The Battle for Hewlett-Packard

Posted – June 1, 2002

Walter Hewitt fights Carly Fiorina for management of his father’s legacy.

At round 8:45 A.M. on Tuesday, March 19, Carly Fiorina, the 47-year-old chairman and C.E.O. of Hewlett-Packard, the $45.2 billion pc firm, took the stage on the Flint Center in Cupertino, California, earlier than 2,000 firm shareholders. She wore her uniform—a dark pantsuit, heels, a pearlpendant necklace, pearl earrings, clear nail polish—and had on bright-red lipstick, and her hair was shorter and blonder than ordinary. From the again of the auditorium, she regarded cool and in management. But close-up one may see pouches protruding below her eyes and an uncharacteristic pallor that blush couldn’t masks—signaling that it had been an extended evening. A handful of individuals, hidden backstage, knew the reality: that Fiorina was a hairsbreadth away from the largest fall of her profession, a fall that may have repercussions for ladies all through company America. As the first-ever feminine head of a Dow 30 firm, she has been celebrated by the enterprise press the way in which Madonna is by the tabloids. Was she now going to flame out from a good better peak than had two of her former highprofile ladies friends—specifically ex–Warnaco chief Linda Wachner and Mattel’s Jill Barad—who have been ousted after they didn’t construct on promising begins?

Onstage that crisp, sunlit morning Fiorina didn’t know the reply. As she launched the Hewlett-Packard government administration staff, sitting beneath her within the entrance row, she managed a bit black humor, asking the viewers to please “restrain” their applause. She knew there would be none.

The final hope for her profession as H-P’s C.E.O. lay with one of many firm’s buyers, Deutsche Bank. All the evening earlier than, Fiorina and H-P’s proxy solicitors, below the watchful eye of Silicon Valley’s “celebrity lawyer” Larry Sonsini, had been on the cellphone, making an attempt to persuade the establishment to alter its thoughts on learn how to vote its shares in the proxy struggle over H-P’s proposed merger with Compaq, the struggling pc firm. Fiorina was arguing that the merger would give H-P the scale it wanted to compete with IBM and Dell in a market demanding more and more complicated methods and companies. It was a dicey guess. No earlier know-how merger had ever labored. Conventional knowledge held that you just couldn’t combine two firms rapidly sufficient to keep away from crippling losses within the manufacturing line. There was additionally the robust argument that H-P’s priceless $19.4-billiona-year imaging and printing (pc printers and parts) enterprise, which introduced in 43 p.c of its revenues, would undergo debilitating dilution. Deutsche Bank had already voted its 25 million shares towards the merger.

But Fiorina was decided to get the financial institution to alter its thoughts. The week earlier than, as a sweetener, H-P had opened a credit score line there, which may facilitate the merger if it went via. Relations have been pleasant. Right now, the urbane Sonsini, company lawyer additionally for Apple’s Steve Jobs, Sun Microsystems’ Scott McNealy, and plenty of different huge Silicon Valley names, was backstage, headset on, able to radio Ann Baskins, H-P basic counsel and secretary, who was seated onstage close to Fiorina, if Deutsche Bank switched.

In the viewers, throughout Fiorina, was proof of why it’d not. About midway again within the auditorium was Walter Hewlett, 57, eldest son of Hewlett-Packard’s late co-founder Bill Hewlett and the chief of the opposition to the merger. A small man, with a little bit of a stoop and an uneven, barely spiky haircut, he regarded extra like a personality out of Lord of the Rings than a company hero. In an ill-fitting grey go well with, he peered via thick glasses and skim a ready speech haltingly off white playing cards, as if he have been a bit not sure of a few of the sentence constructions. (In truth, as a detailed pal of his later confided, he’s each farsighted and dyslexic.) But he obtained a hysterical ovation from the gang, which stood, clapped, whistled, stamped, and waved inexperienced fluorescent glow sticks. Many have been additionally carrying inexperienced T-shirts to match the colour of the opposition’s inexperienced ballots.

Then there have been the more and more hostile questions from the viewers, composed principally of present and ex-employees—who’d watched the worth of their inventory sink from $30 to below $20 over the previous 12 months—lots of whom both had been fired from H-P or can be if the merger went via. Although Fiorina responded along with her regular fluency, many felt their questions went unanswered, or else they didn’t consider her.

Perhaps probably the most poignant second of your complete assembly got here when Dan Dove, a stocky, dark-haired engineer from H-P’s Procurve Network Management division, took the microphone. He spoke softly and clearly: “I love this company,” he remembers telling Fiorina. “Twenty-two years in the past I used to be unemployed, my spouse was pregnant, and I used to be lucky to get a job with H-P as a manufacturing meeting employee. I labored my manner via school, obtained a level in electrical engineering, and subsequently acquired a job within the lab, and since then have obtained eight patents, and I have two pending. Those patents are broadly used all through the business, even by our rivals like Cisco, on whose board you sit. I completely agree together with your assertion that the belief and respect between workers and administration is essential to the success of the merger, and I completely agree that layoffs ought to be a final resort. However, I disagree with the way in which layoffs have been completed final 12 months, and I work in a division the place we have been rising at twice the market price, and we wanted extra individuals to succeed. . . . [Over the years] I had pals who left for startups, who at the moment are multimillionaires. I by no means took benefit of these provides, as a result of I like working at H-P, however I don’t belief the administration that’s pushing the merger, and if this merger goes via, I don’t see how I can proceed to work for this firm.”

The crowd went berserk. Fiorina regarded defeated. “I’m sorry you’re feeling that manner,” she mentioned, and he or she appeared to imply it. But it wasn’t sufficient to purchase off this mob. “She’s a witch,” mentioned one man, who didn’t wish to give his final identify. A lady worker carrying denims, sneakers, and a floral shirt whispered, “I really met her when she first arrived. I launched myself to her in the remaining room, and he or she began fixing her hair, regardless that nothing was misplaced. I imply”—and right here the lady rolled her eyes—“that tells you every part, doesn’t it? Someone who fixes their hair when nothing is flawed with it!”

Later, sources confided that the surface administrators on H-P’s board—represented at this assembly by Sam Ginn, the previous chairman of the cell communications firm Vodafone AirTouch—had been “shocked” on the stage of worker dissension over the merger; within the H-P 401(ok) plan, the one place through which workers have been assured confidentiality, they voted two to 1 towards the deal. One needed to marvel how, if it acquired voted in, this most audacious, difficult merger may actually work within the face of such passionate antipathy from workers.

