Technology

The Surprise Player Behind the HP Coup


By Peter Burrows and Ben Elgin As Hewlett-Packard Co. (HPQ) grapples with its transition following the Feb. 8 ouster of CEO Carleton S. Fiorina, much of the focus is on Patricia C. Dunn, the vice-chairwoman of Barclays Global Investors who replaced Fiorina as chairman of the HP board. But a key player in HP's ongoing saga lives in Boise, Idaho, far from HP's Silicon Valley home.

BusinessWeek has learned that Richard A. Hackborn, the board director who built HP's gold-mine printer business in the 1980s, carried out crucial behind-the-scenes roles in the months-long drama leading to Fiorina's sacking. Even more surprising, two insiders, one former and one current, say that Hackborn's doubts about Fiorina extend back to her early days at the company. "Almost from the time Carly was hired, Dick had his worries," says the former insider.

In the final weeks Hackborn was a key proponent of a plan to shift operating authority from Fiorina to HP divisional heads, says the current insider, adding: "Dick's criticism helped shape the views of other, often newer board members." Hackborn did not respond to requests for interviews, and HP and Fiorina had no comment.

The question now is whether the 67-year-old Hackborn will exert the same influence over the next CEO and the company's future strategy. While many Wall Street analysts want HP to separate the lucrative printer division from the rest of the $80 billion outfit's computing divisions, the board says it plans to stick to its soup-to-nuts strategy. In the past, Hackborn felt that the computer businesses were too weak to stand on their own. If the next CEO disagrees, he or she will likely have to make the case to Hackborn.

Hackborn supported Fiorina's controversial bid to buy Compaq Computer Corp. in 2001. But he and other directors grew frustrated as HP's performance faltered in late 2004, says the current insider. Fiorina argued that the company was performing well, but Hackborn insisted that HP had to be far more aggressive about stemming market-share losses to IBM (IBM) and Dell Inc. (DELL). And in the weeks before her firing, "Dick's role was decisive and catalytic."

The current insider says Hackborn pushed for former Compaq and HP director Thomas J. Perkins to be reinstated to the board. That occurred on Feb. 7, just in time for Perkins to vote for Fiorina's ouster the next day. Two departees from HP say Fiorina wanted Perkins off the board because he was more critical and outspoken than other directors. Perkins retired from the board in early 2004. BusinessWeek's attempts to reach Perkins by phone were unsuccessful.

For more than a decade, Hackborn has operated as the power behind the throne at HP. When Hackborn refused the entreaties of co-founders Dave Packard and Bill Hewlett to make him the CEO in 1992, he was put on the board. He played a key role seven years later in ushering out Lewis C. Platt, who had gotten the job in his stead. Now that Hackborn has helped show Fiorina the door, he'll probably play a significant role as the company looks for her replacement.

Still, his reputation has taken a bruising. In the past, Hackborn was idolized as a legend by HP insiders and investors. Now, much like Fiorina, he has become a polarizing figure, with a base of steadfast supporters surrounded by a community of critics. That's mostly because of his support for Fiorina and the Compaq deal, which has not been the success the computer giant hoped for. "I like Dick, but he screwed up. He should resign," says one longtime former colleague at HP.

Other criticisms go even deeper. While Hackborn's visionary contribution in printers is undeniable, many wonder if he led HP in the wrong direction in the computer business -- away from systems based on proprietary HP technology and toward more commoditized gear, such as Windows PCs, a market dominated by superefficient Dell. Some critics say Hackborn's influence has pushed HP away from its roots as an innovator and relegated it to being a distributor of less profitable products.

TECH HEAVYWEIGHT

How does Hackborn maintain such power at HP? He has tech bona fides, a nose for power, and is at his best working in the shadows. There's no better example of this than the evolution of Hackborn's relationship with Fiorina. During their second one-on-one meeting, Fiorina argued that she should be CEO, with Hackborn signing on as board chairman. The idea was that he would mentor her while she allowed him to remain in the background. And HP would gain credibility with investors by having Hackborn as chairman. Functioning as an adviser to Fiorina offered Hackborn both the influence and the low profile he coveted.

"Dick's very political, but without really putting his skin in the game," says Michael Maccoby, who wrote an exhaustive (and, at the time, anonymous) profile of Hackborn in a 1977 book called The Gamesman: The New Corporate Leaders. "He probably felt he could use Carly to do all the things he didn't want to do."

But within Fiorina's first year on the job, Hackborn fretted in board meetings about three issues, say sources: Fiorina's refusal to delegate operations, her tendency to make bold promises, and the exodus of trusted execs. "As Carly drove strong people out of the company, Dick got quieter and quieter" in HP circles, says longtime colleague Bob Frankenberg, who helped Hackborn build HP's PC business in the early '90s.

Like many, Hackborn was dazzled by Fiorina's salesmanship, but he was concerned about overpromising. "He'd say in board meetings: 'Carly, you shouldn't do that,"' says one former insider who was present at those board meetings.

Publicly and outside the boardroom, Hackborn continued to be her staunchest supporter. Just a year into her tenure he handed her the chairman's job. And during the 2001 fight over the Compaq merger -- an idea he had proposed months before Compaq came calling -- Hackborn agreed to publicly support the deal, and he lobbied key investors. To defend the merger, he even hosted a powwow of select HP and Compaq board members in Boise a few weeks after fellow director Walter B. Hewlett launched his proxy fight to nix the deal.

Hackborn's anxiousness eased after the merger. But as HP began to miss its financial targets in 2003 and 2004, Hackborn "became increasingly outspoken," says the current insider. "Carly viewed [HP's performance] as getting better, requiring less urgency than the board viewed as necessary. Dick was a key figure in this debate."

In part because of his early support for Fiorina and the merger, board members took those doubts to heart. When Dunn presented a memo to Fiorina with a list of concerns before the board's January meeting, Hackborn was in the room, along with director George A. Keyworth III, a former Reagan White House adviser.

While still a power on HP's board, Hackborn remains one of tech's most elusive personalities. Author Maccoby highlights the contradictions in Hackborn's character in The Gamesman. While Hackborn is nonconfrontational, he is decisive and can be coldly calculating, say long-standing colleagues. "If you're on Dick's side, he'll do anything for you. But once he doesn't support you anymore, he won't confront you; he just won't defend you. He'll let you fail. I think Carly lost Dick two or even three years ago," says one such colleague.

Now that Fiorina is gone, will Hackborn's role at the company remain as critical as it has been in the past? His friends say he has wanted to retire from the board for some time. Still, if Hackborn is to fade from the HP scene with his reputation intact, he and his fellow board mates must find a CEO who finally puts the computer giant on a more profitable path -- and ends the soap opera of recent years.

Burrows is Computer editor and Elgin is a correspondent in BusinessWeek's Silicon Valley bureau


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