Why Carly's Out

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Fiorina was brought in to drive a stake through that squishy culture's heart. HP expanded into computers in the 1970s, but by the 1990s, its sundial pace had run up against Internet time. The company needed to reposition itself in a new, networked environment. Fiorina grew up within AT&T and its equipment-making spin-off Lucent Technologies, so she was well versed in the dangers of cultural inertia. At Lucent, she had emphasized speed and aggressive sales targets. "Have I taken risks through my whole life? Yes," she told TIME in a 2002 interview. "The risk that is not worth taking is to do the easy thing and do nothing."

HP had more than 80 separate operating units when Fiorina arrived in 1999. She slashed them into four key groups. She not only rationalized operations but also reoriented them to focus on customers instead of HP's engineers. "The board was looking to revitalize HP, and they saw Carly as a change agent," says Richard Hagberg, a California industrial psychologist who gave Fiorina the personality test credited with helping her win the HP job. "They saw her as a visionary evangelist who could oversee the creation of a new vision, [who] was willing to challenge some sacred cows. And they got that."

They also got a rock star. While most HP executives practiced invisibility, Fiorina led from the front. She came from sales, not engineering, and she looked the part, from the tailored clothing to the new Gulfstream jet she was soon using. "I told her that rock stars were probably not going to be accepted by a culture that's understated, a bunch of engineers," says Hagberg. "She's a salesperson, and she liked the limelight." But Fiorina kept her distance. Unlike her predecessors, she rarely ate lunch in the cafeteria or mingled with HP staffers. "She rubbed a lot of people the wrong way," says a former HP executive. "HP was data driven. Carly was idea driven. That can be an inspiring kind of leadership, but you had a leader at odds with the organization."

Those odds got a lot sharper during her burnt-earth campaign to acquire Compaq in 2002. To Fiorina, combining the two plodding PC businesses was the only way to improve profitability and take on the low-cost, direct-sales monster called Dell. To critics, merging two lousy operations had limited appeal. Director Walter Hewlett, a Stanford music professor and son of the co-founder, led a public proxy fight against the deal. Although Fiorina prevailed, the cost was high. Within months, Compaq CEO Michael Capellas, who was supposed to run the computer division, was out the door. Others followed.

Though the merger did produce significant cost savings, it did not improve HP's strategic position. In consumer PCs, HP is still getting punished by Dell, which just reported record numbers. On the computer- services side, HP is mostly stuck in the maintenance business, where margins are shrinking. Even HP's best performer--the $24.2 billion printer and imaging-products business, which yielded 73% of profits last year--is under pressure. Dell has entered the printer market and already has a 13% share of the U.S. inkjet-printer market.