Amid the ocean of geek garments—denims, sneakers, and checked shirts—Fiorina’s military of corporate-communications ladies (a few of whom she’d imported from the East Coast) stood out like an alien tribe from Star Trek; carrying headsets, they ran round in shiny black pantsuits and designer sneakers. “New H-P meets old H-P,” cracked Chris Nolan, the Silicon Valley gossip columnist.

Given the fractious setting, it was not altogether shocking that, when Ann Baskins lastly handed Fiorina a word saying that Deutsche Bank had voted 17 million of its 25 million shares for the deal, Fiorina regarded lower than ecstatic. H-P attorneys reckoned she had gotten simply sufficient votes, though it could be weeks earlier than they knew for positive. Sonsini later confided that he thought then they’d win by a 2 p.c margin. The opposition thought it had misplaced by below 1 p.c—an irony, since as a part of a diversification program within the earlier six months the William and Flora Hewlett Foundation, on whose board Walter Hewlett sits, had offered 6.Three million shares (0.39 p.c of these voted), a few of which H-P had snapped up.

But ultimately the whys and wherefores have been immaterial. For now, even although Walter Hewlett would sue 9 days later, citing improper “coercions” of Deutsche Bank and “deceptions,” Fiorina held on because the world’s high feminine C.E.O. She left the stage as she’d entered—via a aspect door. “Her slipping in and out of side doors was very typical,” says a former member of her communications staff. “Like a rock star.”

“That’s what her nickname is,” one other former worker confirms: “Rock Star.”

Three years in the past, when Fiorina went from being president of the Global Service Provider enterprise at Lucent Technologies, on the time a white-hot telecom- tools supplier, to C.E.O. of HewlettPackard, the grey girl of Silicon Valley, she was greeted with maybe the noisiest fanfare within the historical past of any incoming chief government. And since she was an outsider, the Valley regarded with curiosity to see what improvements she’d carry to an engineering tradition that had grown cumbersomely large because it entered its third technology of administration. Only H-P’s printer companies remained the leaders of their sectors. Its P.C., server, administration software program, storage, and consulting divisions lagged badly.

So she set about rebranding the corporate. Within only a few months, she’d changed H-P’s mundane promoting with photographs of herself standing in entrance of the single-car storage in Palo Alto the place the 2 founders, Bill Hewlett and Dave Packard, began all of it in 1938 with a tool to check sound tools. She was always on the covers of enterprise magazines; since Fortune first printed its annual “50 Most Powerful Women in American Business” difficulty, she has graced that cowl thrice out of 4, as soon as all by herself. In November of 1999, at Comdex, the business’s greatest annual commerce present, in Las Vegas, her speech about her imaginative and prescient for H-P was so highly effective that folks cried; when she spoke at Herb Allen’s 2000 Sun Valley mogulfest, a line shaped to meet her afterward.

Fiorina began properly at H-P, dwelling as much as all of the heady expectations; after a profitable first 12 months, through which she’d exceeded her personal 15 p.c revenue-growth prediction, she stunned individuals by predicting, in a slowing market, that she would repeat the achievement, however in November 2000 she missed analysts’ fourth-quarter earnings targets by a hefty 10 cents (20 p.c), and her credibility with Wall Street crumbled. As a direct consequence, an tried merger with the consulting division of PricewaterhouseCoopers—which she’d hoped would assist bulk up H-P’s tools companies and consulting enterprise—was deserted (H-P says it was merely “the wrong time and the wrong price”); in January 2001, H-P laid off 1,000 employees. Last summer time practically all of the 88,000 workers took voluntary pay cuts. It was not sufficient. There have been 6,000 additional layoffs.

Many of the excessive rollers within the Silicon Valley group—males who pleasure themselves on being meritocratic to their fingertips—began to whisper that had Fiorina been a person she would have been out. In the 2 years since she’d taken over, the inventory worth had tumbled 77 p.c.

Then there have been the complaints concerning the “rock star” conduct. Fiorina, it was rumored, had an entourage of bodyguards, plus a private coach and a private hairdresser on name. One of her first administrative strikes was to purchase a brand new Gulf stream IV jet, for which a carpenter from Marin County custom-made cabinets; her workplace had three private assistants, whereas her predecessor, Lew Platt, had just one; she refused to pose with some long-term workers for footage. (Referring to a “Carly myths sheet,” H-P spokeswoman Rebeca Robboy denies the coach and the hairdresser; Fiorina does have safety, she says.) These gestures may need rankled anyplace, however they regarded even worse at an organization recognized for its egalitarian strategy. Its instance had sparked the famously relaxed fashion of Silicon Valley workplace life: the informal garments, the versatile hours, the low-key private fashion of C.E.O.’s. “This is an extreme analogy,” says one worker, “however in Silicon Valley, messing with the H-P tradition is just like the Taliban destroying the Buddhist statues in Afghanistan.”

“Management by walking around” was the modus operandi of Dave Packard and Bill Hewlett. Even once they’d made their billions they drove to work of their previous vehicles—Hewlett’s was a Ford Taurus—and so they paid themselves not more than $125,000 apiece in annual salaries. Though their land was price tens of millions, their properties have been easy and with out staffs. They cared much more concerning the setting than about their government perks, and so they im plemented an organization variety coverage and worker medical insurance lengthy earlier than such issues have been widespread. At the annual H-P picnic, they rolled up their sleeves and barbecued the meat themselves.

One former government assistant remembers how Bill Hewlett as soon as begged her to stitch a button on his jacket. She says, “Mr. Hewlett would come round and sit down and say, ‘What are you doing?’ He would hear. He knew individuals—you realize, when their canine died.”

It wasn’t simply the great manners and private involvement, although, that earned Hewlett and Packard the respect of their workers; it was additionally that at coronary heart each males have been engineers. One former worker remembers Hewlett stopping by within the late 80s and asking him all types of questions on what he was engaged on. “It astounded me that somebody with the kinds of issues that he wanted to be pondering of would nonetheless have the power or the curiosity,” he says.

