Why Carly Fiorina should be fired from Hewlett-Packard.
- Dec 10, 2004
OPEN: LATE 2001
A male and a female are standing in a dark alley discussing
business. Both are dressed in sophisticated business
attire (for California) and both are speaking
in hushed, but forceful tones.
Lady: I’m counting on your vote.
Man: Look, I know what I saidÖbut on further reflection, I just,
I justÖ.I donít know. The deal just doesnít make sense.
Long Pause. Stony Silence.
The lady slowly takes a pack of cigarettes out of her
purse and lights one. Itís too dark to see her face, but we
know sheís serious.
Lady (taking a long drag): The deal makes all the sense in the
world. Think about it – once we buy Compaq, we’ll be able to
compete directly against IBM for the lucrative services market.
Man: Yea, but you donít need Compaq to do that. They have
terrible margins -Dell’s killing them.
You could become a services business without them.
Come on, Carly.
Carly (Stepping into the light): Stop your whining.
You and your Wall Street friends are such
f—-n wimps sometimes.
Carly drops the cigarette on the flow and steps on it,
slowly crusing it into the ground.
Carly: Listen closley – I’m not gonna repeat myself.
Hereís how itís going to work ñ the shares your firm are in
charge of are going to vote for this merger.
Carly (cutting him off): But nothing. If you don’t vote with
me I’m going to come down on you like a f—–n hammer!
Youíll never see another penny of investment banking business
from us again. As a matter of fact, Iíll make sure you never
get another technology underwriting as long as you live.
Man (Sheepishly): Yea…ok…
FAST FORWARD TO PRESENT DAY:
Carly Fiorina now wants out. She’s had enough. Game over.
Why the sudden turnaround?
Because she learned.
It took $24 Billion dollar’s of shareholders’ money, but
She learned that unless you’re Dell the PC business in America
For every $1,000 you invest into making a PC, you’re lucky to
get $50 back.
That’s if you’re lucky.
If you’re not lucky you become Gateway (NYSE: GTW). You learn
how to hawk flat screen TV’s in between restructuring charges.
If you’re kind of lucky you become Apple (NNM: AAPL). They learned
how to sell digital walkmans. They’ll become the Sony of America.
Ipods, flat screens, operating systems and oh, yes computers.
But Carly Fiorina is not Steve Jobs. Not even close.
And don’t forget IBM (NYSE: IBM).
In a weird way, IBM is what this story is about.
You heard the news.
IBM announced that they were exiting the PC business this week.
Exiting to China. Selling to the one country that could compete with
Dell on price.
You weren’t the only person who heard the news though.
So did Carly.
Yes, the same Carly who fought to the death for Compaq.
The same Carly that fought the Packard family (or was it the
Hewlitt family?) to the teeth in the press.
The same Carly that paid $24 Billion two years ago to enter
the PC business in the first place.
The same Carly who announced this week that HP was considering
Reversing the deal.
Cutting her loses.
Carly know’s IBM is right.
How couldn’t she?
For every $1,000 she invests in PC’s, she makes $25-50 back.
For every $1,000 she invests into printers, it’s $200.
I know shlylocks in Brooklyn who wouldn’t invest their money
into the PC business. They want the most for every buck.
But that’s not what gets me.
What get’s me is that nothing has changed in the PC business in
the last two years.
As a matter of fact the PC business looks better than it has
in some time.
What get’s me is that all she needed to do was pick up a copy
of the Tycoon Report and she would have learned one of the most
important rules to investing:
***Never invest into a company whose primary product only competes
If she would have read the Tycoon Report she would have had a chance.
Instead of Compaq, she would have bought K-Swiss (NNM: KSWS) or
Timberland (NYSE: TBL).
Both companies earn at least $200 for every $1000 they invest into
Maybe she would have bought Yankee Candle (NYSE: YCC). For every
$1,000 Yankee invests into it’s business, it gets $490.00
That’s $490 dollars versus $50 for Compaq.
Instead of being down on her Compaq investment, she’d be up 50
percent on KSWS and another 35 percent on TBL.
Instead of destroying shareholder value, she would have built
Of course, HP wouldnt look like IBM.
They’d look much more like Berkshire Hathaway.
But so what?
You don’t see their shareholders complaining do you?
Open minds mean larger wallets.