Vacancy at Hewlett-Packard
I’m sorry to have been so out of touch lately. The Startup Tour continues, of course, but this week I also have an Op-Ed article appearing in Sunday’s New York Times that I had to write. It is about Google and Verizon and may give a new perspective on recent events between the two companies. Look for it.
This week brought two other news events worthy of comment — Intel’s settlement with the Federal Trade Commission and Mark Hurd’s sudden departure as CEO from giant Hewlett-Packard.
The Intel story is almost as it is being presented in the trade and general press. Yes, Intel has promised in very specific ways to no longer be evil. No, Intel isn’t being made to give back the money it made as a result of being evil, so to a certain extent crime does pay. Of course some will say the money damages were in part covered by Intel’s recent $1.25 billion settlement with AMD, but the FTC also doesn’t generally impose fines. So if you happen to be guilty of anti-trust I guess it is better to be sued by the FTC than by the DoJ, which does impose fines.
Either way, Intel got away with something and the graphics chip makers in particular should be pissed.
One area where I think the press has it wrong, however, is in its interpretation of Intel’s promise to preserve the PCI Express bus. Third-party graphics cards use this bus and the fear of those companies is that Intel will simply replace PCI Express with some incompatible bus, making the third-party GPU chips and boards obsolete in the process. Now with the new FTC agreement they are promised at least six years before Intel deep-six’s PCI Express.
If only it were that simple. What the agreement actually says is that Intel has to preserve PCI Express for six years but not that it can’t introduce a new — and incompatible — graphics bus.
And that’s exactly what Intel will do. They’ll keep PCI Express but then add a new bus that’s wider and faster and generally better all-around. Even a mediocre Intel GPU that works on the new bus will have more than a fighting chance against NVIDIA or ATi (AMD) cards that work only with the older bus.
Why doesn’t the FTC see this? Because when it comes to the technical internals, they are stupid.
And speaking of stupid, super-smart HP CEO Mark Hurd got the boot this past week for filing improper expense reports and hitting-on a marketing consultant. There is no doubt that Hurd is (was?) the best big PC company CEO of his generation, a true genius who brought HP back not from the brink as Steve Jobs did at Apple, but back a long way back to PC market dominance while Dell self-destructed in response. But Hurd also appears to have had few friends at HP or he could have ridden-out this boneheaded thing or at least held on a bit longer.
Brilliance combined with power can lead to isolation and eventually to arrogance. Hurd was arrogant.
I recall being asked to make a film for HP in the early days of Hurd’s reign and the people I spoke with fairly high up in the company were afraid of the guy. And now he’s safely out of the way so HP can return to sleep if it chooses.
I’m not saying Hurd should have stayed, just that his departure probably was worth the 10 percent drop in market cap that followed the announcement of his resignation.
The best way for HP to recover from this is, of course, to find a CEO even better than Hurd. That’s exactly what they did the last time, when Hurd replaced the hapless Carly Fiorina.
It will be much harder this time for HP to do the same.
10% drop in share price, I’d say we are getting screwed as well as Hurd. Now that is something that going to take a lot to swallow…
now we know why the vapourware above us issued those ethics emails so often.
I doubt HP will suffer in the long term from a change in CEO. In the short term, the hangovers and celebrations might slow the company down for a day or so.
Well, kudos to the board for shuffling him out quickly rather than letting the thing drag on. Every indicator is that they wanted this to be OVER as fast as possible:
a) announce Friday afternoon so it dies down over the weekend.
b) pay a severance to Hurd rather than fire him for cause.
c) Hurd had already negotiated a settlement with Ms. Fisher, so the whole thing was probably done as a package.
Yeah it sucks that Hurd gets $30-40M and early retirement out of this behavior, but both the booth babe and his (soon to be ex?) wife will get their cuts out of that. And it’s a drop in the bucket for HP itself. The publicity from a sexual harassment lawsuit or a wrongful termination lawsuit would have been even more expensive.
This might work out in HPs favor in the long run, too. HP is due for a consolidation after swallowing up EDS, 3Com and Palm. Hurd’s instincts for growth through acquisition are great, but what else is there to buy? Nintendo?
No prizes for guessing new (unimaginative) CEO will kill or sell off Palm.
Words to the wise: Do not dip your pen in the company ink.
“but not that it can’t introduce a new — and incompatible — graphics bus.”
Too much potential harm to public interest and to the market if FTC enjoins chipzilla against innovating a graphics bus for six years. What FTC should have done is require intel to publish any new bus design (or any interoperability change) a year before implementation, and subject to reasonable challenge and modification.