Many workers recount how the corporate supported them in troublesome private instances. Scott Peterson, who labored at H-P for 20 years, remembers how administration helped him via an alcohol downside, when he was nonetheless new to the corporate. Dan Dove says he is aware of of no different agency that may have paid his tuition at Sacramento State University 22 years in the past. Dove says everybody benefited. “H-P allowed me to regulate my work schedule round my class schedule . . . so I believe I got here out significantly better educated than your common school rent.”

“Bill and Dave”—as they have been recognized—formally handed over the reins of the corporate within the late 70s; they then got here again within the early 90s to assist H-P counter the recession. Their successors have been males who had labored their manner up at H-P and who had recognized the founders intimately. They have been subsequently readily accepted by the workers. When John Young, Bill and Dave’s speedy successor, hit a rocky patch and an article in Fortune journal was typically vital, Donna Trombly, an government assistant on the time, felt so badly she wrote him a letter of assist. It ended up with a mass of signatures on it.

Lew Platt, Young’s successor—and Fiorina’s predecessor—was thought of an empathetic man, if not a visionary. Under him the corporate’s paperwork grew heavy and sluggish. Joel Birnbaum, now on the H-P payroll as a advisor, then head of analysis and growth, factors out, for instance, that the ink-jet and LaserJet printers have been competing with each other—as was the case with merchandise in most of the different divisions, since H-P was composed of 83 autonomous models. One of Birnbaum’s greatest gripes is that H-P had parts of Internet know-how years earlier than its rivals did, however risk-averse attitudes prevented early exploitation. In addition, the advertising and marketing was horrible. “One of the native wags mentioned that if H-P ever went into the sushi enterprise it could hang around an indication promoting ‘cold, dead fish,’” says Birnbaum.

In 1999 the board determined to spin off the test-and-measurement enterprise (i.e., all of the non-computer-related engineering parts), considered by many as the guts of H-P. The new firm was referred to as Agilent, although many thought it was the one actually meriting the H-P identify. Of the founders’ kids, solely David Woodley Packard, 61, an eccentric philanthropist and former classics professor, whose passions embody black-and-white motion pictures from the 30s and 40s and writing pc code, confirmed any dissatisfaction with the flip of occasions. He resigned from the H-P board.

Around the identical time, Platt determined he was not the person to steer H-P via the Internet period, and he recommended to the board that it hunt for a brand new C.E.O. A small choice committee was headed by Richard Hackborn, the commemorated strategist who’d based the corporate’s priceless ink-jet printer enterprise in 1984, and who himself had turned down the C.E.O. job, preferring a much less worrying existence in Boise, Idaho. The Hewlett and Packard households, represented on the board by Walter Hewlett, his brother-in-law Jean-Paul Gimon (an engineer turned banker), and Susan Packard Orr, Dave Packard’s daughter, backed him in his alternative of Fiorina.

Fiorina would maybe not have been thought of for the job had it not been for her look in 1998 on the quilt of Fortune as No. 1 on the record of the world’s high ladies in enterprise. Until that second, remembers Pattie Sellers, the Fortune journalist who wrote the quilt story and was on the staff that ready the rating, “there’d solely been one story written about her, in Investor’s Business Daily.”

Fiorina was not even probably the most extremely remunerated or highest-ranking lady government at Lucent—that function belonged to Patricia Russo, then the government vice chairman of company operations, now the corporate’s C.E.O. Fiorina additionally lacked related expertise—though she was the gross sales chief of the $19 billion service supplier division, she didn’t have profit-and-loss duty. It was mentioned inside Lucent that Fiorina by no means stayed in a single place lengthy sufficient to show herself; in the earlier 4 years, she’d modified jobs 5 instances.

But what impressed Sellers was the truth that it was Fiorina, collectively along with her mentor Rich McGinn, then Lucent’s C.E.O., who took the corporate public in 1996—at $Three billion, the largest I.P.O. as much as that point. “She was a lot Rich McGinn’s star, at a time when Rich McGinn was nonetheless a star,” says Sellers, including that at one level Lucent’s inventory had elevated virtually fivefold because the I.P.O.

Fiorina’s highly effective charisma charmed Hackborn and his committee. An insider remembers, “She talked this good discuss needing to innovate, however holding to the H-P manner. She appeared to grasp the corporate.”

But quickly after her arrival, doubts set in—not about her mental skills however about her cultural sensitivity. One supply, talking anonymously, places it this fashion: “I believe what Carly didn’t do was to be one of many workers for some time, get out amongst them and discover out who they’re and what they assume. Instead she got here in with an angle that this can be a nation membership, and I’m going to shake it up. And she started to do issues with no robust data of how even the corporate works. That, I believe, induced workers to develop into very suspicious, and what began as a rousing welcome, an unbelievable outpouring of assist for her and a cheering of what she may be capable of do to steer H-P within the future, changed into disillusionment and finally disbelief in the way in which that she handles worker relations.”

The downside with the adverts that includes Fiorina wasn’t simply that they have been seen to be egomaniacal—a part of the cult of the “East Coast movie star C.E.O.”—but in addition that she had made assumptions concerning the firm’s historical past with out checking. “It was grotesque,” says Jean-Paul Gimon. “Did she not ask anybody? Bill and Dave hated that storage. . . . They used to joke that the one factor that acquired invented there have been bathroom seats.”

Other small missteps additionally created pressure. Fiorina frosted the glass doorways of her workplace and convention rooms, thereby destroying the famously open, democratic nature of the chief house. And whereas Bill and Dave used to frequent the cafeteria, Fiorina has but to be seen there.

Fiorina set about chopping down the corporate’s 83 divisions to 17 product classes, thereby decreasing autonomy. Engineers, who’re perfectionist by nature, discovered themselves being barked at to ship tools earlier than it was prepared. Many started to really feel remoted: they might not speak to their new supervisor, they felt; and so they couldn’t speak to Fiorina. Scott Peterson, who labored within the research-and-development labs, amongst different divisions, discovered it suffi- ciently upsetting to stop after 20 years with the corporate. Peterson says, “When you ask an excellent engineer to place out a product— half of a product—in a 12 months as a result of it will meet a political aim . . . that’s insulting. . . . It is simply not the H-P manner.” He is now at Agilent.

