September 28, 2011
HP board picks the wrong woman once more
And what makes overlooking Ann Livermore for a fourth time worse? Livermore is now a member of the board which chose Meg Whitman. So let the wisecracks about Whitman's eBay legacy begin -- like her being a natural to run a legendary firm now selling off its assets, considering her eBay CEO experience.
Livermore is a lifer at HP. She's never held a job anywhere else in almost 30 years of working. She wanted to lead HP after Lew Platt was invited to step down as CEO. Carly Fiorina was ushered in by Dick Hackborn's board with stock analysts in tow, then proceeded to marry HP to a computer business it now wants to divest. People are saying that Carly's impact on HP will be undone when the HP PC spinoff is renamed "Compaq."
Later, after Carly irked the board with no desire to share power, these HP leaders chose a man over Livermore, who was then running the largest part of HP's business at the time, services and enterprise technology. Mark Hurd went on a mission to burn the furniture at HP to keep the accountant's offices warm, slashing tens of thousands of jobs and R&D down to a level best suited for a company the size of eBay.
Which brings us to the latest HP managment error, the ascent of yet another wrong woman into the HP driver's seat. Not Ann Livermore, because now-dumped CEO Leo Apotheker had kicked Ann into the boardroom earlier this year -- during his brief honeymoon while the board was letting the software exec have his way with WebOS and other buy-ups. Hey, you couldn't promote anyone from the board to CEO, because that's never been done in the history of HP, right?
Wrong, by this week. Right alongside Livermore's seat on the board was perched Meg Whitman, the former eBay founder who paid $45 per voter (of her own money) to lose the California governor's race last fall. After 12 years of failing to do so, Hewlett-Packard has finally promoted from within once again. Just not very far within. It only matters to the declining share of companies who still believe HP's got a future in enterprise computing. If you're not yet migrated, it's not too late to change your target to a vendor with fresh gusto for enterprise computing. That might be Sun, by the looks of this week's processor news -- being made by Hurd.People have calculated that CEO Leo, whose term is the shortest of any non-interim CEO in HP history, made about $12,000 an hour in his 10-plus months as Dear Leader. He also led the company in swiftest fall from the respect of employees. That's pretty incredible considering how battered the HP workforce was after Hurd's ouster. Glassdoor's chart on CEO Leo's approval during 2011 looks like a map of the company's stock price over the year. His contract gave him a $25 million payout, another record for a departing HP executive. (Compaq's Michael Capella had the old record set up by Carly's board, at $22 million. Carly emerged at about $21 million.) There's stock options on top of that for all of them, but as many a 3000 retiree from HP noted last weekend at the Reunion, there's a whole new level of value in those assets.
Some people have counted up the exit packages given to these departed execs, and between Carly, Mark and Leo, the bill is about $83 million. Maybe a rounding error for a vendor who's booking $120 billion a year in sales, for the moment. But think about what $83 million might have bought HP, instead of a full-circle where Compaq is being spun off and new CEO Meg says the current management course is just right.
Back in 1999, when HP was deciding the future of the HP 3000's MPE/iX OS, someone had to prepare an estimate on what it would cost in engineering and testing to bring the fastest HP chips to the environment with the greatest legacy in company history. HP had tried to make HP-UX and MPE/iX boot up on the same system -- after all, just a processor dependent code string stood between turning the 3000 into the MOST project (Multiple Operating System Technologies). HP couldn't get that 1994 effort out of the labs, because it would have taken wind out of the HP Unix sails, billowing with cannibalized sales off 3000 sites. In '94 Unix couldn't compete with an established 3000 business, unless HP tilted the playing field.
Flash forward by five years, a period where HP spent no time engineering any advance off of PA-RISC and onto its clear future of Itanium. Customers were assured in 1997, and again in 1999, that nobody running a 3000 needed those new processors.
Through it all Livermore was there at HP, working at an executive VP level, during all of those miscues. She identified the 3000 in 2000 as a niche product with a bona fide place in the company's strategy. By then that strategy included operating environments Windows NT, Unix, Netware, and MPE for enterprise work. Within a few years the list would balloon to include VMS and Tandem/NonStop, plus the ill-fated Tru-64 from Digital.
There might have been tens of millions of spending in the way of getting MPE/iX to run with Itanium chips on a PCI bus. But let us pause and estimate how much $83 million might have done to get MPE engineered onto Itanium. The same sort of work HP did for its acquired OS VMS, after Carly's Compaq merger. The US defense department insisted on long-term VMS support, so HP had to comply or drop even more enterprise sites.
Oh wait. That Itanium adoption wouldn't have made that much difference in the Very Long Run. But the port surely would have made some members of this community more prosperous, though. Instead of the 10 years which VMS and NonStop has gotten to slide down the roller coaster of Itanium declines in the face of Windows and Linux, some of that decade might have benefitted from part of the $83 million of CEO bailout money.
It seems that stepping away from the HP 3000 was only the first of a decade's worth of HP mistakes, scattered across software, OS and hardware. Not to mention hiring decisions. There's little evidence -- much like Apotheker's annointment -- to confirm Meg Whitman as HP's savior. The company needs some kind of miracle to pull out the tailspin. With the company's stock under $24 a share, while posting billions in profits, its 5.5x stock price-to-earnings ratio makes it ultra ripe for a hostile takeover.
HP endured a takeover once before, after it began choosing the wrong woman for CEO. Fiorina executed a Hewlett-ectomy of the shareholders in a very close proxy vote of 2002. Now the company is owned by 70 percent institutional investors, who are just as unimpressed by Whitman as they were by Apotheker. He's a man who could mourn the loss of the HP Way, but wanted to do little to revive it into what he called HP Way 2.0. A plan as ephemereal as a PowerPoint software slide.
Enter Hurd, wingman for the ever-sharky Larry Ellison of Oracle. This week Hurd announced fresh funding and research to push Sun's SPARC to the fore of non-Intel business processors. Yes, SPARC is back from the dead, thanks to Oracle's spurning of Itanium. Sun will deliver a multi-generational road map next week. SPARC has the blessing of Oracle's database and app management, of course. With an announcement that might have some spending reality behind it, Oracle/Sun has committed to what only IBM desires to do: sell alternative enterprise environments which are not Linux or Windows. IBM has done this as regular as an HP CEO mistake, ever since it turned the System 36 into the AS/400 almost 25 years ago.
Whitman's got neither the experience to turn a battleship taking on water like HP, or the technical visions of a leader like Steve Jobs, to apply to her new work running Hewlett-Packard. There are still more than 300,000 people working at HP, but few of them bring so little insider experience to this daunting task. Livermore may not want this job like she did in 1999 and 2005, or even in the vacuum the board created during the ouster of Hurd just last summer. Nobody could blame her, and she's never cost HP a penny in a golden parachute after steering HP into low-margin icebergs or bleeding out top talent in personnel pogroms.
Not very long ago, HP invited the Stromasys technial management to restart an HP 3000 emulator project that was frozen by an HP legal team. Stromasys CTO Robert Boers, head of the company in 2008, said HP told him that 300,000 HP 3000s had been sold since introduction, and 90 percent of that base was gone to competitors by 2005. It didn't want to lose more of the remaining 10 percent. Perhaps $83 million might have kept 30,000 HP business servers running beyond 2005. It might have been proof HP wanted to be in the enterprise server business, rather than masquerading as the No. 1 computer company since 2001.
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