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Worst-managed company ever?

November 20, 2012 - Harry Eagar
If asked to name the worst management ever, I suppose many people would think first of Enron, but those guys weren't even trying to be honest.

Among managements at least notionally attempting to play by the rules, you could make strong cases for General Motors or AOL, or possibly Long Term Capital Management; and if you take the long view, there is no question but that the various iterations of Citibank have made more and bigger bad management decisions than any other corporation; but for sustained and obtuse mistakes in the 21st century, there's nobody with a record quite like Hewlett-Packard's.

Tech companies fall behind the curve often enough, usually by giving up on innovation, like Kodak. But for an on-the-ball company like H-P, starting from a dominant position and avowedly pursuing strategies of innovation and new market penetration, nobody has put together such a long string of such big mistakes.

The $8.8 billion writedown of Anthology that H-P announced today works out to a loss of something on the order of $18,000 per minute and, presumably, counting.

With Anthology, H-P thought it was getting in on a rising wave. With Compaq, it got in on a receding wave, evidently on the theory that being the biggest player in a marginal business would have some sort of financial advantage. As Nils Pratley in the Guardian points out today, H-P then decided to get out of the PC business anyhow, after overpaying for EDS and Palm:

"Remember the context here. Hewlett-Packard was a former computer titan fallen on hard times. Too many acquisitions, such as EDS and Palm, had turned sour and new-boy chief executive Léo Apotheker was desperate to find an instant fix. He decided to get out of making personal computers and buy Autonomy at an almighty takeover premium of 64%."

Accusations of perfidy are flying back and forth, although the bottom line apears to be inescapable: Whichever side was in the right, morally, one side committed a mighty error. It would be unsurprising, given history, if this turned out to be H-P and its Big Four accounting firm. Where have we heard that story before?

Of all the obvious things that RtO has stated over the years, I think the most original observation has been that the business community's shibboleth about the overriding necessity of creating confidence is nonsense. If we learned anything in 2008 (and the Republicans certainly did not), it is that confidence is like strychnine to business management. Give me a worried CEO any time.

Pratley wonders if "Hewlett-Packard's investors might ask whether their management was too driven by the desire to do a deal, any deal, that offered the prospect of a fresh start."

I would rather think that investors should ask, "Can't we get performance this bad cheaper than by paying executives 500 times what ordinary workers get?" Do I hear 50? 25? 10?

At any rate, let us hear no more about how we should arrange our government to run more like a business.


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