Whitman takes over, but can she fix HP?

The former eBay CEO was named chief of Hewlett-Packard Thursday afternoon. While she grew the auction site dramatically, cutting the fat at bloated HP will be a different challenge. Can she pull it off?

By InvestorPlace Sep 22, 2011 9:05AM
By Jeff Reeves, InvestorPlace.com

Can former eBay CEO Meg Whitman fix Hewlett-Packard?


HP's board named Whitman their new chief this afternoon, after two days of reports the move was imminent.


Hewlett-Packard (HPQ) shares soared as much as 10% Wednesday on rumors that the tech giant's board could be kicking chief executive Leo Apotheker to the curb, with Whitman waiting in the wings. Shares fell almost 5% on Thursday, a little worse than the market overall.


But don't be fooled -- this is just the latest dumb move at Hewlett-Packard, a company plagued not just by a revolving door in the corner office but by a glue-and-sticky-tape approach to its current ugly state of affairs.

I won't bore you with a laundry list of HP missteps during the past few years. They are many and well-known. (I previously wrote a column about how Hewlett-Packard embodies everything that's wrong with corporate America, for anyone who wants an in-depth look at this dumpster fire of a company.)

That's all in the past. What's most troubling is that, after almost $30 billion in buyouts since 2008 -- $10 billion for Autonomy + $1.2 billion for Palm + $2.7 billion for 3Par + $2.35 for 3Com + $13.6 billion for Electronic data systems -- there are much more corporate shenanigans going on than there is growth to manage.

Meaning that even if you want to give Whitman the benefit of the doubt and grant her 100% credit for the success of eBay, the Hewlett-Packard mess is just too different a situation for her to be a good fit.

Here are five reasons Whitman won't be able to fix Hewlett-Packard:

No corporate IT experience. Whitman's tenure at eBay was fundamentally defined by a connection with consumers. Even the "sellers" on the auction site are largely average Joes and tiny out-of-the-garage businesses. Before that, she worked at Hasbro (HAS) to market Playskool and Mr. Potato Head. That's a far cry from cloud computing, tech support, networking hardware and bulk computer sales to Fortune 500 companies. On the plus side, her consumer focus might be able to help prop up HP printer and laptop sales, with Hewlett-Packard killing its TouchPad tablet amid the Apple (AAPL) iPad craze and planning to spin off its PC business. It might make sense to appoint Meg Whitman the CEO of this smaller consumer-focused division, but it makes no sense to appoint her now. She is ill suited for the very big-business nature of corporate IT sales, which is HP's core business.

Her heart might not be in it. Let's be honest: Whitman is 55 years old with a net worth of over $1 billion and the bragging rights of building one of the most iconic names in the tech sector. What does she have left to prove? And what incentive does she have for the 60-hour workweeks that will be required to quickly fix the mess at HP? It takes guts and determination to race into a burning building like this, and perhaps Meg Whitman has it. But investors should have serious doubts. She ran for governor in 2009, for Pete's sake. If aspiring to become a politician isn't waiving the white flag on a serious business career, I don't know what its.

It's not growth HP needs but strategy. Whitman joined eBay on March 1998, when it had 30 employees and the site was a simple, ugly web page. Juxtapose that with Hewlett-Packard, which got its humble beginnings in 1935 and had one of its namesake founders on the board until 1993. Thanks to decades of growth and expansion, the behemoth now boasts a list of products, divisions and services that boggles the mind. In short, it’s not growth HP needs, but streamlining and strategy. Leading a fast-growth business like eBay and taking it public is no small task, and kudos to Whitman for her success on that front. But frankly, those experiences don’t compare at all to the task of hacking through the weeds at HP. There’s a reason why many of the best entrepreneurs often sell out of a company once it gets big-time and then start fresh on another start-up — because they understand the very different leadership roles in small and big businesses. This is not to say that Whitman is incapable of the task, just that all of her previous experiences mean very little — and she would have to have the self-awareness of this going in.

Buyouts are the bane of HP's existence. Along the same lines of growth vs. strategy, at eBay, Whitman’s biggest feather in her cap was the 2002 PayPal acquisition for $1.5 billion. Recent earnings reports prove the continued contribution to eBay’s bottom line from this great addition, and future potential of PayPal in the mobile device space cannot be understated. However, HPQ already has made a mess of things trying a “growth by buyout” philosophy. If Whitman is looking to leave her fingerprints on HP, she had better look for a different approach then buyouts. Shareholders better hope she takes to heart the cautionary tale of her $3.1 billion boondoggle on Skype rather than try and recreate the PayPal deal.

HP shareholders have little patience. Perhaps the biggest problem is that even if Whitman can manage to overcome all of these hurdles, the bottom line is that shareholders are furious and want to see results. The stock is off 40% in 2011 and is trading at 2005 valuations. HP stock pays a dividend of less than 2% despite spending tens of billions on doomed buyouts. Earnings and revenue will be up slightly this year, but there is a general consensus that the world is passing Hewlett-Packard by. Whitman will have a very short period of time to prove herself — witness the brief tenure of saintly Carol Bartz at Yahoo (YHOO) as one so-called CEO upgrade that didn’t work or didn’t work fast enough. And if Whitman doesn’t show her stuff within a year or two, the sad reality is that the musical chairs will continue at HP as the leadership vacuum continues.

Jeff Reeves is the editor of InvestorPlace.com. As of this writing, he did not own a position in any of the stocks named here. Write him at editor@investorplace.com, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook.