AMD is probably covered as they can upgrade the GPU’s on their Fusion cores. How about a quad or 6 core CPU combined with the equivalent of an HD5870 on-chip with a direct (multi-lane?) hyperTransport output to a video multiplexor module in the chipset. That module only directs the data stream to the appropriate graphics port so it will be fast as hell.
With this type of direct connection, you could make room for the video multiplexor by ripping out a few lanes of PCIe from the chipset as you would no longer need them.
nVidia might be able to pull of something similar from the GPU side by updating their graphics compute capabilities to full-blown x86 compatibility, but they have a lot more hurdles to overcome to convert their architecture to replace the CPU and integrate the new CPU into a hardware platform that doesn’t violate Intel or AMD patents.
Boy… You just don’t get it… yeah, he diddled the help but so what?
Mark had cut HP to the bare bones. There’s nothing on the horizon for new, innovative technology. The best & brightest have left — because they can.
Common, Bob. You’re smarter than this! You’ve covered technology for decades… He’s not leaving because of a sex scandle. Although that is a convenient exit strategy… He’s leaving because he has nothing left to cut without exposing vital organs. Sex scandles happen all the time — “I’m sorry. I did it. I’ll pay…” No big deal. People weather these storms all the time.
Sheesh. Frankly, I’m disappointed.
Eric’s right – HP may be making money but they’re like a whorehouse that makes money by selling off the girls one by one. There’s very few people left in the company who give a rats ass AND are technically competent. Carly started the rot and Mark continued cutting everyone and everything that a bean-counter saw as not contributing to his personal pay-packet. With a golden handshake at the end, who really gives a damn about the company? Clearly not the CEO.
Simply put – HP used to make a lot of stuff that I bought … 20 years later I buy nothing from them other than a few printer cartridges and, when the printer dies it will not be replaced by an HP printer. It’s sad because I used to love that company.
IBM has been doing this for years. I find it amazing how long a company of the size of IBM or HP can operate in the face of such severe cuts — decades.
When a firm starts cutting the first thing you notice is often a boost in productivity. There are always a lot of folks who really do not contribute enough to cover their pay checks. When you get them off the payroll, expenses drop, profits increase.
The next step is to find the weak lines of business and get rid of them. Most firms have lines of business that are not as profitable as others. They tend to average out the balance sheet and dilute the profit of the better divisions. If you are planning for the long term you want a balanced portfolio of products and services. Its like the advice they give you for your investments — diversification! In a diversified company, you always make “good” money, but never great money. Wall Street hates this. They prefer you keep the most profitable lines and get rid of the rest. Then when the economy sours, you have nothing to fall back on.
At some point it is time to stop cutting, but most firms continue on cutting into muscle and brain cells. The sad thing is most firms can continue to operate for years without them. Usually those folks DO make the company serious money. Years later when they are gone, something happens and their absense loss hurts the company.
The bottom line is Wall Street does not care if your company is unable to operate next year. The LOVE to see increasing profit. That runs up the stock price and they make money. The reward CEO excessively when that happens. With feedback like that, CEO will continue to cut. Rest assured the moment a firm faulters, Wall Street will dump their stock long before any of us know about developing problems.
To Wall Street Mark Hurd was great. Since they were the ones paying his salary, no other opinion really matters.
I’m not sure I buy this argument. Both the memristor and the (alleged) proof of P != NP have come out of HP. Both are pretty fundamental research projects that have come to fruition in the past couple of years.
Eric is right on. Leave before the house collapses.
Of more concern to me, not caring a fig about graphics, is how much impact ditching or ignoring PCIe will have on those SSD vendors who’ve designed to it????
Bob,
We were all hoping that you would have the name of Mark Hurd’s friend, that is the one “I did not have sexual relations with that woman!”
Perhaps, this revelation will be in tomorrow’s NYT Op-Ed?
Cheers, Jacob
named were named today on other rumor sites.
the name appears to be a former softcore ‘actress’, and reality show (as a ‘cougar’) participant.
and her role was primarily as greeter at corp functions.
Daring Fireball is pinging on explicit inclusion of the adjective of “we did not have a ‘intimate’ sexual relationship,” from both sides.
The fact that Gloria Allred is involved makes this more of a TigerWoods style tawdryness, than a ‘false expense report’ gone bad. Cringeley’s assessment of having few friends appears to scream out at the fact that they wanted him out, as the bad press was not worth him being around anymore, Market Value be Damned.
What got him tossed wasn’t his diddling, but the fact he diddled on the company’s dime. This guy was negotiating a 3 year $100 million contract, and he expensed maybe as much as $20,000 of his dalliance to the company?
These CEOs expense their dry cleaning, their kids schools, their car, and their paramour’s apartment to the company? What do they do with they do with the money they actually get paid? Take baths in it like Scrooge McDuck?
