Thomas White Global Investing
Global Players

Global Players

February 2012

Meg Whitman, CEO, HP


“If you ask me who I am, my first response is I am my mother’s daughter.”

— Meg Whitman


Meg Whitman was a particularly studious child in school. But she learned her life’s most important lessons at home from her mother, Margaret. One of Meg’s favorite stories about her mother dates back to the War era when “the feisty woman, despite being a homemaker who had never looked under the hood of anything, learned to repair jeep and airplane engines in New Guinea” just to be able to contribute to the war effort. In everything she did, Margaret Whitman demonstrated to her children one simple philosophy — to believe without the slightest doubt that they had the potential to accomplish anything they desired.

This is a credo Meg Whitman is likely to take to heart during her difficult journey ahead as the new CEO of Hewlett-Packard (HP). After all, the iconic technology conglomerate, which is universally recognized as the symbolic founder of Silicon Valley and its culture of innovation, has rarely seen a more tumultuous phase in its 70-year history. For over a decade now, the company has not been able to stay the course, changing its principal growth strategy faster than perhaps even its product upgrades. In 2002, HP, under then CEO Carly Fiorina, purchased the PDA and computer hardware maker Compaq for $25 billion in order to position itself as a major player in the commodity-PC business. Six years later, it shifted tracks and bought data-processing manager Electronic Data Systems (EDS) for $13.9 billion. Within the next three years, the firm changed its mind again, this time deciding to abandon its personal computer business and switch gears to expand into the software space, aggressively snapping up U.K.-based Autonomy Corp. for $10 billion.

While HP has appeared to be at sixes and sevens all through the past decade seemingly due to the lack of a vision, the controversies surrounding both its CEO and chairman, which surfaced in 2006 and 2010, have also chipped away at its reputation as a company that had once famously propounded “The HP Way,” a set of operating principles for corporations, including the promise of “uncompromising integrity.” Not surprisingly, therefore, when Whitman took over the helm at HP in September last year, the company’s predicament was mirrored not just in its share price but also its leadership history. Whitman had become the company’s fourth CEO in just 12 years. In fact, the third one and her predecessor had left in less than 11 months.

Under these circumstances, the burden of expectations on 56-year-old Whitman’s shoulders is heavy. Not only do the HP board and employees expect her to end the string of executive failures, but they also look to Whitman to provide the leadership that is key to the company’s turnaround strategy. Adding to this string of hopes, shareholders undoubtedly are anxious for the company to return to growth quickly and begin creating value again.

However, these are broader goals, and to achieve them, Whitman has a number of specific objectives to fulfill. Perhaps most importantly, she must first devise a clear revival plan for HP and then communicate the nuances of the strategy across the vast and diverse company, which sells everything from computer, printing and imaging hardware to software, services and enterprise equipment. Secondly, the company has large and powerful rivals in the technology sector, who have been strengthening their positions steadily while HP has been dealing with its controversies and mistakes. For instance, the firm is just a minor player in IT consulting, a highly lucrative segment where technology companies make money by helping corporations streamline their operations. In order to simply begin catching up with the major players in the space, such as IBM, HP needs to develop expertise across diverse industries, from finance to pharmaceuticals.

Interestingly, Whitman’s appointment as CEO and turnaround agent is a high-stakes gamble for not just HP but also for Whitman herself. She already has considerable standing in Corporate America, having been the CEO of eBay from 1998 to 2008, a time where she is credited with transforming the company from a 30-employee, $4-million-revenue business to a 15,000-employee, $8-billion-sales behemoth. She is quite a celebrity even outside corporate circles, thanks to her image as a highly qualified woman with degrees from Princeton and Harvard universities, who has become a billionaire on her own steam. Sundry titles such as the “Harvard Business Review’s 8th Best Performing CEO of the Past Decade” and “The Financial Times’ 50 faces that helped to shape the decade” have added to her aura.

But there are some blots on this certificate of success Whitman likely wishes to remove. As CEO of eBay, she was criticized for the eCommerce company’s disastrous acquisition of Skype. And most recently, her foray into politics as a candidate for California governor in 2010 ended in a humiliating failure, despite Whitman’s personal expenditure of $140 million to further the campaign. Whether or not Whitman herself views these setbacks, the successful turnaround of HP on her watch would certainly blow away the cobwebs on her trophy of achievements.

To give her credit, Whitman has begun the process of revitalizing HP in right earnest. The mother of two, who is married to a neurosurgeon, has asked all her top executives to abandon their office rooms and move into cubicles to facilitate better communication between personnel and the various arms of HP. According to one Barron’s report, she has also been spending a great deal of time talking and listening to colleagues, a practice said to be quite contrary to the aloof demeanors of her predecessors. And in one of the most important steps she has taken since joining, Whitman has renewed focus on HP’s Research & Development division. Barron’s goes on to report in its article that before Whitman’s time, the division was neglected as a “cost center,” something which has now affected HP’s ability to innovate.

Nonetheless, these are just baby steps, albeit in the right direction. Given the leadership deficit HP is believed to have suffered over the past several years, nobody, least of all Whitman, doubts that there are unknown hurdles ahead on the path of its revival. But, then, Meg Whitman has been trained early to relish the challenge.

 

 

 

 

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