Given her lack of technological experience, many thought it weird that Fiorina didn’t promote anybody round her who did have such data. “One of the problems at H-P,” says a former worker, “is that there’s a dearth of expertise on the high.” More worrisome, says a former salesperson, was an innovation made in 2000 often known as “channel-stuffing,” used to inflate earnings—i.e., merchandise are shipped to retailers and distributors earlier than they’re really offered. (Fiorina has categorically denied channel-stuffing.) Still, the nervousness at H-P was saved under the floor till late fall 2000, when Fiorina missed the earnings that she had projected as late because the week earlier than. One former high-level worker remembers the all-day Saturday convention name the weekend Fiorina realized she was going to must do a U-turn: “The name was infinite. Six, seven hours. And she was rattled. . . . We had completed all these dotcom offers. . . . They blew up. . . . And whereas she was out selling 15 p.c development . . . what was clear to all people was that the attention was off the ball. This got here as an virtually full shock. . . . And that doesn’t occur at H-P.”

People outdoors the corporate in Silicon Valley additionally began to fret about Fiorina’s stewardship. This is a tiny group, the place everybody’s enterprise connects with everybody else’s. The huge gamers get collectively at Chantilly, a restaurant close to Fiorina’s dwelling in Atherton with an atmosphere so clubby that there aren’t any menus for regulars. It is unusual, say many C.E.O.’s, that Fiorina has proven little urge for food for mixing socially with them. She failed to look at Bill Gates’s annual C.E.O. summit in Seattle her first 12 months, which went down as a snub.

Others seen that she turned down their invites for dinner. “Networking is the Silicon Valley way,” says one insider. “The proven fact that she didn’t wish to do this made us assume she was insecure—that she couldn’t maintain her personal as a result of she didn’t perceive the know-how sufficiently.”

One of her early conferences with Bill Gates was a bust. Fiorina went to see him after he’d given the opening speech at Comdex, through which he unveiled his blueprint for the “personal web.” In his room backstage, a supply says, she gave him a tough time for mentioning her rivals however not H-P in his speak. “She was pretty intimidating.”

Reese Witherspoon

In the autumn of 2000, one thing else occurred to accentuate the doubts in individuals’s minds: the S.E.C. started an investigation of Lucent, after the corporate knowledgeable it of beforehand misreported earnings. That 12 months its inventory worth had fallen by 76 p.c from $75 to $18. In an alarming foreshadowing of the Enron debacle, it was principally the corporate’s smaller shareholders who suffered. Many of its company executives— for whom a $40 million golf course in Gladstone, New Jersey, had been constructed on the behest of C.E.O. Rich McGinn—had offered their inventory the earlier 12 months. (Fiorina had appropriately swapped her choices for $65.6 million of H-P inventory in 1999.)

Some on the H-P board began to marvel overtly about their so-called prodigy. The former H-P C.E.O. John Young, now on the Lucent board, instructed a pal that he and the board attended a two-day, off-site assembly to research step-by-step what had gone flawed at Lucent. Apparently, Young mentioned, after six or seven hours of this he had an epiphany. “It was like, ‘Oh my God, this is chapter and verse of what’s taking place at H-P.’”

Fiorina joined AT&T’s Network Systems division—now Lucent—within the late 80s, when she was in her early 30s. “It wasn’t the most seen arm of the enterprise,” says Bill Marx, an government vice president of AT&T on the time. “It was predominantly male; I used to be trying to shake it up.”

“Most individuals thought she’d take a job in telecom companies, as a result of that was what was seen and political,” says Kathy Fitzgerald, now Lucent’s senior vice chairman of communications.

Fiorina’s path to AT&T had been simply as unorthodox. After leaving Stanford, the place she’d majored in medieval historical past and philosophy, she toiled at U.C.L.A. Law School for a number of months to please her father, Joseph Sneed, now a senior court-of-appeals choose in San Francisco. She hated it and stop, flying to San Francisco to clarify to her father, who instructed her he was fearful she would by no means “quantity to something.”

Back then, in response to her first husband and fellow Stanford graduate, Todd Bartlem, 48, now a pc advisor within the hospitality business, Fiorina was not but fixated on a high-flying profession. The couple quickly headed to Italy, the place Fiorina taught English, and Bartlem went to graduate faculty. Then Fiorina was a “tagalong,” in response to Bartlem.

“We had great friends. And we did all sorts of fun things. And we were poor as church mice,” Bartlem says.

The Sneed household, which hailed from Texas, Bartlem remembers, was not notably rich, however they’d a gorgeous home in San Francisco, of which Fiorina’s mom, the late Madelon Sneed, a housewife who painted in her spare time, was extraordinarily proud. There have been three kids: Joseph; Carly, whose actual identify is Cara Carleton, so referred to as as a result of each Sneed technology, going again to the Civil War, had had a Carleton; and Clara, who later wrote an article for a historic journal about John Beale Sneed, a great-uncle who grew to become an area Texas legend by advantage of getting shot his spouse’s lover and the lover’s father.

According to Bartlem, a few of this aggressive vitality stays a household attribute. “You simply couldn’t get via the dinner earlier than any individual had gotten mad and stomped out of the room,” he says.

Bartlem and Fiorina have been married for virtually seven years. After Italy they returned to Washington, D.C. She went to enterprise faculty in Maryland after which to work at AT&T. He says that as she flung herself into the job, working across the clock, he seen that on weekends she was drained, depressed, relatively like a “wounded animal.” He knew that he was shedding her, that she’d determined upon a fast-track profession—not for the cash, however for “the power,” he says. Not the company sort himself, he took a job on the World Bank and began to journey. A number of instances when he referred to as dwelling at evening, there was no reply.

The motive, in response to Bartlem, was that Carly had begun an affair with Frank Fiorina, a divorced man with two kids. She moved out and filed for a divorce. Bartlem says he requested her to go for counseling; she refused. She ceased all contact. About a 12 months later, simply after the divorce went via, he says, she pulled up within the driveway of their dwelling and calmly mentioned, “‘I will never see you again.’ I mentioned, ‘Isn’t that a bit’ . . . how would I say? . . . ‘extreme?’ Given, you realize, we’d had no battles. There was no animosity.

“She had came upon from enterprise faculty that you just . . . weigh your selections, and you then make the arduous alternative. And she has prolonged that to her complete being, and that features work, that features play, that features marriage. If you don’t match within the plan, you don’t match,” says Bartlem.

