Fiorina's record at HP will be key to Senate race

WASHINGTON — Carly Fiorina's claim to fame — her five-and-a-half years as chief executive at Hewlett-Packard Co. — could alsobe her greatest vulnerability in next year's U.S. Senate race in California.

Hours before Fiorina made her candidacy official on Wednesday, her campaign aides sent reporters an 11-page report touting her record at HP. At the same time, Sen. Barbara Boxer's team was portraying Fiorina as an insensitive CEO who oversaw the firing of thousands of workers and a then-controversial merger with Compaq Computer Corp.

"California needs a senator who's going to fight to create jobs, not write off 28,000 workers and ship jobs overseas," Boxer campaign spokesman Rose Kapolcznyski said.

Boxer is likely to keep up the attack even as Fiorina tries to fend off conservative state lawmaker Chuck DeVore in the Republican primary, where issues such as government spending, abortion and gay marriage will play a greater role. If Fiorina survives to face Boxer in the general election, which side wins the race to define her tenure at HP could well determine her prospects for the campaign.

Fiorina's time as head of Hewlett-Packard Co. was so unique and tumultuous that at least three books were written on the subject, including her own best-selling memoir.

With that scrutiny transitioning to the campaign trail, Fiorina said she is ready to defend her record.

"Barbara Boxer has been calling me a failed CEO for the entire year," she said. "It is yet another of her works of fiction, but nevertheless, she conveniently in this charge forgets that I led Hewlett-Packard through the worst technology recession in 25 years and doubled our revenues, improved our profitability, tripled our rate of innovation, quintupled our cash flow, added jobs and created a market leader in the process."

HP dismissed Fiorina in February 2005, giving her a $21 million severance package. Board members, seeing little progress in the company's stock value, approached her about reorganizing the company into two units, in essence delegating more responsibility for day-to-day operations to a president presiding over each unit. She resisted and soon lost her job.

Since then, she has served on advisory boards for the Department of State and the Department of Defense and worked as an advisor for Sen. John McCain's presidential campaign. Fiorina was diagnosed with breast cancer on Feb. 20 and underwent surgery. She completed her treatments earlier this month and said Wednesday the disease is behind her.

The report presented by the Fiorina campaign noted that HP stock opened at $17.44 the day the Compaq merger was complete. It's now at about $48 a share, an increase of more than 160 percent.

Rob Enderle, principal analyst with the Enderle Group in San Jose, said Fiorina's strength was vision, but not execution.

"In terms of the merger with Compaq, it's actually worked out very well in hindsight," Enderle said. "HP is at the head of the market. Granted the market is kind of sick, but it's at the head of the market, and it wouldn't have been if she had not done the acquisition."

Critics note that profits and shareholder value did not make a strong comeback until she left.

"She walked into a fundamentally sound, healthy, vibrant company and had a disastrous tour of duty," said Jeffrey Sonnenfeld, a professor at the Yale School of Management. "She sliced shareholder wealth in half and had a reign of terror that was infamous for its scapegoating, finger-pointing culture."

Sonnenfeld noted that Compaq's equipment was antiquated and said Fiorina's successor as chief executive, Mark Hurd, deserves the credit for making the merger work.

Fiorina's campaign says net revenue increased from $39.3 billion the year before she became CEO in 1999 to $86.7 billion when she left in February 2005. Profits dipped from $3.1 billion in 1999 to $2.4 billion in 2005, but soon after shotup, to $8.3 billion in 2008.

In her book, Fiorina shares the credit for HP's rebound with Hurd. She said the company's current standing as one of the world's premiere technology companies stems from his management, as well as the transformation that took place on her watch.

At Stanford University, officials at the business school have always had a keen interest in the operations of Hewlett-Packard. The company's founders, Bill Hewlett and Dave Packard, were classmates there. Fiorina also attended, majoring in medieval history and philosophy.