HP's Strategy and Operations under Carly Fiorina and Mark Hurd
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Case Details:
Case Code : LDEN042
Case Length : 19 Pages
Period : 1999-2006
Pub Date : 2006
Teaching Note : Available
Organization : Hewlett Packard Company Industry : Computers and Information
Technology
Countries : USA
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"I think the company's success will by my legacy. The
company's failure will be my failure, with all the predictable consequences of
that."1
- Carleton S. Fiorina, former CEO of HP, in 2002.
"HP is one of the world's great companies, with a proud
history of innovation, outstanding talent and enviable positions in many of its
product lines and services. It's a great honor to join its leadership team and
have the opportunity to build on its success."2
- Mark V. Hurd, HP's CEO, in March 2005.
"She (Fiorina) was a "celebrity CEO" known for her sales
and marketing flair, Hurd is a low-profile, no-nonsense operations whiz. While
many at HP felt Fiorina didn't mix enough with the troops, Hurd is known to walk
the halls chatting with employees as he goes to get coffee."3
- BusinessWeek, a prominent business magazine, in 2005.
Introduction
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In May 2006, Hewlett Packard Co. (HP) announced its second quarter results for
the fiscal year 2005-20064. The company
posted revenues of $22.6 billion5 - a five
percent increase over the revenues in the comparable quarter of the previous
fiscal. Its earnings per share (EPS) for the quarter also shot up to $0.54
(later revised to $0.69, to include a favorable settlement in a prior period tax
audit), from $0.37 in the second quarter of 2004-2005. The 2Q 2006 results were
received well by investors and industry observers, because HP's financial
performance had been unsatisfactory right from fiscal year 2002. (Refer to
Exhibits IA and IB for a snapshot of HP's quarterly and annual financial
results).
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As a result, the performance of HP's shares on the stock exchange had also
remained lacklustre (Refer to Exhibit II for HP's share price from 1997 to
2006). HP's poor earnings since 2002 were attributed largely to the effects
of its much hyped merger with Compaq Computer Corporation (Compaq)6
in May 2002.
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The merger had been led by the company's then CEO, Carleton S. Fiorina (Fiorina),
and was the largest merger in the computer industry at that time. Analysts
said that the merger had not yielded the desired results because Fiorina had
not been able to manage the operations of the combined company effectively.
In February 2005, Fiorina was asked to resign by the HP board. After Fiorina
left, the board appointed Mark V. Hurd (Hurd) as its new CEO in March 2005.
Under Hurd's management, HP's earnings started showing signs of improvement.
The company's share price too was beginning to show an upward trend. In May
2006, HP was ranked # 11 on the Fortune 500 list of the top 500 companies in
the United States (as measured by gross revenue). |
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