I’ve often wondered what the top execs do with their own money when the company pays for so much of their personal expenses. Thanks, David W., for posing the question and proposing an answer that provided a chuckle.
I bet the pretentiousness of the $100 million/3 year contract he was negotiating annoyed more than a few people at HP.
Hi Bob,
There is no “contact me” email on your blog . . . but Papermaster is out of Apple. I remember the entertaining post you ran when Steve brought him in . . . .
https://www.computerworld.com/s/article/9180378/Apple_s_head_of_iPhone_engineering_out_after_Antennagate_?taxonomyId=12
For those of you that missed it, this was the original Cringely story I was referring to: https://www.pbs.org/cringely/pulpit/2008/pulpit_20081107_005502.html
I doubt if it was the dime or the diddling. The dime was nothing to the company and the woman herself maintains “I did not have sex with that man”. Bob’s explanation, unpopularity, is the only one that makes sense. That and the speculation that he just wanted to retire with a huge payoff.
Regarding the Google-Verizon net neutrality issue, it looks like Google and others may be willing to pay for priority service after all. The payment consists of paying sepcific telco expenses. The definition of net neutrality should be expanded to allow this type of payment only if it benefits all internet traffic equally. In other words, the data centers become telco property for caching all internet traffic on a non-preferential basis.
Brilliance doesn’t need to be combined with power to lead to isolation. Brilliance alone can lead to isolation, and isolation surely leads to loneliness more readily than arrogance. Everyone agrees he accomplished a lot. No one can take that from him.
Would Papermaster and/or Rubenstein be able to run HP profitably? The former just exited Apple and the latter is already at HP.
Could the next CEO be able to rehire the whores fired by Hurd or have all of the whores already left town and found better Johns?
Who knows? Papermaster didn’t do well at Apple, but perhaps it was a culture clash (or a personality clash) and he would do better at HP.
I wonder if Tony Fadell is available?
Okay, I’m a little behind the curve business-wise when it comes to IT lately.
What exactly did Hurd do that was so brilliant.
All I know is that he
-CUT CUT CUT, which almost any turnaround person can do, (just read the business publications about Chainsaw Al Dunlap)
-Raised ink prices while simultaneously dropping printer prices (and quality)
-Charged for services as a revenue model
-Bought Palm stuff
Personally, I thought the whole MS Courier form factor/model was a good idea. HP released it then killed it or ??
Did he actually do anything that was really brilliant, or ?? I’m not being sarcastic. Please educate me.
Brainer
Well setting aside the question of whether Hurd was brilliant or not, turnaround cutting is not that easy – if you want to do it well that is, and Hurd did it well. You have to know what to leave alone to know what to cut. Ask any surgeon.
Cutting is all relative.
The only reason why it looks good right now is that the economy has been in the tank, and the people are stuck waiting for the job market to turn. Once it goes, there are a lot of signs of a mass exodus in services alone. It’s almost as if HP/EDS management expects people to leave –and then return– to get the raise they want. Except that isn’t how things have been done at HP in the past.
HP/EDS sales people are still promising the moon and then demanding that people achieve it on reduced resources. Salaries have declined, whether incrementally or by virtue of a sudden hacksaw method, and boatloads of services people haven’t had a decent raise the past decade. Additionally, most of the institutional knowledge in a lot of these services accounts will disappear when people jump ship for greener pastures.
Management doesn’t see these gaps, but only the margins and the numbers. When management also takes up the bulk of the bonuses and raises, that leaves a very disgruntled workforce.
Hurd’s successor will be left the job of cleaning up after everything hits the fan when the economy turns.
It gets even better. The message to the employees this morning was: Mark’s policies are good, we’re not changing them. The 2011 plans are in place and they’re not changing either. Stay the course and keep your nose to the grindstone! So they get another year’s worth of Hurd squeeze until it bleeds policies without paying him a dime (well, OK, only 12.2 million plus the cost of extending all those options beyond what should be their expiration date….). From their (unimaginative) viewpoint, it just doesn’t get better than that!
But beware the economy turning, which it will. I don’t know of anyone (other than people who are close to retirement) who isn’t spring loaded to leave as soon as the getting is good. The execs may claim that turnover is low, and that they compensate at “industry norms”, but few that work there believe that. And they are mostly prepared to vote with their feet. The “HP way” no longer exists in the form it used to, and it is now a commodity company, not an innovation company.
Good luck with that.
Until wages and costs in India and China rise enough to bring the market into balance, any “big company” jobs are going to come from there.
So you will either be starting your own company or working at a small business with greatly reduced bennies. Or working for the government with a slightly reduced salary.
