Tuesday, February 15, 2005

Fiorina: Let's Not Get Carried Away With The Gender Issue

by Tom Bozzo

It's not that sexist yahoos don't deserve a take-down. But there's not a ton of evidence that the market actually undervalued the woman-led dollars of HP earnings. For instance, as of yesterday's close, the market price of $1 of HP earnings was $18.06 (almost back to the level prior to Fiorina's dismissal, after a brief bounce), versus $18.89 for an IBM earnings dollar. I'm hardly an efficient markets hypothesis religionist, but surely this magnitude of price differential is not beyond explanation by HP's earnings growth prospects versus IBM's.

And even if HP and IBM earnings rationally deserved equal valuation, that wouldn't do much to remedy this performance:

In the ongoing executive compensation thread, whether IBM CEO Sam Palmisano deserves to be paid (in 2003) $7.9 million in salary, bonus, and incentive payouts for IBM stock performance roughly tracking the S&P 500 (the green line in the chart) may be a good question. But if getting paid the better part of $3 million a year while presiding over the disappearance of nearly two-thirds of the market value of one's company is, as a Pub Sociology commenter suggests, "never [being] given a chance," would someone please never give me that chance?
I always thought the definition of "bold, strategic moves" was not the same as von Clausewitz's "any positive action, even if ultimately incorrect."

Especially in such cases where you use "road show" numbers that don't even come close to reflecting your reality two years later. (op. cit. the Fortune article.

Another good reason for the valuation differential between IBM and HP: they are two different types of company. IBM is a technology services company that bills itself as a technology services company. HP is a commodity company (printer supplies--think "film" for the early-21st century) that claims to be a technology services company.
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