When I read that Blackstone was asking ex-HP CEO Mark Hurd to be its CEO champion in its attempt to wrest control of Dell from its founder, I nearly had a heart attack. I’ve been following the Meg Whitman turnaround effort at HP closely and the amount of damage Hurd did to that company is unprecedented in my experience.
But financial analysts love Hurd and, over the short term, he likely could spike Dell’s valuation by optimizing quarterly numbers until Blackstone could exit with a profit. However, whoever was left holding the company would have a dying shell that probably couldn’t be recovered. With Oracle’s numbers falling, largely led by its underperforming hardware unit led by Hurd, he is likely looking for another company to bleed. Let’s hope for Dell’s sake it won’t be that company.
I had no idea how bad Hurd was for HP until after he was kicked out. Apparently, none of us had done our homework because apparently he had done similar things at NCR, resulting in employees slashing his tires there. His practices were incredibly hostile to employees. At HP, for instance, he reduced both salaries and benefits for the employees, even in China, which is and was experiencing one of the fastest median income increases in the world. This destroyed employee productivity and morale. HP is just now showing morale improvement, thanks to a huge amount of work by its Harvard-trained HR EVP, Tracey Keogh.
The mess she stepped into was almost unbelievable. Not only had Hurd created and driven turf wars between the top executives under his administration, but he’d outsourced executive reviews to headhunter firms. Yes, this is exactly like having foxes guard the hen house and explains why seven of 10 employees and executives were recruited from outside. These headhunter firms were incentivized to replace the folks they were reviewing. The only question I have after learning of this was why the number wasn’t 10 out of 10, because, otherwise, these headhunter firms were leaving money on the table.
While at HP, Hurd cut R&D sharply, creating a huge problem for Whitman, who has had to restore it by hurting quarterly performance to assure HP’s future. Financial analysts look for quarter-over-quarter changes and loved Hurd’s cost-cutting moves. But like selling seed corn to push up short-term profits and killing a farm because there would be nothing to plant for next season, cutting R&D put HP in a position of desperation, particularly with regard to software, and it likely contributed to its Autonomy mistake.
The reason Hurd has done poorly at Oracle is that Sun already was cut down to a shadow of a company before he took over. Even Hurd couldn’t get blood from a stone; a cost cutter like Hurd had nothing to work with in an anorexic company like Sun. He is like a weight loss specialist taking control of the health of someone who, due to illness, is already a walking skeleton.
Blackstone’s strategy with Hurd follows two likely paths. First, do to Dell what Hurd did to HP and maximize top-line and bottom-line growth by sacrificing the company’s future. And then, before it collapses, take the company public again, leaving the new investors with a near-unrecoverable expensive mess. This is what would have been left of HP had Hurd gone his full term and not been kicked out. The fall back is that Michael Dell won’t want to see his legacy destroyed and might be willing to pay significantly from his own resources to stop Blackstone from killing his company. Neither Michael Dell nor Microsoft are likely to stand idly by and let Dell be destroyed.
Frankly, I don’t think this kind of thing should be allowed; gutting a company to pass the shell onto unsuspecting stockholders should be caught before it is ever started. Personally, I don’t think people who bleed companies like Mark Hurd did should ever be allowed to run them. Aside from the financials, this is cruel and unusual punishment for the employees.
This Blackstone deal with Hurd is so wrong on so many fronts. But if you really want to get a sense for what kind of a guy Hurd is, the book, “The Big Lie: Spying, Scandal, and Ethical Collapse at Hewlett Packard,” highlights some of it. Hurd shouldn’t be allowed to kill another company.