Related Articles

Sep 22, 2011 12:13PM
Anyone can do a better job than Leo A. has done. HP should fire their board also....one bonehead move after another is killing this company. They should have never fired Mark Heard and dealt with his issues quietly and out of the public eye. We really will never know what that whole fiasco was all about.
Sep 22, 2011 5:13PM
Have we forgotten the great Carly Fiorino, who took HP down the toilet about 10 years ago, got fired and walked away with $40 Million? The idiots on that Board ought to be horsewhipped. And the shareholders should be running up to HP Headquarters with axes.
Sep 22, 2011 5:31PM
HP needs to get back to its roots building a solid product in America and stop all the outsourcing and low quality products. It used to be you expected to pay a little more for an HP printer but you knew it was a good one and they would stand behind it. Today they are like every other nickel and dime store product out there, low quality, support that stinks and techs that can't communicate. Go back and take a page out of Bill & Dave's handbook and turn the tide or soon HP will just be another corporation that got greedy and failed!
Sep 22, 2011 1:52PM
She can sell off parts of the company on EBay and just keep the profitable printer ink business :-)
Sep 22, 2011 7:56PM
HP has made to many poor choices like out sourcing to India , my sons HP crashed and he didn't have a recovery disc, I called the service line and got some idiot in India that could barely speak English, I had to repeat the model # 3 times because he didn't understand me and when he repeated it I couldn't understand him, they sent the wrong disc, poor service, I'll never buy a HP again.Confused
Sep 22, 2011 8:13PM
Whitman's an idiot. She did not do that great of a thing with eBay and she will be the demise of HP once and for all. Hewlett and Packard are now rolling over in their graves and may come back to visit as zombies.. another stock to dump ASAP!
Sep 22, 2011 5:08PM
What a sad demise of a once-great company. And it doesn't even relate so much to my intense dislike for Ms. Witless. It has more to do with my hesitation to have anything to do with companies run by morons. Needless to say, HP has lost a once-loyal customer FOREVER.
Sep 22, 2011 4:59PM
The board leaves sooo much to be desired .
Sep 22, 2011 5:28PM

whoa! did everyone forget what this Ho did at ebay?

SELL HP now!

Sep 22, 2011 4:00PM
Well get ready HP, to be torn apart and sold off, and get ready for all the layoffs as well.
Sep 22, 2011 5:25PM
Why don't you hire someone in  that field? Scout  Microsoft  Management and hire from there. I think your wasting $ again. Wake up HP it's time to smell the coffee. Your Product is  crap and it keeps getting worst. Your customer service  sucks and your product crashes just after warr. has ended. You really have to look who is running the company because HP is headed out of business within a year or two.
Sep 22, 2011 5:36PM
Something tells me that she is NOT the answer to HP's problems.
Sep 22, 2011 6:17PM

Whitman is a freak.   She has the ego of an emperor and the logic of an idiot.  Meg Whitman ruined eBay.   Period!  Meg tried to buy her way as Governor of California.  Pull- ease,  she makes me regurgitate.

She probably bought her new title at HP?

Wolf in sheep’s clothing...

Get ready for more outsourcing!  That’s Meg's specialty...  F the population ~ I'm the only one that counts! Pee-ons


This is exactly what is wrong with America's Economy - Greedy People who don't give a damn about anyone else - She will look you square in the eye and lie to you 24/7 without batting an eye.


So now HP has a Sociopath running the ship. LOL  --  God Bless America

Sep 22, 2011 8:36PM

I could care less about hp and who runs it, I will never buy another hp anything!



Sep 22, 2011 4:42PM
In contract bridge they call this "a loser on a loser" play.
Sep 22, 2011 5:18PM
The problem with companies ( and our government ) is that the inmates are hiring the guards.
Sep 22, 2011 4:30PM
Can she pull it off?


Seems like a pretty safe play for Whitman. If she does turn things around she’ll be the CEO icon of the decade, write three books, and be interviewed like Warren Buffett at least twice a month on CNBC. If it doesn’t work out, she’ll walk with her signing bonus and a mega million dollar severance package, along with plenty of prior HP management failures to point to and say, “See, the Board really was the problem all along”.  Even if it’s a long shot for her, it’s mostly upside and little downside. Now if only I could get a job like that. Heck, I would be happy to get fired like that just once, please.

Sep 22, 2011 9:55PM

"I don't know you and you don't know me"

That's what Meg told the illegal maid that had been scrubbing Meg's stains out of Meg's gold plated toilet for years.  Some gratitude from a billionaire.


Gloria Allred set the trap and stupid Meg stepped right in, proving Meg in writing she's a liar.


HP must be in bad trouble to choose Mega Bucks Whitman.


I was about to buy a new FAX machine, it certainly won't be an HP.


MegaBucks Whitman is only concerned about herself and her selfish self.


You better dump your HP stock, it's going belly up fast.

Sep 22, 2011 5:43PM
ebay would have happened whether he, I mean she, was there or not. She got lucky.
Sep 22, 2011 6:29PM

That ego inflated bitch will do nothing for hp except send more jobs overseas. Too bad she doesn't take her own example to heart and move with them.

Dell and apple are looking very good about now for my next computer purchase.

Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

123 rated 1
266 rated 2
485 rated 3
660 rated 4
586 rated 5
652 rated 6
640 rated 7
504 rated 8
289 rated 9
159 rated 10

Top Picks

TAT&T Inc9



Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.