Frank Fiorina, now 52, nonetheless, did match. A technician at AT&T who rose to vicepresident stage, he was prepared to have a commuter marriage when Carly accepted the job with Bill Marx, which was in New Jersey. Frank instructed her that he may see she would run an organization at some point, and he needed to be there to assist her. It should have been music to her ears. He couldn’t get transferred out of D.C. for 4 years, however, apparently, this didn’t matter.

“A large part of the job was on the road, traveling,” Marx explains, so workers didn’t have a lot of a house life throughout the week anyway. Contrary to what many individuals consider, Carly and Frank did need to have kids of their very own, says a detailed pal: “When she was named C.E.O. of H-P . . . individuals began speaking about why she didn’t have kids, which was horrible. Because there may be no one who likes kids higher than Carly and needed to have kids extra.”

Very rapidly Fiorina rose up the ranks at AT&T. “She simply had management qualities—that was very apparent,” says Marx. “She gained individuals over in a short time, and he or she was an impressive salesperson.”

Fiorina was so enmeshed within the company tradition that even on informal Fridays she wore her dark fits—which, as all H-P workers know by now, are typically Armani or Versace. At 35 she was Network Systems’ first-ever feminine officer; at 40 she was heading gross sales for North America. “She gave the impression to be about three inches above others in being acknowledged as politely, quietly bold,” says a former president of Bell Atlantic, Jim Cullen.

As a strategist, she achieved a coup—or so it appeared then—in 1996 when the worldwide networking market opened up and he or she and Rich McGinn, a colleague in Network Systems, presided over the extremely profitable spin-off and renaming of the community division—now Lucent. Fiorina chosen the emblem—a hoop of purple brushstrokes—saying it reminded her of one in every of her mom’s summary work. Even when she stumbled— as, for occasion, when she orchestrated a three way partnership with Philips Electronics N.V., which changed into a fiasco as a result of the Philips administration was considered as weak and likewise as a result of, says a former colleague, “she didn’t focus on it, she went on to the next thing”— she acquired away with it.

People within the business began to speak a few fiercely analytical thoughts, a photographic reminiscence, a persona that by no means wavered from being “on message.” Analysts have been directly impressed and intimidated by the vitality. “She can’t sit nonetheless. She’s all the time strolling across the room,” says one. When Cisco president and C.E.O. John Chambers later put her on his board, it was, he reportedly instructed pals, as a result of she beat him in each gross sales pitch she made.

Fiorina was additionally common amongst her colleagues. At workplace gatherings she was the lifetime of the social gathering. “Carly is very funny,” says Fitzgerald. Even her former hairdresser Marlo Ricciardelli, now of the Bloom Studio in Morristown, New Jersey, remembers Carly all the time had time to speak about her canine, her stepgrandchild, her boat, and her life with Frank. After the primary Fortune article, nonetheless, coworkers seen that she grew “aloof.” “You had a hard time getting to see her,” says one.

Amra Tareen, the previous director of product advertising and marketing for Access Networks at Lucent, says that everybody thought Fiorina could be C.E.O. at some point, however that day appeared very far off, since McGinn was solely in his early 50s. “Rich . . . had no intention of going anywhere,” says Fitzgerald.

Enter executive-search advisor Jeffrey Christian, who’d learn the Fortune article and who approached Fiorina concerning the H-P job. What he—or certainly anybody outdoors Lucent—couldn’t have recognized was that Lucent’s funds had been stretched perilously skinny by a collection of measures adopted to attain more and more bold projected earnings. Says Lehman Brothers fairness analysis analyst Steve Levy, “They began to do issues that . . . have been exhibiting up on the corporate’s stability sheet, however weren’t essentially exhibiting up on the revenue assertion. . . . They have been making an attempt to satisfy some pretty aggressive gross sales objectives. And while you attempt to develop an organization a little sooner than it’s able to doing, you ask individuals to do unnatural acts. So they began giving out issues like vendor financing [i.e., lending customers the money to buy Lucent’s products]. Now, in case your product was adequate, they’d purchase it. . . . Rich McGinn, with out any query in my thoughts, ought to take the vast majority of the duty. However, Carly was proper there with him, and, for my part, each time she was requested a troublesome query, definitely by me, there was all the time some easy, slick reply.”

An instance of the strain utilized by McGinn on his employees was revealed when Nina Aversano, a former president of Lucent’s North American operations, alleged that in 2000—the 12 months after Fiorina left—she was forcibly “retired” as a result of she had instructed McGinn his income goal for the fiscal 12 months 2001, 20 p.c development, was hopelessly unrealistic. She is suing Lucent for wrongful dismissal; amongst different episodes, the courtroom papers cite an occasion on August 15, 2000, when in an inside convention name McGinn yelled that she would “take down the complete enterprise if she didn’t ‘make the numbers.’”

Thanks to McGinn’s excesses, it’s tempting to bracket Fiorina with the opposite Lucent executives of that period and see her as grasping. Yet Fiorina, say colleagues, was by no means after private wealth per se.

Larry Sonsini provides that when she was provided the H-P job she by no means haggled concerning the phrases, leaving it to her husband and her representatives. “What she wanted to do was start acting like a C.E.O.,” he says.

And, certainly, her home in Atherton, bought for $1.Three million, although giant and nice, just isn’t outstandingly giant and nice. It sits on the finish of a row of others similar to it; it’s gated, the driveway is gravel, and an S.U.V. is parked in entrance. “

If Carly was grasping,” says a pal, “she could have cashed out years ago.”

Which invitations the query: How may somebody so revered on one coast flip into the depraved witch of the East on the opposite? One reply, which is probably what John Young noticed when he analyzed what had occurred at Lucent, was that at each firms Fiorina overpromised and underdelivered.

Walter Hewlett absolutely by no means anticipated to be anybody’s nemesis—least of all that of the administration of the agency his father had co-founded. Quiet, like his youthful brothers, Jim and William junior, and two sisters, Eleanor Hewlett-Gimon and Mary HewlettJaffe, Walter has sought most of his life to give attention to his chief passions: music, know-how, and athletics. He might have inherited $25 million in H-P and Agilent inventory, however he drives a $17,000 purple EV1 electrical automotive and a Ford minivan; one in every of his pals says, “Walter wears garments that you just assume you in all probability noticed in any individual’s closet 5 or 10 years in the past.” He performs 10 devices, his favourite being the cello.

