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A Project of The Annenberg Public Policy Center

Fiorina’s Selective Record at HP

Republican presidential candidate Carly Fiorina repeatedly has said “we doubled the size of the company” and “took the growth rate from 2 percent to 9 percent,” while she was CEO of Hewlett-Packard. Both statistics pertain to revenue, but Fiorina uses different time frames to boost her record. She also neglects to mention that the increase in revenue came after HP acquired Compaq and was accompanied by a decrease in net earnings.

Fiorina has given these statistics, and others, in response to questions about her firing from the technology company. She was CEO of HP from July 1999 through February 2005, when she was ousted from the company. She told NBC’s Chuck Todd on “Meet the Press” on May 10: “And what people fail to comment on is the fact that we doubled the size of the company, we took the growth rate from 2 percent to 9 percent, we tripled the rate of innovations to 11 patents a day.”

She rattled off similar points to Yahoo! News’ Katie Couric on May 4, saying: “We doubled the company to almost $90 billion. We took the growth rate from 2 percent to 9 percent. … We quadrupled the cash flow.” And those same claims are on Fiorina’s campaign website.

‘Doubled’ Revenue

Fiorina’s major move as head of HP was the acquisition of Compaq in May 2002. It was controversial — opposed by Walter Hewlett (the son of founder Bill Hewlett), who unsuccessfully contested the close shareholder vote for the merger in a lawsuit. But the merger certainly caused an increase in revenue, as the company known for printers moved into the personal computer market.

For the claim that revenue “doubled” to “almost $90 billion,” Fiorina compares the fiscal 1999 revenue of $42.4 billion with the fiscal 2005 revenue of $86.7 billion. HP’s fiscal year ends Oct. 31, so 1999 would include a little more than three months of Fiorina’s tenure, which began July 19 that year. She left the company on Feb. 9, 2005, so that fiscal year includes about three months with Fiorina at the helm. (The figures come from the company’s annual 10-K filings with the Securities and Exchange Commission.)

Fiscal 2004 may be a better point of comparison, since Fiorina was with HP for the full year. Revenue that year was $80 billion. That’s still close to a doubling since 1999.

The merger was a significant reason for the jump in revenue. In 2001, HP’s revenue was $45.2 billion and Compaq’s was $33.6 billion. In 2003, the first full fiscal year for the combined companies, HP’s revenue totaled $73 billion.

HP revenue growth chart, FactCheck.org


And revenue statistics alone don’t tell the whole story. Net earnings, or income, didn’t see the same kind of boost as revenue. In fact, if we look at the same fiscal years as the Fiorina campaign, net earnings dropped, from $3.1 billion in 1999 to $2.4 billion in 2005.

The company didn’t see a significant spike in earnings until 2006, when they hit $6.2 billion.

We asked Kartik Hosanagar, a professor at the Wharton School of the University of Pennsylvania, about using financial indicators to evaluate Fiorina’s performance. He said that normally the reduction in earnings (along with layoffs that occurred after the merger and a drop in stock valuation) “would by itself be enough to say that it was an unsuccessful stint. However, she was HP’s CEO during an overall tough period in the tech industry. Most companies laid off workers and lost stock market valuation.”

When we asked Fiorina’s campaign about the reduction in earnings that came with the growth in revenue during her tenure, we were referred to a spokeswoman for her super PAC, who noted that Fiorina led the company during an economic recession. “Carly Fiorina made the tough decisions that were necessary to reform the company, and HP and its shareholders reaped the rewards of those decisions after she left,” said Leslie Shedd, press secretary for Carly for America.

Conflicting Revenue Claims

Fiorina’s “doubled” the company claim is often followed by the claim that “we took the growth rate from 2 percent to 9 percent.” That, too, is a reference to revenue, but it isn’t calculated by comparing 1999 to 2005. Instead, her super PAC says the statistic compares the second quarter of 1999 to all of 2005.

If we use the same parameters as Fiorina’s “doubled” claim, revenue growth went from 7.5 percent in 1999 to 8.5 percent in 2005. But 2005’s revenue growth was only 6 percent on a constant currency basis, which is an adjustment due to foreign currency fluctuations. (In 1999, there wasn’t a significant currency impact.)

