When Meg Whitman took the helm of HP in September, the company was in crisis.
Employees were openly angry.
When one of them warned her they would live blog one of her famous employee meetings, she replied, “You all have taken leaking to a new art form,” reports Fortune. “It’s a sign of an unhappy company. You wish HP ill.”
That guilt trip worked, the story goes. Employees put their smartphones down, stopped live tweeting and listened. They began to hope that Whitman would save the once-venerable company that still ranks at No. 10 on the Fortune 500 (with $127 billion in sales last year and $7 billion in earnings.)
It’s been about eight months and its time to face the facts. HP is still foundering.
Fortune’s article is an almost 8,000-word expose of how things got so bad. Based on that article and our own reporting over the months, we’ve distilled Whitman’s problems down to a few key areas.
HP is big. It's profitable. But its 2011 profits were 19% lower than 2010, reports Fortune.
The company faces long-term threats on most of its major lines of business: PCs are threatened by tablets/mobile devices, printers are threatened by online photo-sharing/electronic document sharing, Itanium servers are threatened by a lack of support from big software players like Oracle and so on.
'So far her strategy amounts to this: Let's execute better while we figure out our long-term plan. That's fine, as far as it goes. But the company will never come close to reclaiming its former glory unless she and the board can find a way to function together and, most important, until she can answer the real question: What is HP?' writes James Bandler with Doris Burke in the Fortune article.
Agreed. The only strategy she's announced so far is that HP won't do any of the radical changes that Léo Apotheker toyed with. It will stay, at its core, a hardware company.
At first, Mark Hurd's cost cutting measures were 'valuable and necessary,' Fortune says. But then it got ridiculous.
He made employees work from home and pay for their own Internet service, office phones, and other equipment. At HP's office in Fort Collins, Colo., the lights would shut off automatically at 6 p.m. forcing workers to go home. Wages were cut and an employee evaluation structure was put in place designed to deny increases, employees told us.
Whitman has amended many of these policies but during that time, many talented workers left. Until HP rights itself, it hasn't got the panache to lure young talent back again.
It's odd that HP chose Whitman at all. HP desperately needed an HP insider when it ousted Apotheker and Whitman didn't know much about enterprise IT or any of HP's other major businesses.
Heck, at the shareholder meeting in March, she didn't even know how old the company was.
Four internal candidates were considered for CEO instead: Todd Bradley (though scuttlebutt said that Bradley had made a lot of internal enemies), Ann Livermore, Tom Hogan, and David Donatelli, Fortune reports.
These folks were reportedly ticked when Whitman was hired instead. Now, Whitman appears to be setting up both Bradley and Donatelli as head-to-head heirs, with Bradley running the new massive $66 billion combined PC/printer group and Donatelli running the new Enterprise group which includes global sales.
As an outsider, Whitman has spent most of her time just coming up to speed. The same thing happened when HP hired Apotheker. 'Employee morale started to improve. Apotheker undid salary cuts that had occurred under Hurd. He held a series of town halls and breakfasts. He toured HP's labs and vowed to bring innovation back,' Fortune reported.
Sound familiar? That pretty much looks like what Whitman has done so far right down to promises to improve HP's innovation. Whitman has vowed to 'double down' on R&D spending. HP spent $3.2 billion on R&D -- 2.5 per cent of annual revenue -- in fiscal 2011.
Ray Lane held a lot of responsibility for Apotheker's disastrous run at HP. Lane had vouched for the guy and was in on decisions such as the massive $10.2 billion purchase of Autonomy, dropping Palm as a tablet strategy, the proposed spin-off of the PC business, Fortune reports.
Lane distanced himself from it all, blamed Apotheker and then landed as Whitman's co-leader, getting himself bumped up to executive chairman. He has since said that he's 'taking the training wheels' off of Whitman, but he hasn't given up the executive chairman role.
HP's first-quarter results were hardly stellar. The company reported non-GAAP EPS of $0.92 on revenue of $30 billion. It was a drop of 32% and 7% respectively from last year.
Whitman is a smooth talker but she didn't show a lot of humility when discussing a turnaround. 'I've done this a number of times in my career,' she told analysts on the earnings conference call. 'It's what great business leaders do.'
To Whitman's credit, she has tried to change HP's insane executive culture. She eliminated the gated, barbed-wired executive parking lot. She made HP execs give up their cushy offices and sit in cubbies.
Most of HP's dysfunctional board has been replaced compared to its worst years. Lane has vowed that the next HP CEO, whenever that happens, will come from inside.
And if things don't change, HP investors could get the unheard-of power to fire board members, too.