I’ve heard that great leaders are often sound decision makers. Truth is anyone can make a poor decision in the heat of the moment, or with limited information. Perhaps, great leaders are very good at leveraging the outcomes of good decisions and dealing with the repercussions of bad ones. I came across a great article on ZDNet – called “all time worst tech industry exec decisions. I’ve selected a few of them for this piece – below.
IBM, Digital & Microsoft
In the late 1970′s, a small team within IBM began development of its legendary 5150 PC, which recently had its 30th anniversary. But to run this PC, IBM needed an operating system. At the time, there was only one serious contender, Digital Research’s CP/M, which ran on a number of early personal computers including the Apple ][, The Osborne and the Kaypro, all of which had substantial market share in a small but quickly growing industry.
In 1980, Under the direction of CEO John Opel, IBM attempted to contact Digital Research’s founder and CEO, Gary Kildall, to license CP/M for use on the 5150 and other future PCs, but when negotiations failed, IBM went looking for another suitor. Bill Gates, Steve Ballmer and Paul Allen at Microsoft, seeing an opportunity in the making, approached a tiny software company, Seattle Computer Products, which had an x86-compatible OS which used a similar command interpreter to CP/M called 86-DOS. Microsoft purchased the OS and perpetual usage rights, which they then re-christened as “DOS”, for a mere $75,000.
After negotiating an almost unheard of non-exclusive licensing agreement with IBM, the company would be established as the leader in personal computer software for decades to come.
Microsoft’s MS-DOS would go on to sell tens of millions of licenses, and the software business for Windows and related follow-on products that Microsoft would generate which would build upon it would turn the company into an industry giant. Digital Research could very well have had the same licensing deal and IBM could have imposed stricter licensing terms on MS-DOS, or could have purchased either of the two companies outright, giving the company an exclusive. But it was not to be. Digital Research’s CP/M became an also-ran and the company eventually attempted to produce it’s own DOS clone, DR-DOS, which although having a number of technical improvements over Microsoft’s OS, was a dud. It was eventually sold to Novell, then Caldera and then later on became the property of SCO.
Eventually, the highly competitive MS-DOS based PC clone business made Digital Research’s CP/M irrelevant and also would eventually force IBM to exit their own PC business in the late 1990s and early 2000′s.
Carly Fiorina, Hewlett-Packard: Compaq Merger
While the Itanium partnership with Intel surely started HP down the road to hell, it was accelerated in 2001 when HP, under the guidance of CEO Carly Fiorina decided to merge with Compaq in a $25 billion dollar deal. Many large shareholders opposed the merger, including Walter Hewlett, the company’s outspoken director and son of the company’s co-founder, who engaged in a proxy battle in an attempt to prevent it. The prime objection was that Compaq had many overlapping product lines and would get the company involved in the low-margin PC business that its main competitor, IBM, was already in the process of exiting. Under Carly Fiorina’s reign, the merged “New” HP lost half of its market value and the company incurred heavy job losses. Fiorina stepped down in 2005.
Since the Compaq merger, HP has endured numerous problems with failed initiatives, dubious acquisitions (3COM, EDS) and has been plagued with ineffective management, including two major ethics scandals that have forced Chairwoman Patricia Dunn and CEO Mark Hurd to resign. The PC business that HP gained from the Compaq merger is now in the process of being spun off, after losing money in the face of tremendous low-margin industry competition.
Jerry Yang Plays Hard To Get with Microsoft; Carol Bartz Gets Screwed
Yahoo! grew rapidly during the early 1990′s as one of the first search engine companies and went on a steady path of acquiring smaller Web companies and offering other Internet portal services such as financial news, web and image hosting (such as Flickr) but its failure to adapt to competitive forces, notably the rise of Google and FaceBook, caused the company’s revenue to go into decline as it was unable to monetize these properties effectively.
Looking to expand its online presence, Microsoft made an unsolicited offer to purchase Yahoo! Inc. In February 2008 for approximately $47 billion. CEO and co-founder Jerry Yang, playing hard-to-get, formally rejected the bid, stating that it “substantially undervalued” the company and was not in the interest of shareholders.
Weeks of back-and-forth of highly publicized meetings between the two companies resulted in a standoff. Shareholder and Yahoo! investor Carl Icahn attempted to patch things up in a last ditch attempt to get the Redmond-based software giant to come back to the table and attempted to force Yang out via a board room coup, but Microsoft CEO Steve Ballmer had enough and walked away completely exasperated, directing his company to create its own search engine and web properties under the Bing and Windows Live brands. The company entered a round of heavy layoffs in 2008 following the failed merger attempt with Microsoft, and the market value of the company went into steep decline. As of September 2011, the market capitalization of Yahoo! Inc. has plunged to a low of $17.66 Billion, a far cry from Microsoft’s original offer of $47 Billion. Jerry Yang eventually found himself ousted and replaced with the very dynamic and outspoken CEO Carol Bartz in 2009, who ironically ended up entering a partnership agreement with Microsoft in a 10-year deal to use Bing as the search engine for Yahoo!
Carol Bartz tried desperately to improve Yahoo’s business, but was unable to turn the company around, whose initiatives had little support from her Board, and her tenure was marked by yet another round of heavy layoffs. On September 6, 2011, the Yahoo CEO picked up her iPad and sent a broadcast email her employees, notifying them that the Chairman of the Board of Directors had just fired her via prepared company statement during an impersonal, cowardly phone call.
While Steve Ballmer and Microsoft’s investors are probably quite happy in retrospect that they walked away, for Yahoo, it will always permanently scar the company for what might have been because Jerry Yang decided to play hard-to-get — and it is questionable at this point the the company will ever recover.