HP’s decline under Carly Fiorina stemmed from cultural disruption, a troubled mega‑merger, and alienated employees, while its later “rebirth” under Mark Hurd shows how the same merger could succeed with disciplined execution and quieter leadership.
HP before Fiorina
HP evolved from a respected engineering‑driven firm with 80+ semi‑autonomous units into a bloated bureaucracy losing ground to Dell, IBM, and Apple by the 1990s.
Employee expectations of guaranteed bonuses and resistance to change signaled that the original “HP Way” had hardened into an obstacle to competitiveness.
Fiorina’s strategy and missteps
Fiorina, a celebrated AT&T/Lucent executive but first‑time CEO, was hired in 1999 to unify HP and push it back to industry leadership.
She invoked the “Rules of the Garage” and consolidated ~87 business units to cut costs and speed decisions, but this rapidly built internal resentment.
Her centerpiece move, the $25 billion Compaq merger, was pushed through despite fierce opposition from employees, shareholders, and Walter Hewlett, who foresaw large layoffs and cultural damage.
The Compaq merger and fallout
On paper, HP and Compaq were complementary, promising cost synergies and PC scale, and initial headlines framed HP as the world’s largest PC maker with doubled revenue.
In reality, “doubling” mainly reflected adding Compaq’s sales: HP’s net earnings fell from about $3.1 billion (1999) to $2.4 billion (2005), in a low‑margin PC market where Compaq was already weakening.
Fiorina’s hard‑edged management style (“make your numbers or be replaced”) plus massive layoffs—eventually over 30,000 jobs—crushed morale and reversed HP’s historically high employee satisfaction.
Leadership failure and removal
Internal surveys showed widespread unhappiness with poor communication and implementation, and internal forums were shut down as they turned into spaces for attacking Fiorina.
By 2004 HP’s stock had lost roughly half its value, and in 2005 Fiorina was fired with a $42 million exit package; HP needed a reset in leadership and culture.
Hurd’s “Anti‑Carly” turnaround
Mark Hurd, an experienced turnaround CEO from NCR, adopted a low‑profile, execution‑first style, even working a day at Best Buy to understand how customers saw HP PCs.
He refocused marketing on personal computers (“The computer is personal again”), cleaned up business structures with clear accountability, and continued cost cuts, including ~14,500 more layoffs—but with more visible awareness of their human impact.
Under Hurd, HP’s stock more than doubled in the first years, revenue passed $100 billion by 2007, and HP held roughly 25% of the US PC market for the next decade.
Ambiguous legacy of Fiorina
The video argues Fiorina was a bad CEO in execution—destroying value, culture, and trust—yet her controversial Compaq merger created the scale Hurd later leveraged.
Responsibility is shared: the board hired a celebrity executive with no CEO experience into a structurally troubled firm at the peak of the tech bubble, then watched the stock jump 6.9% the day she was fired.
Discover more from Erkan's Field Diary
Subscribe to get the latest posts sent to your email.