Let’s just say his acquisition strategies went far more smoothly than Fiorina’s acquisition of Compaq. Plus, you can see how the acquisitions fit together in a synergy to go head to head with IBM and anyone else in the industry. Some of his “brilliance” is by contrast to Fiorina’s bumbling of the Compaq deal, but a five year run of outperforming the industry is pretty impressive.
“…he could have ridden-out this boneheaded thing or at least held on a bit longer.”
Just love that double entendre, Bob! Keep it up!
Bus? Intel’s Core i chips put the GPU on die with the CPU.
What kind of incompatible external bus would be useful here?
I’ve been looking closely at the words of the actress Jodie Fisher and Mike Hurd (and their attorneys).
* We know these facts: She sued him for sexual harassment.
* He paid her an undisclosed sum.
* Both claim that no sexual relationship was involved.
The problem, of course, is that most sexual harassment suits don’t involve sex. These are situations where the sexual situation makes one of the parties uncomfortable. It might include unwanted advances or lewd behavior that makes one of the parties uncomfortable in the business climate.
My take is he wanted to make the relationship a bit more personal, and she said “no”. He then ended her contract and she sued. No sex was involved because Jodie didn’t let sex get involved.
H.P. investigated and concluded that sexual harassment probably wasn’t involved because they could find no direct quid pro quo in the contract termination. Besides, the contract was against company policy to begin with.
Hurd had few friends at H.P. He did a lot of cutting to get the company profitable, and people are pissed that he was negotiating himself a $33 million dollar a year contract, was about to cut 9,000 jobs, and then had the audacity to have the company PAY for his personal escort.
That’s what really gets me about these CEOs. They get millions in pay, and they still go around and expense their dry cleaning, mistress’ apartment, and their bratty kids’ schooling to the company.
Interesting headline from today’s paper:
“Billionaire Larry Ellison is blasting Hewlett-Packard’s decision to oust CEO Mark Hurd as cowardly and the worst personnel decision since Apple forced out Steve Jobs 25 years ago.”
https://www.signonsandiego.com/news/2010/aug/09/billionaire-ellison-blasts-hp-ceos-ouster/
Everybody is concentrating on the WRONG thing here. HP has outrun Dell (their biggest PC competitor) by simply making a better product(s). Dell Comp is mired in outsourcing, cost-cutting, & sqeazing every nickel and dime not only out of their suppliers but their employees as well. I’ve known over a dozen people who worked for Dell in Round Rock Texas & Oklahoma City. They refer to the experience as “Dell Hell”. All have left Dell.
Dell computers are cheap, unreliable, clunky, and their tech support really sucks. Both Carly Fiorina & Mike Hurd were at the helm when HP overtook Dell. HP won’t go down the tubes with over the ousting of Mike Hurd. That’s an investor issue – not a product issue.
HP’s are the best in the Windows world – Dell cannot compete with them unless they undergo a dramatic overhaul which will NOT happen – Michael Dell is just too stingy.
Thank God for the stock price drop in HP – BUY NOW!!!
I’m just sayin’
I’m not (yet) a customer of either company, but if I had to choose I’d pick Dell since they sell PCs without crapware.
In my neck of the woods, the opposite is held to be true. HPs are regarded as cheap and liable to break early, and Dells are ‘okay’ and youre likely to get a decent timeline out of them.
The fact that HP sells more than Dell can be explained how Walmart does more business than Target. Everyones poor(er).
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Maybe we are all missing something.
Board was mostly appointed by Hurd and they dump him, quickly, over a trivial matter for a CEO. What if there is a link to one of HPs’ overseas scandals ?
Germany for instance ?
HP’s share price drop is partially due to Hurd’s departure – but I think it has a lot more to do with the fundamentals of HP’s business. Last I checked, about one quarter of their revenues come from ink and toner sales.
People are printing less. A look at the declining USPS mail volumes will provide some corroborating evidence of that.
HP’s share of the ink market is shrinking while the overall ink market is shrinking at the same time.
In my opinion, HP is screwed. Can you think of any other large corporation that has such a significant chunk of its revenue dependent on printing?
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Things will get better. I see that many of the awful, and I do mean awful senior managers have now retired. In the past 10 or so years, they have had their eye on the door, their pensions, stock options etc. so they have acted like the jerks they are. They certainly were never interested in the future of the company or its employees. Just their own futures. Hurd should actually be in prison, but having been around senior EDS management for several years and seeing their conduct with females and with expenses, many of them should be keeping him company. Just an all around unpleasant bunch of people.
Cathie Lesjak, the company’s CFO, will be replacing Hurd as CEO on an interim basis, though she will retain her duties as CFO during the search for a new chief executive officer. The company has created a search committee to select a new Board Chair and CEO, one that includes Netscape founder and venture capitalist Marc Andreessen. Lesjak has taken herself out of consideration for the permanent CEO role.