In a document that criticizes the Washington Post‘s FactChecker, Glenn Kessler, for taking issue with these same claims, the Carly for America super PAC says, “When dealing with complex information like SEC reports for $90 billion companies, you could cherry-pick different data sets to get the answers you want.” We couldn’t agree more. But it’s Fiorina, not Kessler, who’s doing the cherry-picking.

The PAC argues that the second quarter of 1999, the last full quarter before Fiorina joined the company, is the only fair starting point. But it uses an apples-to-oranges comparison by looking at the growth rate for six months ending April 30, 1999, (over that same period from 1998), and comparing that to the full year for 2005.

If Fiorina uses the full year for 1999, the increase in revenue growth doesn’t look as impressive, as we just showed. And actually, revenue growth decreased after HP adjusts the 2005 numbers for currency fluctuations.

Comparing the growth rate in one year to another, however, doesn’t reveal much about how the company performed over a six-year period. In fact, revenue growth figures fluctuated significantly during her time as CEO: In 2001, the growth was a negative 3 percent, while 2003, the first full fiscal year of the merged company, saw 23 percent growth, both currency-adjusted numbers. The 2003 10-K report filed with the SEC attributes the big jump that year to the Compaq acquisition, saying: “The net revenue increase in fiscal 2003 as compared to fiscal 2002 and in fiscal 2002 as compared to fiscal 2001 was attributable primarily to our acquisition of Compaq at the beginning of May 2002.”

HP revenue growth rate chart, FactCheck.org

Revenue growth didn’t follow a clear trajectory over Fiorina’s time; instead it dipped, increased and dipped again, as the chart shows.

Cash Flow and Patents

In saying she “quadrupled the cash flow,” Fiorina is comparing cash and short-term investments from Oct. 31, 1998 ($4 billion) to Oct. 31, 2005 ($13.9 billion). That’s an increase of 240 percent (or more than a tripling). Using Oct. 31, 1999 as the starting point — the same date used for her “doubled” revenue claim — drops the increase to 150 percent (cash and cash equivalents were $5.6 billion then).

Either way, it’s a sizable increase in cash flow, again primarily attributable to the 2002 merger. Cash flow remained around $4 billion through fiscal 2001, and then jumped to $11.4 billion in 2002 and $14.2 billion in 2003.

The number of patents also increased under Fiorina. She claims, “We tripled the rate of innovations to 11 patents a day.” Precise numbers are difficult to come by — and we disagree with the math provided by the PAC to back up Fiorina’s claim — but there is support for the claim that the rate of obtaining patents tripled.

Here’s how the PAC comes up with those numbers: It says, “When Carly started at the company in 1999, HP had 10,000 patents in force.” That figure also appears in a December 1999 news article. That year’s 10-K report doesn’t say anything about the number of patents. But the 2005 10-K report says the company had 30,000 patents. That’s an increase of 20,000 patents over six years, for an average of nine patents per day. Not 11, as the PAC says.

The sheer number of patents tripled, but — as the Post‘s Kessler also points out — Fiorina claims a tripling of “the rate,” not the number. The 1999 news article said that Fiorina had said patents were growing at a rate of five per working day. Since Fiorina is talking about a change in patent rates from the time she joined the company compared with the time she left, it’s best to look at the rate of patents in her final year with the company.

From fiscal 2003 to 2004, the final full year she was with HP, patents increased by 4,000, according to the company’s 10-K reports. That’s nearly 11 patents every day of the year, but if we discount weekends, we get 15 patents per working day. That would be a tripling of the rate compared with 1999.

The following year, HP saw an even greater increase in the number of patents, going from 25,000 at the end of fiscal 2004 to 30,000 at the end of fiscal 2005.

Now, the Compaq merger again had an impact on this facet of the company. Compaq’s 2001 10-K report (its last year before the merger) says the company had 3,900 patents at the end of that calendar year, with another 1,800 patent applications pending.

— Lori Robertson