Meg Whitman is unjustifiable choice for HP

September 23, 2011

By Robert Cyran
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Hewlett-Packard’s board just can’t get out of its own way. Appointing Meg Whitman to run the company is the latest example why. The former eBay boss only became a director earlier this year. The feckless body has already ousted three previous outsiders, including most recently Leo Apotheker, damaging HP each time along the way. But that’s not the only reason choosing Whitman as CEO is almost completely unjustifiable.

It’s not that she doesn’t come with a reasonable track record. Whitman turned eBay into one of Silicon Valley’s bigger successes. In addition to growing the online auctions business, M&A played a part. While the acquisition of Skype was a dud, buying PayPal proved a masterstroke.

But there are blemishes, too. Whitman quit the board of Goldman Sachs in 2002 after it emerged she had been given shares in scores of hot IPOs led by the bank, and quickly dumped them for gains. Goldman also had been providing financial services to eBay at the time.

Experience, however, is a bigger problem than judgment. Selling hardware to companies is HP’s sweet spot, yet Whitman’s background is almost entirely consumer-oriented. Among her former employers are Procter & Gamble and Disney. Fixing a lumbering giant is also radically different than growing a spry upstart.

After all its troubles with newcomers at the helm, it defies logic that HP directors didn’t recruit from the inside. It isn’t as if they lacked for candidates. Give Whitman credit, though. Her powers of persuasion apparently swayed the board. She’ll need them to run HP.

The company’s problems are long-standing. Gross margin, a proxy for pricing power, has been falling for a decade. A history of fetishistic cost cutting has left employees disheartened. The firm’s storied R&D program is a shadow of its former self. HP is embarking on a radical transformation. It will take more than smooth talking to work through it all.

Though Whitman doesn’t seem to possess the skills to turn the company around, presumably all the HP directors have met her, which is more than can be said of Apotheker, as was recently disclosed in the New York Times. And if the board stays true to form, she also might not be around for long.

Comments

Other than selling tablets at below cost, HP isn’t making many waves in technology. Odds are with Whitman it can disappear with only a few bubbles. Still, Larry Ellison is probably arrogant enough to do anything, including buying HP at a discount in 2 – 3 years, so the name may survive.

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Bizarre analysis

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