46 of 49 people found the following review helpful
"Backfire", Peter Burrows' remarkable chronicle of Hewlett-Packard's controversial acquisition of Compaq, marks an important milestone in the rich technology heritage of Silicon Valley. "Backfire" is far more ambitious than the pabulum typical of business writings. In order to build a cogent thesis, Burrows takes on a broad range of topics, including pertinent biographical background of the key players, the legend and lore of Hewlett Packard - the company and the founders - and the arcane mechanics of proxy votes and corporate government. But while the subject matter risks could easily yield a pompous and boring analytical tome, the author injects exactly the right amount of intrigue, drama, treachery, and humor while capturing characters that are wholly believable in their flaws, foibles, and ultimate victory or defeat. The economy of Burrows' prose, sharpened by years of reporting for "Business Week", yields a tale that is a true page-turner with much more energy, excitement, and personality than the standard business fare.
Any frequent "Business Week" reader knows that Burrows is no fan of Carly Fiorina. Consequently, the author was not granted official access to either Fiorina or HP officials (HP denies any connection, citing only "scheduling conflicts"). Notwithstanding, his portrayal of HP's embattled CEO is vivid and wholly believable. Fiorina, the marketer and master-of-spin with no prior CEO experience, is injected into the venerable but stumbling culture of Hewlett-Packard. A veteran of the politics and bureaucracy of AT&T and Lucent, she is an unusual match for the techno-nerd culture of HP, where products trump hype and integrity and loyalty are revered. But while Burrows' criticism of Fiorina is biting and unrestrained, due credit is given to her tenacity, oratory skills, and relentless dedication to completing the acquisition at all costs. Walter Hewlett, who rises from a cocoon academic obscurity to fight-the-good-fight is treated much more charitably, but he only barely qualifies as the hero of the tale. While recognized for his honor and integrity in refusing to allow the proxy fight to deteriorate into personal attacks on Fiorina, his actions and judgment as a board member in the weeks and months prior to the planned merger's announcement are rightfully questioned. If there is a villain in the story, it is HP's board of directors. It is the board that passively watched while HP failed to capitalize on the rise of the Internet in the mid-late nineties, allowing HP to degenerate to a position of significance only in its printers. It was the board that initiated a bizarre, if not amateurish, CEO search leaving Fiorina as virtually the only real candidate for this high-profile job.
Much is made of the demise of the celebrated "HP Way". But Burrows wisely resists the temptation to attribute all of the responsibility for this decline on Fiorina. While it is successfully argued that she failed to grasp the true significance of this unique culture, further alienating frustrated employees, by the time Fiorina arrived on the scene it was already in steep decline. What was once an honored tradition of mutual respect and pride in innovation had been replaced by a sense of entitlement and an excuse for sloth. It is unfortunate, Burrows notes, than in the age of Enron and WorldCom, with corporate America in desperate need of the principals and values that embodied the "HP Way", that there is little chance of resuscitation under Fiorina's reign.
In summary, "Backfire" is a masterful portrayal of the rise-and-fall of an American icon, and a revealing exposé for the behind-the-scenes machinations of history's largest technology merger and ugliest proxy fight. It is a must read for anyone interested in the history of Silicon Valley, executive leadership, corporate governance, or corporate culture. In the subsequent dissections of the HP/Compaq post-merger failures (or, less likely, successes) that are sure to come over the next several years, Peter Burrows' "Backfire" will serve as a frequently quoted and pivotal reference point.
17 of 18 people found the following review helpful
on May 9, 2006
HP is a company in transition. For decades one of the fastest growing companies in history, it is now seen as a beleaguered giant, risk averse and unable to transform itself.
This book situates the company's crisis in the context of the ascension of Carly Fiorina to the position of CEO and her brutal fight to acquire Compaq while changing the company.
The origins of Hewlett-Packard have become the stuff of legend. During an electrical engineering class at Stanford in 1934, Bill Hewlett and David Packard began to formulate a vision for a company; their professor, Fred Terman, immediately recognized their talent and set about to mentor them. Four years later, in a rented garage with just $538, Hewlett and Packard, flipping a coin to decide whose name would come first, founded Hewlett-Packard. From the start, HP strove to create innovative technology products, predominantly in the instrumentation and measurement field. Their first big break came with the Disney company's purchase of an audio oscillator, which it used to fine tune the sound track for the experimental music film Fantasia. As the company grew, the founders articulated a series of objectives ("the HP Way"), which included the necessity to make a profit with a focus on innovation in the electronics field, but also an egalitarian culture that emphasized employee profit-sharing, career opportunities, and a contribution to the community.
According to many employees, the HP Way helped to create an exceptional work environment, in which individual opinions mattered and strong personal relationships of trust grew along with professional engagement. Many HP employees spent their entire careers at the company. According to David Packard, HP sought to balance entrepreneurship against insubordination: if an employee chose to continue to develop a product on his own after it was officially terminated, he often would be allowed to do so within limits. Time and again, Packard found, such entrepreneurship resulted in breakthrough instruments, such as oscillator viewer screens, that generated millions of dollars in revenues. To maintain this entrepreneurial spirit, as profitable groups grew within HP they were allowed to function as near-autonomous divisions. This was particularly well suited to the booming electronic instrument business: with a few hundred thousand dollars, a small group could develop a product for a unique area of need and then sell it on their own. For decades, this structure worked. From 1958 to 1998, the company grew an average of 20.2 percent per year, a record that no other company has surpassed.
As Burrows relates, during the late 1960s, HP began to develop computers and related product lines and technologies. This represented a major departure for the company, away from its core business of electronic instrumentation. While the move opened huge new areas of potential profit - from printers and personal computers to pocket calculators and specialized semiconductor processors - it vastly increased the complexity of the company. Not only did R&D often require millions of dollars over decades to develop competitive product lines, but by the end of the 1990s there were over 80 quasi-independent businesses under the HP umbrella; often operating in separate geographical regions, each of these groups had its own sales force, its own engineers and designers, and its own software developers. By 1997, when HP began to miss its financial targets for the first time, many in the company began to fear that it was losing its way, that its structure had become wasteful, unwieldy, and worst of all, risk averse. Furthermore, after having invested so heavily in computers, HP executives recognized that the industry was becoming increasingly commoditized. In the opinion of industry observers, the moment had arrived to shake up the company.
After a few attempts to transform the company from within, the HP board chose Carly Fiorina as the new CEO in 1999, an acknowledged high tech "rock star" who recently had headed sales at Lucent, the communications hardware giant that had spun off from the AT&T breakup. From the start, she was a controversial presence in the company. For example, her specialty was marketing, which automatically branded her as an outsider in an engineering company. Moreover, as a media darling, the personal publicity she attracted made many longtime HP executives uncomfortable. However, others argued that she was bringing a fresh perspective on where the company should go, that she could gain an overview that few insiders had and would formulate a new strategic direction. In particular, Fiorina argued that with the unmatched breadth of its product lines, HP might somehow combine them into a more coherent whole, perhaps by focusing on the internet. Nonetheless, this vision of strategic synthesis remained to be defined in detail.
So far so good. This background was extremely useful for me and covers to about 2004. But from this point, Burrows goes into excruciating detail about Fiorina's personality and style as well as adds several chapters on the civil war within the company that the acquisition of Compaq sparked. None of that interested me much, though this is the "intrigue" that many readers found most interesting. Then, the book ends as she obtains the acquisition, well short of the aftermath in which she was fired. So in addition to being too gossipy for me, it is already outdated.
Burrows is a good journalist and covers a lot here in a better way than I have found elsewhere, but it is not very deep and glosses over many of the others issues that Fiorina was concerned about, such as the creation of synergies between the 83 largely independent businesses that make up the company.
17 of 19 people found the following review helpful
on June 19, 2004
I enjoyed this book as it contained substantial original reporting that is not duplicative of the work that others have done. I would have liked to see more material concerning bottom line issues. The bottom line issue that has the most resonance for me is the Wall Street assessment, both now, and at the time of the merger, that HP's non-printing businesses have no value on the Street. In other words, if HP were to be bought by some other firm, the Wall Street consensus is that such an acquirer should simply eliminate the other businesses. HP's value is actually less as currently structured because eliminating these other businesses has closing costs associated with this shutdown activity.
The clear implication here is that Walter Hewlett was absolutely correct in opposing this merger, since the result clearly is that 20 billion dollars was completely wasted, and precious time is still being lost on ineffective strategies to revive these businesses. With the benefit of hindsight we can say that Walter Hewlett should have been given more credit than he received, even from Burrows, for opposing this capital and job destruction, even in the face of Fiorina's personal attacks.
This book should have pointed out that these at-risk businesses can still be saved, particularly the server and server-related businesses, with the appointment of proper management by the Board of Directors. What they need to be looking for this time is not someone whose picture has been on the cover of "Fortune" magazine, as was Carly's before she was hired, but someone with the knowledge and interest in saving HP. Carly not only does not have the engineering expertise, she simply creates the impression that she has no interest in HP's existing businesses, even printing, which she has left to wither on the vine in a new investment sense.
HP has had a computer server business for over 25 years. It is a big market, roughly 50 billion yearly and rising. HP has 27%, but has failed to gain any share at all from the collapse of Sun Microsystems. Instead, customers are transfering to IBM and Dell, which should be a big wake-up call for the Board. Dell Computer is number one in market position for the key Linux server business, perhaps because of HP's totally insular and uninformed approach to this market. A lot of hard work by HP employees went into building a formerly successful server business, it is senseless to discard this potentially excellent business because Carly is more interested in trying to sell MP3s at Starbucks, something that will never generate much profit.
I would have liked to have seen a clear statement in this book that if in the summer of 2004 if HP's non-printer businesses are still worth zero, that the HP Board of Directors needs hire a new CEO. Doubtless they prefer to have a charming dialogue with Carly about her boneheaded hipster ideas involving HP products in Starbucks rather than argue with some computer nerd about computer enterprise/service-provider product investments, but I would argue that being true to their responsibilities requires that they do the later, whether they like it or not. It would have been good for Burrows' book to say so.
8 of 8 people found the following review helpful
on May 5, 2004
The main weakness of this book was that its treatment of CEO Fiorina was far more favorable than the facts warrant. The controversy over the 20 billion dollar merger should have been foreseen by the Board of Directors. Certainly there was ample evidence at the time of the proposed merger that Carly Fiorina's ideas and actions were incompatible with her role as head of a major American company. Burrows should have detailed many more of these. For example, she invested millions of shareholder dollars in a radical feminist group and even set them up with office resources at HP. She donated over $100,000 of her personal funds to an eccentric socialist training camp in Los Altos Hills. This is clearly a businesswoman that simply does not have her head screwed on right for business. The businessman George Soros has been rightly condemned in the business community for analogous nutty actions on a larger scale but Burrows mostly gives Fiorina a free pass on such activity, although his account is certainly better than most.
It has been nearly five years since Carly Fiorina took over HP and the bottom line result is that even after spending 20 billion on Compaq, the investment community values HP at less that half of what it was worth when she took over. Clearly, a much harder-hitting book from Burrows was warranted than what he produced, given the huge magnitude of the investor losses that have occurred since.
5 of 5 people found the following review helpful
on February 29, 2008
This book gives us a better insight on what's going on at "the top." Oh, those company layoffs. I am just glad to have survived many of them. Even just a rumor of them is sure to diminished one's morale. But now I know why they have to happen.
I admire Fiorina's toughness, poised and confidence. BUT....It breaks my heart to find out the ridicules and bad treatment that Hewlett received. Come on, he is Hewlett!
Here is a scene where Hewlett arrived with Neal at Steve Schatz office for his deposition.
Steve Schatz, a former government prosecutor, wanted to prove that Hewlett wasn't the Jimmy Stewart character the press had made him out to be. ... Schatz let Hewlett know how he felt about him immediately, apologizing that the deposition was starting a few minutes late. "I hope you won't think that I had some nefarious rationale for it starting a few minutes late," he said, a clear reference to Hewlett's claim that HP delayed the start of the shareholder vote so it could lean on Deutsche Bank. From there Schatz didn't hold back.
At one point, HIS FACE INCHES AWAY FROM HEWLETT AND HIS FINGER JABBING THE AIR, Schatz asked: "Are you aware that your complaint accuses Hewlett-Packard of lying?" according to Hewlett and Steve Neal. The session was rife with mutual disdain, disrespect, and rudeness. Schatz fired away, and reloaded every few seconds. Schatz denied anything inappropriate.
Read this book. It's better than fiction.
Romina Wilcox, Author of Cold Eyes
8 of 9 people found the following review helpful
on February 19, 2003
In addition to being a compelling, insightful account of the merger announcement and ensuing proxy fight, Backfire gives a wonderful glimpse into the heart and soul of the most powerful woman in American business. Especially when it comes to the Lucent anecdotes and the revealing moments after she first arrived at HP, Burrows provides a rich tapestry of insight and examples that allow you to truly get your mind around (and inside) what makes Carly tick.
With a wealth of interview material to draw from obtained prior to the HP's decision to freeze him out, what this tome does without compromise is maintain its sense of impartial perspective -- a never wavering eye on the events of the past and present. No deal had to be struck and no compromises made in order to deliver this saga, and it is far more fascinating, honest, and revealing without those concessions.
8 of 9 people found the following review helpful
on February 18, 2003
This is a great book and an easy read. Burrows makes you feel like he is sitting across from you as he discusses the merger, the HP Way, Carly and Walter Hewlett's motivations. He clearly brings recognition to the HP Way and how it made HP a great company, and the dangers involved in destroying HP's identity by merging with Compaq. Why would a company with a suffering PC division want to buy a PC giant that was suffering even more, in a market where consumers have stopped buying PC's? "Two garbage trucks colliding". And yet Burrows gives credence to Carly's abilities and talent and clearly offers both sides of the story.
The best part of this book is the general business understanding it offers of mergers gone wrong. This is a prime example and well portrayed.
24 of 31 people found the following review helpful
on February 7, 2003
Great book. Gets you behind the scenes of what really happended and how Carly wrecked HP and overpaid for Compaq.
I used to be a decent small corporate customer of HP. We bought their servers, desktops, printers, monitors, hubs & switches, calculators, great hard drives (when they were making them) plus other stuff. HP always had great engineering.
After what she has done to HP - I cannot in good conscience ever buy any new HP gear except maybe their laser printers.
Carly has wrecked HP. The people on the board who decided to hire her must have been .... She left wonderful Lucent just before it crashed and before the cooked books and other things were disclosed.
The only guy still trying to manage a company the old "HP way" (where you care about the employees) in Silicon Valley is Scott McNealey at Sun. Carly is a disaster. Please note this is not a rant about women managers. There are plenty of very good women managers but Carly is not one of them.
If you want to learn how one greedy person wrecked one of the greatest American corporations - read this book.
12 of 15 people found the following review helpful
on August 4, 2004
This book contained a lot of good material concerning the interaction of Carly Fiorina and her highest-level executives. However, Burrows' coverage of her impact on lower level managers in critical positions was inadequate. The failures of such managers can have major impacts on HP for potentially decades and thus deserve scrutiny. A good example prior to the Fiorina era was when HP lost over 60 points of market share in the technical workstation market in the 1980s which also led over time to a weakened server market position, due to lost technical and financial leverage. The current value of this loss may be as high as 10 billion dollars in revenue yearly.
The keynote address by her Vice President for Linux at LinuxWorld yesterday illustrated well the huge risks HP is taking by having lower level executives like this VP adopt her approach. While this area is currently too small to register on the Board of Director's radar, critical market battles are currently being fought that will strongly influence HP financials for a long time. Carly Fiorina's bad influence was evident in VP Martin Fink's keynote address. This speech spent a lot of time promoting Linux, which customers can buy from many vendors, and virtually no time promoting HP's value-added. HP makes money whether it sells Linux or Windows-based machines. There is no real incentive to for HP to sell an HP-Linux machine instead of an HP-Windows machine, or vice versa.
Why is HP's Martin Fink wasting valuable time in front of a huge audience promoting one side of an issue that is a don't care situation (with respect to Windows) and potentially a losing proposition (with respect to HP_UX) to HP financially? Note that HP has no time to waste in this market, the market leader at present, due to earlier HP missteps, is Dell Computer, not HP.
What Martin Fink should have been promoting is why customers should buy HP Linux systems as opposed to IBM or Dell Linux systems, instead of arguing customers should buy Linux instead of other alternatives that HP also makes. Martin Fink's mistake yesterday is a typical Carly mistake, to get caught up in promoting what is fashionable, rather than what is best for HP. The lack of loyalty to HP implicit in his address has also been a familiar issue to Carly observers - that she is promoting herself far more than she promotes HP.
The central theme of this example, the appalling deviation from business basics that Carly inspires in her team, is one that was deserving of much more attention in Burrows book. Corporate marketing resources need to be focussed on beating the competition, not on taking market share from one HP division and transferring it to another, or promoting the next job for some executive, whether that executive is Fink or Fiorina. It seemed yesterday that Martin Fink was promoting himself for some more senior Linux position at some other firm, which would explain his lack of HP advocacy, something Fiorina is thought to do in promoting herself for political office using her HP soapbox. It is also a good demonstration why the point of view prevalent on some unengaged Boards, that a CEO as just a public relations representative is adequate, is so misguided.
9 of 11 people found the following review helpful
Peter Burrows offers insights into high level business, where personality matters more than economics, as he explores the mammoth HP-Compaq merger. Most mergers fail to make money or to produce the promised "synergies" so, he asks, why - other than ego - do CEOs pursue them? Though stylistically somewhat trite, this book successfully explores the HP Board's decision to approve the merger, with Walter B. Hewlett's vote in favor, and his subsequent lonely, ultimately quixotic battle against it. The most contentious issues in contemporary business are all here: shareholder rights and value vs. CEO power; employee-oriented cultures vs. "re-engineering;" corporate integrity vs. sharp practice; and the interesting spectacle of a ruthless, hard-headed female CEO pitted against a sensitive, cello-playing man. The author says Hewlett-Packard executives were told not to speak with him after he quoted merger critics in Business Week, so there is an inevitable Walter Hewlett bias. We found this to be a very good read, even a must read, for corporate warriors.