GO
Loading...

How Hewlett-Packard Committed ‘Corporate Suicide’: Greenberg

So here’s the question: Would Hewlett-Packard be in this mess if Mark Hurd were still running the show?

Hewlett Packard
AP
Hewlett Packard

Hurd was kicked out two years ago after a messy sexual harassment issue, later landing as co-president of Oracle .

But would HP be better off? Doubtful. (Read More: Hewlett-Packard Says Revenue Will Fall in 2013.)

As Tom Brakke pointed out last year on his Research Puzzler blog and as former HP director Tom Perkins told the Wall Street Journal at the time: The company had committed “corporate suicide.”

All you have to do is look at two charts: Research & development and operating margins. As Brakke’s chart shows, the two crossed in 2003 — three years before Hurd’s arrival — with margins shooting higher as R&D spending tumbled. (Read More:'Sell or Short' Hewlett-Packard: Peter Misek.)

The trend continued under Hurd.

As Brakke wrote at the time, “When improvements in stock prices come from goosing margins by cutting the lifeblood of the company, it only goes on for so long. Don’t worry. Someone will figure out how to do it again, and be paid handsomely for the effort, just as Hurd was. Such is short-term capitalism in the 21st century.”

Proof is in HP’s stock, which closed below $15 for the first time in nearly 10 years on Wednesday.

—By CNBC's Herb Greenberg

Questions? Comments? Write to HerbOnTheStreet@cnbc.com

Follow Herb on Twitter: @herbgreenberg

Find Herb on Google+

Subscribe to Herb athttp://www.facebook.com/herb.greenberg

Disclaimer

  • Patti Domm

    Patti Domm is CNBC Executive Editor, News, responsible for news coverage of the markets and economy.

  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

  • CNBC Senior Commodities Correspondent and Personal Finance Correspondent

  • JeeYeon Park is a writer for CNBC.com. Follow her on Twitter: @JeeYeonParkCNBC

  • Rick Santelli joined CNBC Business News as an on-air editor in 1999, reporting live from the floor of the Chicago Board of Trade.

  • Senior Producer at CNBC's Breaking News Desk.