Carly Fiorina Out at HP: Why Her Big Bet Failed

Carly Fiorina Out at HP: Why Her Big Bet Failed
Buying Compaq hasn't paid off for Hewlett-Packard's investors. Not by a long shot. Now, nearly three years after the merger, there is still no easy solution to HP's problems.
FORTUNE
Wednesday, February 9, 2005
By Carol J. Loomis

Editor's Note, February 9, 2005: The chairman and CEO of Hewlett-Packard is leaving the company immediately, after being forced out by the board. "While I regret the board and I have differences about how to execute HP's strategy, I respect their decision," Fiorina said in a statement. Fiorina, one of America's most powerful women in business, had engineered the purchase of Compaq. As Carol Loomis's cover story from the February 7, 2005 issue of FORTUNE explains below, buying Compaq hasn't paid off for HP's investors. And there's no easy way out.

It has been just over six years since Carleton S. Fiorina, now 50, burst upon the national stage—and we will acknowledge straight out that FORTUNE played a role in putting her name in lights.

Back at the takeoff point, in 1998, she was the accomplished, high-energy president of Lucent Technologies' core business. FORTUNE, publishing its first-ever ranking of the 50 most powerful women executives in the U.S., put her smack at the top of the list. A line heading the accompanying article said, "It may surprise you that our No. 1 woman is someone you've never heard of."

That was the end of Fiorina's quasi-obscurity. Less than a year later she was named CEO of Silicon Valley's famous Hewlett-Packard. That post, making her the head of a company that now has $80 billion in revenues and is the 11th largest in the U.S., vaulted her to a level in the corporate hierarchy that a woman had never before attained. For years she had a near lock on first place on our annual list of women executives (though she was edged out last year by eBay CEO Meg Whitman). Her reputation bloomed, heading toward rock-star celebrity. She became one of the few businesspeople identifiable by her first name: She was just "Carly." Totally poised, she gave countless speeches; she became the only woman extant who never had a bad-hair day; she was the subject of endless rumors that she might move on to politics.

But celebrity, as everybody knows, isn't an achievement in itself. Beneath the public image are the yardsticks against which executives are—and should be—measured. So it is right to ask whether this whirlwind has succeeded. And inevitably that question must be answered in two parts. First, under the only lens that matters, did the famed merger that Fiorina engineered between HP and Compaq produce value for HP's shareholders? Second, with that merger nearly three years past, is HP in shape to thrive in its brutally competitive world?