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HP’s Fantasy 5-Year Turnaround Plan

By ValleyBeat FOXBusiness


According to the woman formerly known as CEO of Hewlett Packard (HPQ), Meg Whitman, the two companies formed by her decision to split the storied Silicon Valley tech giant are currently in the fourth year of a five-year turnaround effort. And everything’s going according to plan.  

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The former eBay chief even joked at a recent event that “turning around HP was relatively easy versus running for governor of California,” referring to her spectacular loss to Gov. Jerry Brown after spending a record $140 million of her own money on the failed campaign.

Here’s the thing. The only HP turnaround that can accurately be described in the past tense is the one that was brilliantly executed by former chief executive Mark Hurd – now co-CEO of Oracle. Clearly, Whitman misspoke, since she’s still got one year left on her five-year plan and, as we’ll see in a minute, she’s certainly not there yet.

And while the historically and notoriously dysfunctional HP board – which I guess is now two boards – seems perfectly comfortable with Whitman’s description of the current situation, I’m not. First, let me challenge a concept that’s gained fairly broad acceptance in recent years – the idea of a long, protracted turnaround.

Forget about five; four years is actually a very long time. President Ronald Reagan enacted sweeping political and economic initiatives from the moment he stepped into the Oval Office in 1981. By the end of his first term as president, his supply-side economic policies known as Reagonomics were clearly evident and effective.

Likewise, New York City’s remarkable transformation from a crime-ridden metropolis on the verge of bankruptcy to its former grandeur as one of the world’s great tourist destinations was apparent during David Dinkins’ four-year mayoral term, although Rudy Giuliani certainly continued if not accelerated the effort.

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And while nations and cities are certainly not the same as companies, I’m sure we can all agree that turning around America and the Big Apple was no small matter. Now let’s talk about the corporate world.

When Lou Gerstner showed up at the helm of IBM (IBM), the plan was to split the computer giant into a bunch of “Baby Blues,” but the former RJR Nabisco executive instead managed to turn Big Blue into the world’s biggest IT solutions provider. While that took a while, significant operating improvements were evident within a couple of years.  

Likewise, while many thought HP should be broken up, Hurd disagreed, and his 2005 turnaround was highly visible from the get-go. Where former CEO Carly Fiorina had completely overhauled the company’s vision, strategy and organizational structure, Hurd picked up where his predecessor left off.

The former NCR CEO focused on execution, streamlining decision-making, and cutting costs and bureaucracy. He led HP to market share gains across all its core businesses and a remarkable five straight years of profit and revenue growth, even though three years of his five-year tenure coincided with the Great Recession.

That, my friends, is what a successful turnaround looks like.

Meanwhile, Whitman – now CEO of the newly created Hewlett Packard Enterprise and Chairman of HP’s legacy computing and printer company – has presided over one of the biggest corporate breakups in American history, 85,000 announced layoffs, about $20 billion in write-offs, and four straight years of revenue declines.

Whitman may say this is all according to plan, but in my experience – and I’ve been studying corporate turnarounds for a very long time, successful turnarounds simply don’t take anywhere near this long without any sign of a competitive growth strategy or significant bottom line improvements.

I have, on the other hand, seen lots of attempted turnarounds that, like Whitman’s, went on for a good many years. They all had one thing in common: They all failed.

While former Sprint (S) CEO Dan Hesse didn’t engineer the telecom company’s doomed merger with Nextel, he spent seven years unsuccessfully trying to clean up the mess left by his predecessor, Gary Forsee. Instead, Hesse left a legacy of $19 billion in accumulated red ink, big subscriber and market share losses, a failed merger attempt with T-Mobile and the slowest 4G LTE network in America.

Likewise, Howard Stringer spent many long years trying to turn around Sony. So did Scott McNealy and disciple Jonathan Schwartz at Sun; Mike Zafirovski at Nortel; Jerry Yang, Carol Bartz and now Marissa Mayer at Yahoo (YHOO); Kevin Rollins and Michael Dell at Dell; and a laundry list that includes dozens of tech companies you’ve never heard of.  

Truth is, turnarounds are hard. Really hard. And they’re rare. Really rare. But the rarest kind is a turnaround that’s supposedly going well after four years with absolutely no material evidence that that’s the case, topped off by a politically expedient breakup intended to mollify Wall Street. In reality, there is no such thing.

What do you think?

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