Each 12 months Hewlett places himself and pals via a punishing 129-mile, one-day bike tour often known as the Death Ride—within the Sierra Nevada Mountains. The occasion takes place in July, and Hewlett’s household co-sponsors any H-P or Agilent workers who want to take part (final summer time there have been 120). There is a celebration for them at his household’s property on Lake Tahoe. Hewlett doesn’t rent caterers or outdoors assist; he’s the first one to leap into his automotive and drive to the grocery store to get the provisions.

Though in school Hewlett majored in physics and acquired superior levels in music, operations analysis, and engineering from Stanford, he, like his siblings, selected to not work at H-P; as an alternative he shaped a musictechnology firm—the Center for Computer Assisted Research within the Humanities. The determination to not be a part of H-P was not made due to lack of curiosity. Rather, says his niece, Nathalie Farman-Farma, the youthful technology “would bend over backwards to keep away from the notion of nepotism.”

Bill Hewlett took particular care to not spoil his kids. When as a pupil Jim Hewlett took a summer time job at H-P, a former government assistant remembers, he requested for an advance on his wage. She remembers, “He instructed me, ‘My father pays for my training, he pays for my library, and he pays for household journey. And I’m accountable for every part else.’”

“As children, it was one outfit, one pair of shoes per year,” says Farman-Farma. When Bill Hewlett lastly did begin to hand out his billions, his kids have been properly into maturity, after which it was completed largely to show them—as they in flip taught their kids— learn how to deal with charitable giving. The household’s important charitable belief, on whose board Walter and two of his siblings sit, is the Hewlett Foundation, the sixth-largest non-public basis within the U.S. It owns 5.6 p.c of H-P’s inventory—price $3.Four billion final June, $2.2 billion in April 2002. Significantly, nonetheless, Walter just isn’t on the inventory committee, since Bill Hewlett meant to maintain the board impartial of familial pursuits.

But it was not some sentimental attachment to his father’s reminiscence that drove Walter Hewlett to struggle the H-P/Compaq merger a lot because the opposition of H-P workers and shareholders—and the hundreds of individuals who obtain grants from the Hewlett Foundation. A pal says, “There might be nobody in your complete area of Santa Clara County who doesn’t profit in a roundabout way from the Hewlett and Packard foundations.” As Walter would say again and again as he carried out his marketing campaign, “I don’t take the criticism personally, however I do take the autumn of the inventory personally.”

Relations between Fiorina and Hewlett began to get tough in May of 2001, when, in response to one colleague, Michael Capellas, chairman and C.E.O. of Compaq, telephoned her and recommended that their two firms merge. (Capellas is extra cryptic, saying, “You won’t ever know” whose thought it was initially.) From Capellas’s perspective, it was in all probability a no brainer: Compaq, primarily a personal-computer firm, had been struggling since its disastrous merger with the computer-technology agency D.E.C. in 1998; given Dell’s supremacy within the computer-systems market, Capellas was working out of choices.

Fiorina noticed the concept as a possible godsend, one thing that would flip round her firm’s current sluggish efficiency. Yes, it was hellishly dangerous, however she feared that standing nonetheless was worse. The merger fitted into her beliefs that the way forward for H-P lay in being not a {hardware} firm however a “solutions business.” Inevitably H-P jobs would be misplaced—15,000, Fiorina recommended—and there can be a income dip in the quick time period— 5 p.c, H-P mentioned—but when she may pull it off, she would revolutionize H-P, making it right into a market chief for the longer term. As Dan Niles, a senior Lehman Brothers electronics analyst who was initially skeptical however is now a fan, places it, “I got here to see that if it labored it could possibly be large.”

First, although, Fiorina needed to win over her board. Between May and the deal’s announcement on September 4, the H-P board held 9 conferences. Walter Hewlett, who of all of the board members was the biggest shareholder— he owns 109 million (or 6.Eight p.c of the voting) shares personally—mentioned proper from the beginning he was towards the merger. It wasn’t simply the job losses—which have been unprecedented at H-P—but in addition that Compaq’s important enterprise— P.C.’s—was a shedding enterprise that would dilute H-P’s printer enterprise, he believed. The remainder of the board, together with Richard Hackborn, to whom many regarded for steering on this difficulty, was additionally leery. But over the course of the summer time Hackborn appeared more and more to maneuver in favor; if he had reservations, he additionally had a obligation to assist Fiorina, who, in spite of everything, had been his alternative for C.E.O.

The similar went for Sam Ginn, the retired chairman of Vodafone AirTouch. And the others got here round: Boeing’s Phil Condit, Patricia Dunn of Barclay’s, former White House science adviser George A. “Jay” Keyworth II, chairman of Internet Access Technologies Robert E. Knowling Jr., and H-P C.F.O. Robert P. Wayman. It was a powerful lineup, and that they have been in favor must have assuaged Walter Hewlett’s fears.

But like all Hewlett and Packard kids, Walter was raised to be an impartial thinker. He was not afraid to confess that he nonetheless felt uncomfortable—and more and more out of the loop. “You can simply see,” says a pal of Hewlett’s, “that Carly in all probability didn’t pay a dime’s price of consideration to Walter. And mentioned, ‘This man has no enterprise expertise, wouldn’t be on the board if his identify wasn’t Hewlett, and doesn’t actually have a lot to supply.’”

On July 12 he was making ready for the annual Death Ride, telling H-P to convention him in for a deliberate board assembly; he says the decision by no means got here. (H-P says a board assistant made quite a few makes an attempt to achieve him.) Hewlett additionally claims that after giving months of warning that he’d be enjoying the cello on July 19 on the Bohemian Grove—a summer time retreat for the Bohemian Club, a social fraternity for the wealthy and highly effective which has such august members as former president George Bush and Henry Kissinger—H-P scheduled a twoday board assembly to start that day.

It was later reported that when he sat down on the second day and mentioned, “I don’t know why you guys wish to make a disaster out of [H-P’s situation],” numerous members of the board rolled their eyes.

