Shares of Hewlett-Packard (NYSE: HPQ ) are soaring as much as 10% today on
rumors that the tech giant's board could be kicking Chief Executive Leo
Apotheker to the curb. His replacement as Hewlett-Packard CEO allegedly is
former eBay (NASDAQ: EBAY ) CEO Meg Whitman. But don't be fooled this is just
the latest dumb move at Hewlett-Packard, a stock 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
an exhaustive column about how Hewlett-Packard embodies everything that's
wrong with corporate America , for those who want an in-depth look at this
dumpster fire of a company.) That's all in the past. What is 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 is 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
connecting 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 (NYSE: 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 (NASDAQ: AAPL ) iPad craze and
planning to spin off its PC business. It might make sense to appoint Meg Whitman
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 work weeks 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 (NASDAQ:
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 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 .
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