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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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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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.


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.

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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1]  "HP boss emerges victorious," http://news.bbc.co.uk, May 3, 2002.

2]  "HP names Mark Hurd to serve as CEO and president," www.crm2day.com, March 30, 2005.

3]  Peter Burrows and Ben Elgin, "HP's new low-profile boss," www.businessweek.com, April 4, 2005.

4]  HP's financial year ended on October 31st

5]  Dollars ($) refer to US dollars in this case study.

6]  Compaq was founded in 1982 by Jim Harris, Rod Canion and Bill Murto, ex-employees of Texas Instruments. The company started out by selling personal computers. The company's first product, Compaq portable, a portable IBM-compatible PC went on to become a huge success. It entered the retail computer market with its Presario range of personal computers in the early 1990s. In the late 1990s, Compaq was facing stiff competition from Dell in the PC market. In 2001, the company entered into merger talks with HP and finally merged with the company in May 2002.


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