On the final day of August, a scorching Friday afternoon, the board gathered in Larry Sonsini’s gleaming workplaces in Palo Alto. The deal, Sonsini mentioned, was going to undergo. This meant that both Hewlett must resign or the clause that the board wanted unanimously to assist the deal would set off renegotiations that would damage H-P. Hewlett mentioned he was in a repair. Given that the one different time period left to debate was worth, it was truthful to imagine that if Hewlett didn’t resign Compaq would use the dearth of unanimity as a bargaining chip to make the deal extra helpful for itself. Sonsini requested Hewlett to step outdoors. Sonsini instructed him that he can be inside his rights to vote one manner as a board director and one other as a shareholder. Hewlett mentioned he needed to take the weekend to assume it over.

On Tuesday, Hewlett got here again and, reluctantly, mentioned he would vote for the deal; his reasoning was that he didn’t need H-P shareholders to lose out financially—and he didn’t wish to resign. At this level Fiorina’s focus was on Wall Street; she knew it could react skeptically to the merger—however even she underestimated simply how skeptically. The day of the announcement, September 4, the inventory worth went from $23.21 to $18.87—a lower of 18.7 p.c. But she reckoned she’d have loads of time to promote the deal; in spite of everything, gross sales have been what Fiorina excelled at.

What she couldn’t have foreseen have been three huge obstacles looming forward of her: the terrorist assaults of September 11, which, Fiorina says, delayed her pitch to Wall Street for a month; the collapse of Enron; and the dedication of Walter Hewlett.

On September 14, Fiorina and C.F.O. Bob Wayman visited the Los Altos of- fices of the David and Lucile Packard Foundation, a belief on whose board Dave Packard’s three daughters sit. Since Susan Packard Orr was a famous fan of Fiorina’s, and one of many board members who had  been on the H-P committee that had employed her, Fiorina was optimistic that the muse would vote her manner. It employed the consulting agency Booz Allen Hamilton to supply an impartial report on the proposed merger.

What Fiorina didn’t know was that David Woodley Packard, who had left the Packard Foundation in 1999 to commit himself to the Packard Humanities Institute (a nonprofit group which has 1.Three p.c of H-P’s voting shares), was receiving a whole lot of letters from workers outraged concerning the merger. The most non-public member of all of the Hewlett and Packard households, David Woodley, as he’s recognized by the Hewlett household, has additionally been probably the most overtly captivated with what he sees as the guts being ripped out of H-P. Bill Taylor, the organist who performs twice every week at David Woodley’s beloved Palo Alto movie show, was let go from H-P final summer time.

On November 6, David Woodley introduced that he was towards the deal; earlier within the day the Hewlett Foundation—whose inventory committee had additionally commissioned an impartial report—had come out towards it as properly. H-P inventory went up 17 p.c consequently. A number of weeks later, earlier than the Packard Foundation met to overview Booz Allen Hamilton’s report, David Woodley despatched the letters to its of- fices. On December 7, the Packard Foundation introduced that it, just like the Hewlett Foundation, can be voting towards the merger.

Fiorina realized that with each foundations towards her she was minus 18 p.c of the votes she wanted to get the deal completed. On December 12, Walter Hewlett wrote her and the board a letter asking them to rethink the merger; he described “huge unhappiness” on the a part of analysts and shareholders.

Fiorina turned once more to Sonsini for assist. She knew now that it wasn’t only a race to woo buyers but in addition a public-relations battle. Sonsini referred to as corporate-P.R. specialist Joele Frank. Petite, with quick, jet-black hair, Frank had the pit-bull fame you need when issues get tough. He was too late. Frank mentioned she appreciated the decision, however she had already been employed by Walter Hewlett.

It was at this level, Sonsini says, that he knew issues have been going to get ugly: “I knew straight away, having been in proxy contests, the place they might go. And there’s a little little bit of tabloidism within the world in the present day. And I believe that this factor sadly had a few of these parts.”

But it was Fiorina who fired the primary salvo, in January, when she despatched a letter to shareholders calling Walter Hewlett a “musician and educational.” The implication was that he didn’t have the enterprise acumen to offer recommendation to a board which, as Fiorina favored to repeat, had extra than 300 cumulative years of government expertise amongst its members.

“Oh, the mud is flying,” Hewlett reportedly mentioned to his household that weekend. Meanwhile, David Woodley Packard entered the fray, taking out adverts in The Wall Street Journal, one in every of which concluded with the phrase “There is now an actual hazard that H-P will die of a damaged coronary heart.” He additionally commissioned three impartial phone polls of present and former H-P workers in Corvallis, Oregon, Boise, Idaho, and Fort Collins, Colorado; the outcomes have been greater than two to 1 towards the merger.

Hewlett-Packard branded the polls unscientific. Board members, together with Richard Hackborn and George Keyworth, introduced that the board would resign if the deal didn’t undergo (a place they later reversed). Most troubling personally to Hewlett was that Keyworth, presumably below strain from Fiorina, had allegedly misled The Wall Street Journal about what had gone on in a particular executive-board assembly referred to as in January, through which the surface administrators had graded Fiorina’s efficiency as C.E.O., giving her A’s and A-pluses, however Hewlett had abstained. Keyworth insisted to the paper, which determined to not run the story, that Hewlett had participated within the grading course of. (H-P and Keyworth say the account is absurd.) “Walter felt that George and Richard have been being manipulated,” says Joele Frank. “That was personally upsetting to him.”

Fiorina referred to as on her movie star acquaintances to endorse her place: Citigroup’s Sanford Weill, AOL Time Warner’s Steve Case, DreamWorks’ Jeffrey Katzenberg, and the New York Stock Exchange’s Richard Grasso appeared in a promotional video for the merger. H-P’s spokespeople repeatedly quoted then G.E. head Jack Welch, who had mentioned that it was “unpardonable” for a board director to vote for the merger after which lead the opposition.

E-mails flew forwards and backwards amongst merger opponents, speculating that H-P had employed a non-public investigator to compile a file on Hewlett. (Two P.I. sources verify they’d been retained by H-P.) Reporters have been instructed by H-P’s media division that Hewlett had a shortlist of who ought to go and who ought to stay if the deal collapsed, and that not a single lady can be left on the government stage. Hewlett, when requested about this by an analyst, brushed it off in a monotone. “I don’t take any of that personally.”

