Must-Read: Josh Barro: Carly Fiorina Increased Hewlett-Packard’s Sales, but Not Its Profits

Must-Read: Josh Barro: Carly Fiorina Increased Hewlett-Packard’s Sales, but Not Its Profits: “Carly Fiorina… said… ‘despite those difficult times…

…we doubled the size of the company, we quadrupled its topline growth rate, we quadrupled its cash flow, we tripled its rate of innovation.’ The key undermining word in that statement is ‘topline.’… As Mr. Trump correctly pointed out… Fiorina’s strategy to quickly grow H.P.’s top line was to buy another large company, Compaq Computer. That deal was widely criticized at the time because it got H.P. a big increase in sales but little profit…. The idea behind H.P.’s purchase of Compaq was that, by getting a bigger slice of the P.C. market, the company could find economies of scale, get better prices on parts and raise its profit margins. Mrs. Fiorina pushed the acquisition through over objections from much of H.P.’s board and, most notably, the family foundations of the founders that held a large chunk of the shares…. The merger did not produce…. The Compaq merger brought a lot of growth to H.P. but not the sort that H.P.’s board or its shareholders found attractive. Hewlett-Packard’s profits in 2005 were $2.4 billion, a billion less than in the year Mrs. Fiorina started as C.E.O. That is a key reason she was fired.