HPE, said the company has weathered rough weather and come out the
other side.

Not only was this a challenging time for HP, but it was for the entire
industry, he said. Its hard to think of a period thats been more disruptive
to tech than the last five years.

Perhapsbut in the meantime some of HPEs competitors have gotten larger,


not smaller. The merger of Dell and EMC resulting in Dell
Technologies (with $74 billion in combined sales), Amazons continued cloud
dominance, Microsofts resurgence, and Googles increased investment in
enterprise tech means Whitmans outlook hasnt gotten any easier.

Many people dont expect Whitman to stick around much longer. With a new
U.S. president around the corner, there is talk that her next step could be
into a cabinet positionSecretary of Commerce? Treasury?for Democratic
nominee Hillary Clinton, should she win the election, leaving Whitman to
declare victory at HPE and move on.

Asked about her plans beyond Hewlett-Packard Enterprise, Whitman


deflected. (After all, she did pick up some political tricks while running for
California governor in 2010.) Her work at HPE is not done, she said. I feel
were making real progress but we have some planes to land, she said. We
have to separate out enterprise services and software and make sure the
remaining company strategy is robust.

Whitman did not rule out smaller future acquisitions, pointing to HPs
acquisitions of 3Com, 3Par, and Aruba as examples of purchases that have
paid off big in terms of expanding HPs networking and storage businesses.
(She expects the pending SGI acquisition to be equally as fruitful.)
In the meantime, running HPE is way more fun than it was five years ago,
Whitman said.

It was a lot of things five years ago, she said, but fun wasnt one of them.