In Whitman, H.P. Gains a Prolific Deal Maker
By MICHAEL J. DE LA MERCED
DealBook
New York Times
September 22, 2011, 5:41 pm
Now that Hewlett-Packard has confirmed that Meg Whitman is its new chief executive, it’s worth wondering what kind of leader she will be.
There are plenty of clues in Ms. Whitman’s nine-year tenure as eBay’s chief executive. During that time, she built the online market place from a 30-employee minnow of a company to a 15,000-employee whale with $8 billion in annual revenue.
Much of that was accomplished organically, as eBay grew into a dominant online bazaar. But much of that was also through deal-making, a skill she may be expected to bring to her new role.
Under Ms. Whitman, eBay struck about 40 deals worth more than $9.6 billion, according to data from Capital IQ. H.P.’s newly promoted executive chairman, Ray Lane, noted her record in a conference call with analysts announcing her appointment on Thursday.
“I was a supplier” of many of the companies that she purchased, he said, alluding to his other job as a managing partner at Kleiner Perkins Caufield & Byers.
EBay’s first major takeover was the company’s 2002 acquisition of PayPal, a $1.5 billion transaction that eventually made eBay one of the world’s biggest online payments processors.
But the company’s biggest-ever deal, its $3.1 billion takeover of Skype, is more of a mixed bag. EBay outbid the likes of Google and Yahoo, ostensibly with the intention of folding the video-chatting service into its market services, allowing buyers and sellers to talk to each other. That never fully took off, leading eBay to write down Skype’s value by $900 million.
In 2009, eBay sold 70 percent of Skype for just over $2 billion to an investor group led by Silver Lake, leaving eBay holding onto a loss and the ignominy of what Silicon Valley denizens called one of the worst deals of all time.
Skype did pay off, eventually — for its new owners, who sold the service to Microsoft earlier this year for $8.5 billion. That deal instantly increased the value of eBay’s remaining stake to $2.3 billion from about $620 million.
A third notable eBay deal was the company’s 2004 purchase of a 28.4 percent stake in Craigslist for $32 million. It’s unclear how much the stake is worth, given that Craiglist is privately held.
Still, even then it was another headache of a deal. In 2007, the two began to fight over eBay’s beginning a new classified-ad site that Craiglist viewed as a competitor. Craigslist diluted eBay’s stake down to 24.85 percent, stripping the company of its board seat.
That prompted a lawsuit by eBay, touching off one of the stranger legal battles in Silicon Valley. (EBay claimed victory last year, after a judge ruled that Craigslist had improperly shaved down its stake.)
At H.P., Ms. Whitman will be confronted by a company struggling to redefine itself as a corporate software services provider. It has already agreed to buy Autonomy of Britain for $11.7 billion, a deal that would be exceptionally difficult to back out of. H.P. is also weighing a divestiture of its P.C. business and “strategic options” for its webOs unit.
So far, H.P.’s board is relatively comfortable with that strategy; it just didn’t believe that its just-fired chief executive, Léo Apotheker, was the right person to carry that plan out.
On Thursday’s call, Ms. Whitman said she was “excited” by the Autonomy acquisition. Of the potential sale or spinoff of the P.C. business, she allowed only this: “We’re committed to doing the work right now to determine the best path going forward.”
She added that time was of the essence, and that H.P. would conclude its review of any possible spinoff by the end of the year. “It’s not like fine wine,” she said of the company’s pending decision. “It doesn’t get better with age.”
It remains to be seen whether Ms. Whitman will reach into her deal-making arsenal will finally set H.P. on the right path.
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