Jason Pontin's open letter to Carly in 2002, telling her to step down:

[David Farber <dave () farber net>]

------ Forwarded Message
From: Jason Chupick <jchupick () plesser com>
Date: Wed, 09 Feb 2005 11:06:26 -0500
To: David Farber <dave () farber net>
Subject: Jason Pontin's open letter to Carly in 2002, telling her to step
down:

Hello David,
 
I managed to dig up Jason Pontin¹s open letter to Fiorina that he wrote when
he was Editor of Red Herring back in 2002.  I thought IP would get a kick
out of it.
 
Full disclosure:  I handle PR for Technology Review, where Pontin is now
Editor-in-Chief.  The letter is pasted below.
 
Best,
Jason Chupick
212-420-8383 x108
 
 
OPEN LETTER
 
January 15, 2002 To: Carly Fiorina
From: the editors of Red Herring
Re: your departure
 
Dear Ms. Fiorina,
Please resign.
 
 You were appointed in 1999 to replace the boring if dependable Lewis Platt.
An outsider, you brought to Hewlett-Packard the cult of the celebrity CEO.
You said the right things: You promised Wall Street 15 percent annual growth
when HP (a sclerotic giant with $42 billion in sales) had seen its growth
dip below that figure in 1998. You predicted that HP would be a leader in
"the second phase of Internet." You assured employees that you would embrace
and yet reform the "HP Way"--the egalitarian, innovative, technologically
driven corporate culture that Bill Hewlett and David Packard created.
 
 You have not met any of these promises.
 
First, Wall Street has lost faith. Since you took charge, the company's
stock has tumbled 50 percent: nearly $4.8 billion in shareholder equity has
vanished. By contrast, the stock of IBM has declined only half as much. HP's
cost of sales has increased 19 percent from October 1999 to October 2001‹but
revenue has declined by 9 percent. Among your competitors, only Apple
Computer, Gateway, and Compaq Computer have done worse over a similar
period.
 
Second, under your management, HP seems unlikely to be a leader in the
second phase of the Internet--or anything else. For example, you tried to
copy the corporate-services successes of IBM's CEO, Lou Gerstner, by making
a pass at PricewaterhouseCoopers, only to see the $17.5 billion merger fall
apart. Good thing, too, because purchasing the
consultancy could not have made HP another IBM. IBM's services are so
attractive because, in addition to expensive servers, IBM sells software.
Fully one-third of IBM's profits derive from software sales. HP has--what?
Nothing. Your company earned a mere $1 billion in software sales in 2000.
 
Third, far from embracing and renewing HP's corporate culture, your personal
style has been comically at odds with the company's traditions. While a CEO
with a bodyguard and a Gulfstream IV jet (and tens of millions of dollars in
compensation) might be appropriate for some companies, at geeky, democratic
HP you have alienated everyone. The 6,000 layoffs you ordered profoundly
shocked a company that never laid off anybody.
 
At press time, you were struggling to merge HP with an even more stricken PC
maker, Compaq. You have defended the deal by saying it will allow HP to sell
higher-margin PCs and servers to corporations and help the company compete
in the coveted professional-services market. The William and Flora Hewlett
and David and Lucile Packard Foundations (which oppose the deal) have "other
concerns," you darkly hint, like "wealth stability." They offer no
alternative for HP's future, you complain.
 
Nonsense. Compaq is not a leader in high-margin computers and servers. Like
HP, Compaq sells commodity PCs. The merger cannot help HP sell services--HP
has no services business. And wealth stability is a perfectly valid concern
for shareholders
. . . No: the merger will only increase your dependence on commodity PCs
with their increasingly slender profit margins, while diluting the strength
of your successful businesses like printers. In any case, mergers of large
computer companies nearly always fail--as did Compaq's own merger with
Digital Equipment.
 
The merger is like two starving men agreeing to share a crust of bread.
 
 You say that your critics offer no alternatives? Here are some: HP's
mergers should aim to acquire technology, not "scale." Specifically, if HP
does plan to sell services and servers, it should, like Sun Microsystems and
IBM, sell software as a driver of those products. Why not buy a database,
data-storage, or server operating system company? And if HP hopes to be a
leader in the second phase of the Internet, it should invest more in
research and development and seize new markets in wireless technologies,
handheld
devices, and the Internet infrastructure that would link such devices
together. Your company's best chance is to embrace its own engineering
traditions.
 
Many have suggested that if HP's shareholders reject the proposed merger,
you will resign. But even if the merger is approved, you should leave. You
have badly damaged HP's morale, organization, and strategy. Please go.
 
 
 


------ End of Forwarded Message

-------------------------------------
You are subscribed as lists-ip () insecure org
To manage your subscription, go to
  http://v2.listbox.com/member/?listname=ip

Archives at: http://www.interesting-people.org/archives/interesting-people/