Meg Whitman

MOST OBSERVERS GIVE THE EX-CEO HIGH MARKS

By Jack Chang
jchang@sacbee.com
Published: Sunday, Jan. 10, 2010 – 12:00 am | Page 1A

In just the last month, Meg Whitman has been called both one of the top 10 CEOs in the world and a “monster” who plays dirty when she doesn’t get her way.

Those who have studied her 10-year tenure leading the online auction firm eBay call her a disciplined chief executive who quickly capitalized on the company’s strengths. Her critics say she made major missteps at eBay, leaving behind her a trail of litigation.

Now Whitman is the Republican front-runner for California governor, vying to turn corporate glamour into votes. She’s campaigning to be “the CEO of this state,” and making her eBay years the centerpiece of her pitch.

On the whole, experts give Whitman high marks at eBay, saying she turned a great idea by company founder Pierre Omidyar into a global phenomenon that at times scored profit margins approaching 90 percent.

Last month, the Harvard Business Review named Whitman the eighth best-performing CEO in the world hired between 1995 and 2007.

“She was really responsible for much of eBay’s success,” said Peter Krasilovsky, an analyst who follows eBay at the firm BIA/Kelsey. “eBay was well-run and moved into a lot of interesting areas.”

Former eBay Chief Financial Officer Rajiv Dutta said Whitman distinguished herself with her close attention to detail and her inspiring commitment to the company’s growth. Whitman also quickly grasped the company’s recipe for success, including the loyalty of its buyers and sellers, Dutta said.

“Of all people I’ve had the opportunity to work for and work around or observe in business and management, Meg is, sort of, head and shoulders above everyone,” said Dutta, who joined the company five months after Whitman. “She has the ability to see the big picture as well as the ability to dive into the details.”

Most of Whitman’s colleagues at eBay, however, have stayed mum about her tenure, and the company declined to speak to The Bee. Whitman’s campaign also refused a request to interview her. To date, her campaign has tightly controlled media access to the candidate.

Others who wouldn’t comment include: co-founder Omidyar; former technology leader Mike Wilson; former Chief Financial Officer Gary Bengier; and Bob Kagle, a general partner at the venture capital firm Benchmark Capital, which was an early investor in eBay.

Guided eBay’s maturity

According to Adam Cohen, the author of a 2002 book about the company, Whitman’s first feat at eBay, after becoming CEO in early 1998, was maturing what was then little more than an oversized startup. The Harvard MBA brought with her expertise in consumer marketing and years of experience at firms such as Disney and the toy company Hasbro.

eBay co-founders Omidyar and Jeff Skoll were “looking for someone to professionalize the company and take it to a point where it could be taken public,” Cohen said in an interview. “As far as I can see, Meg did that and did a professional job of that.”

Whitman first came up with short-term priorities such as determining how much the company should invest in server capacity and preparing eBay for its initial public offering, according to a 2000 Harvard Business School case study of Whitman.

She also insisted on learning in depth what everyone on her management team did and holding long brainstorming meetings, despite busy schedules, to build camaraderie, the case study says.

“She was able to look at the business model of this small company,” said study co-author Maria Farkas in an interview, “and see that her experience in this completely different world applied, that in effect selling is selling and it doesn’t matter where you’re selling.”

Billionaires within months

Whitman often describes eBay’s halcyon early days in her campaign stump speech, although parts of her account clash with other descriptions of that time.

Whitman has dramatized the company’s growth by describing how when she arrived, she had to replace lawn chairs still being used by employees with real office furniture.

Cohen’s book, however, tells how Omidyar and Skoll had already replaced the lawn furniture at the end of 1997, at least a month before Whitman’s arrival.

Whitman press secretary Sarah Pompei responded that news accounts and other records back Whitman’s comments about eBay’s growth.

“The fact is,” Pompei wrote in an e-mail, “that Meg oversaw the transition of eBay from a startup furnished in part with beach chairs and helped guide it into a Fortune 500 company.”

Either way, eBay’s trajectory hit overdrive seven months later, when its IPO overshot the target share price by 163 percent. The company’s market capitalization instantly ballooned to nearly $1.9 billion.

Cohen credited Whitman with helping to pull off the nationwide IPO roadshow that she, Omidyar and CFO Bengier mounted for major investors, despite Yahoo’s surprise announcement that it was launching its own auction service. In the end, Whitman, who spoke the longest during the roadshows, persuaded key investors to bet on eBay.

“The IPO is a real testament” to Whitman’s talents, Cohen said. “It was pulled off very well.”

The IPO, in fact, made Whitman’s political career possible by turning her, Omidyar and Skoll into billionaires within months based on their holdings of eBay stock.

She coped in eBay crisis

Whitman’s biggest challenge, however, came nine months later, when the company’s Web site went down for 22 nerve-racking hours. At one point, Cohen writes, Whitman feared the site would never come back up without having to be rebuilt, which could have spelled the end of the company.

Whitman rose to the occasion, