"In the early summer of 1999, when we were interviewing Carly (for the CEO post), we discussed it would take a minimum of three years to turn things around and there would be lots of ups and downs," said George Keyworth II, an HP director and also chairman of public policy research institute The Progress & Freedom Foundation. "We are absolutely behind her and know there will be challenges."
Keyworth's statement of support comes amid a rebuilding period for the Palo Alto, Calif.-based computing giant. HP has been hit hard by the technology decline, with most product divisions showing losses when the company reported earnings last week for its fiscal third quarter. PC revenue, a bright spot last year, declined 36 percent in the recent quarter while profits slid 144 percent. Unix server revenue, meanwhile, dropped 22 percent. The situation has prompted some analysts to question whether many of Fiorina's reforms are taking hold.
The board, according to Keyworth, is taking the long view of the situation. When Fiorina was hired, the board envisioned that it would take three years to cure some of the issues then facing HP. Fiorina, in fact, signed a three-year employment contract. The reform measures haven't fully kicked in, but Fiorina is only two years into her tenure.
"We asked Carly to make a series of changes that were long overdue--something we called a major modernization of the company," Keyworth said. "We felt we had missed the Internet and wanted to reinvigorate the company."
Although HP's stock has fallen roughly 60 percent from its 52-week high and the company's third-quarter revenue dropped 14 percent from the previous year, to $10.1 billion, Keyworth said HP's board believes the company's performance is in line with that of a number of other large tech companies struggling through the current slump.
"The financial performance is not where we want it to be, but, overall, its performance is very much in tune with the times," Keyworth said.
Although the board thought it would take a minimum of three years to turn things around, the directors realize it will now likely take longer, given the unexpected turn in the economy, he said.
He added some of the fruits from Fiorina's efforts include restructuring the organization into a "customer-facing organization." Employees are largely categorized into one of two groups, those who deal with customers and those who develop products.
"It's allowed us to respond to rapid change in our product mix," Keyworth said. He pointed to the quick development of an inkjet printer that sells for less than $100.
Fiorina's strategy, in a nutshell, is to transform HP into a services giant that sells software and hardware, rather than a technology products company that also provides services. Last year, HP tried to expand its capability in the consulting arena in an attempted acquisition of PricewaterhouseCoopers' consulting arm in a deal valued at upwards of $18 billion. But Wall Street was less enamored with the deal and pushed HP's shares down. The deal was eventually called off, due to market conditions.
Some critics pointed to that move as a misstep by Fiorina. But Keyworth said HP's directors had wanted to grab a large piece of the services business for years and fully supported Fiorina in those efforts.