Fiorina's 'Segway' Candidacy

Anybody remember the hype surrounding something called the "IT"? This device was set to revolutionize transportation in the new millennium. It was going to make the car look like the horse and buggy, conjuring images of the Jetsons while promising worldwide transformation in the mold of the PC. In a clever bit of marketing, it even received what sounded like a secret agent codename -- “Ginger.”

We all know the end of that story -- the Segway is a novelty item big with mall cops.

After a couple of impressive debate performances, Carly Fiorina is the new Segway candidate. Those looking for a constitutional conservative need to know what she can promise vs. what she could actually deliver.

In many ways, Carly’s business track record forms the linchpin in her viability as a candidate and a leader. Given her current “outsider” status, her thin political track record, and her touting of business successes on the campaign trail, her business history has deservedly received considerable scrutiny. It deserves more.

Let’s start at Lucent, where the record becomes troubling -- perhaps even more troubling than her tenure at Hewlett-Packard.

Carly rose to president at Lucent on the heels of her successful sales career and her primary role during the Lucent IPO. In the euphoric days of the dot-com boom, Lucent dove headfirst into “vendor financing” deals -- corporate-to-corporate loans equivalent to subprime real estate loans. Carly, for her part, was reported as having advocating this growth agenda on Wall Street, and was credited with authoring vendor financing deals such as PathNet -- a deal that loaned up to $2.1 billion to a company that had 100 employees and an annual revenue of only $1.6 million.

While former Lucent CEO Richard McGinn appears to have been the primary driver behind the bad loans and shady accounting, it strains credulity to the breaking point to think that Carly had no role in the matter, as this New York Times author concluded despite his own citation of the PathNet deal. She was a powerful sales force closing deals and a president in charge of the “service provider networks” -- the very sector into which these loans were being poured. Indeed, Fiorina cashed-out to the tune of $65 million in performance-linked pay, and Lucent’s soaring and unsustainable profitability performance at the time was primarily driven by these vendor financing deals.

Her timing was good. Leveraging her position at the high-flying Lucent, she vaulted to the top spot at HP. That was 1999. She left in her wake a balance sheet bullet-riddled with bad debt, and when the dot-com bubble burst in 2001, Lucent was bought out before suffering near-death bankruptcy as a result of its paper-engineered growth.

Mostly negative ink has been spilled over her tenure as HP CEO, even landing her on "Worst All Time CEOs" lists. She has pushed back against the criticism by citing misleading statistics, such as revenue growth and the number of patents filed, while ignoring the more relevant metrics of substantially increased debt, lower-to-flat income, and a plummeting stock price that significantly underperformed the S&P, the NASDAQ, and her tech rivals. She has also explained away HP’s poor performance as the result of a troubled tech market and clashes among the board members.

This excellent Fortune article from 2005 captures the essence of why Carly failed, and why her failure at HP is highly relevant to her campaign. Her Compaq acquisition serves as the focal point, as Carly’s “big bet” would drive HP’s financials for the remainder of her tenure, in addition to touching off a bitter 2001 proxy battle from which she would emerge as the narrow victor.