At a lunch in Manhattan, the household— Walter Hewlett’s brother-in-law JeanPaul Gimon, his eldest daughter, Nathalie, 34, a former New Yorker editorial assistant, and his son Eric, 31, a physicist on the Institute for Advanced Studies in Princeton—was aghast at how their relative was being portrayed. “Either Carly Fiorina has not learn these adverts, through which case she just isn’t managing the corporate as intently as she ought to, or she has learn them, through which case she is far, a lot worse than we had ever anticipated,” mentioned Gimon. (H-P’s Rebeca Robboy later confirmed that Fiorina had authorized all of the proxy-related adverts.)

To the frustration of each Joele Frank and Hewlett’s lawyer, Steve Neal, Walter Hewlett wouldn’t reciprocate in form. “If we may have used all of the instruments at our disposal, we’d have gained by miles,” says Neal, “however Walter mentioned, ‘We both win by the excessive highway or not at all.’” He provides, “Come again and see me in two years’ time and I’ll inform you what his choices actually have been.”

On February 19, Hewlett launched his plan for H-P, a method that may give attention to the corporate’s imaging and printing enterprise—possibly even spinning it off—and would construct up the company pc enterprise with niche-filling acquisitions. Fiorina breezily dismissed it as a “press release”—however then Hewlett delivered his most wounding assault but. The evening previous H-P’s analyst assembly in New York, he launched particulars of a proposed compensation bundle for Fiorina and Capellas—totaling $117.Four million in wage, bonuses, and inventory choices, with $69.Eight million of it for Fiorina—ought to the merger undergo. Fiorina was visibly offended as she leaned over the lectern on the New York Hilton and instructed analysts that “shareholders have every right to know” what the compensation of the C.E.O. can be, and that the figures had not been launched earlier as a result of the conversations had been solely preliminary, and the quantities would must be adjusted to the market when the time got here.

Nonetheless, the data affected Institutional Shareholder Services (I.S.S.), which was making ready a report on the merger and which each side have been fiercely lobbying, because it was estimated the report may sway greater than 20 p.c of the shares held by giant buyers. Though I.S.S. got here out in assist of the merger in March, its report said that to have omitted the small print of discussions on compensation “falls far short of the good governance ideal.” With Enron’s cloud looming overhead, this was precisely the form of P.R. Fiorina didn’t want.

By March, regardless of how a lot Fiorina declared, “This just isn’t a sport,” the competition was trying increasingly like one—a blood sport. Each day a brand new establishment got here out and introduced whom it was voting for. TALLY IN THE VALLEY, ran an area headline. By March 19, the day of the particular shareholder assembly, it was, everybody knew, too near name.

The morning of the vote, Walter Hewlett, Joele Frank, and Steve Neal knew that Deutsche Bank was being lobbied by H-P. “We knew a little earlier than seven that beginning at seven Deutsche Bank was going to be speaking to the corporate. They instructed us that,” says Neal. Still, when the anti-merger staff, accompanied by Hewlett’s spouse, Esther, his son Ben, his brother Jim, and Pam Packard, David Woodley’s spouse, arrived on the assembly, any emotions of tension have been momentarily overcome by the frenzy that greeted them.

“It was like a wave,” mentioned one H-P worker. Inside the auditorium, individuals ran to shake Walter’s hand and thank him.

From the second it was introduced the assembly can be delayed, Hewlett’s camp says, they knew it was as a result of H-P was negotiating with Deutsche Bank. “A bit of after 10, we obtained phrase from our proxy solicitors that Deutsche Bank was altering its vote, for the merger,” says Neal.

When it was throughout, Fiorina closed the assembly, later saying that nobody would know for positive for a number of weeks whereas the votes have been counted in Delaware, however that H-P had gained by a “slim but sufficient” margin. Walter Hewlett didn’t look dismayed—removed from it. At a press convention he learn—awkwardly—from his notes and joked that he would now be returning to his life as “an academic and a musician.”

The board knew it wanted to fix fences; within the subsequent few days Sam Ginn met with Walter Hewlett to debate the opportunity of his renomination to the board. Hewlett, he thought, was amenable to the thought. The following Monday, Hewlett gave a speech to the Council of Institutional Investors, advocating that, sooner or later, boards throughout America retain authorized and monetary counsel impartial of firm administration; Fiorina had been scheduled to talk the following day however canceled, citing fatigue.

Then, on March 28, Hewlett sued H-P for each utilizing improper coercion of Deutsche Bank and misrepresenting anticipated job losses and the degrees of income achieve. H-P claimed that his arguments have been “baseless,” however some analysts and attorneys weren’t so positive. Jesse Choper, a regulation professor on the University of California, Berkeley, says, “Even the choose has mentioned that if Hewlett can show what he alleges, there’s a potential plan of action.” The board mentioned it was “shocked” by the lawsuit and determined to not renominate Hewlett in spite of everything. A courtroom date was set for April 23.

Fiorina’s colleagues say that she is unrattled—that she is at her absolute best along with her again towards the wall. “She is so calm and decisive,” says one. “She thrives on this,” says Lucent’s Kathy Fitzgerald.

Meanwhile, dissent grew inside H-P. There have been leaks from the so-called “clean team”— the combination physique making ready the merger— that no manner may as few as 15,000 jobs be misplaced and that Fiorina’s targets have been manner offbase. An E-mail went across the H-P alumni Web website suggesting that H-P would probably spend $727 million on the merger advert marketing campaign and the compensation packages, virtually as a lot because it hoped to save with the layoffs. A memo surfaced from Ann Livermore’s Services division saying that targets had been missed for H-P’s second fiscal quarter, due partly to the disruption brought on by the proxy struggle. A voice-mail message of March 17 was despatched to the San Jose Mercury News; on it Fiorina could possibly be heard telling Bob Wayman that they could have to do “something extraordinary” to influence Deutsche Bank and Northern Trust Corp. to modify their votes. The turmoil was sufficient to trigger the S.E.C. to begin investigating whether or not Fiorina had used improper strategies to affect institutional shareholders to vote for the merger.

On April 17, H-P introduced that the vote depend by an impartial firm had been accomplished, figuring out that the merger had handed by 45 million votes—a margin of two.Eight p.c. This meant that even with out the 17 million Deutsche Bank votes, Fiorina would have gained. However, if the courtroom finds that improper ways have been used to sway shareholders, it may order a re-vote. Meanwhile, Fiorina launched a hunt to seek out the workers who had given memos and E-mails to the press; one who admitted to leaking two memos was fired by her. Her voice mail searching for “something extraordinary,”

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