Shrinking Your Way to Success
GOP presidential hopeful Carly Fiorina isn’t the only CEO with a failed track record at Hewlett-Packard, said Richard Waters. The once great computing giant has “been a graveyard for business reputations” for years, largely because its past leaders repeatedly tried to buy growth by gobbling up other companies. They forgot that when your business has lost its innovative edge, “acquiring your way back to relevance is seldom the answer.” Fiorina spent $25 billion on PC maker Compaq in 2001, rather than pursue the smarter strategy of carving HP into smaller businesses; the result was an unwieldy conglomerate she couldn’t control.
Her successor, Mark Hurd, tried to reposition HP by splashing out $14 bil lion on services company EDS; Léo Apotheker followed up with an excessively pricey $11 billion purchase of software company Autonomy. Together, the three CEOs spent more than $70 billion on acquisitions in just over a decade, “nearly 50 percent more than HP’s entire current stock market value.” It was too much, too late: None of the purchases could hide the fact that HP wasn’t as innovative as its rivals. To unwind these mistakes, CEO Meg Whitman has laid off tens of thousands over the past four years. She understands what her predecessors didn’t: Shrinking is often the key to survival.
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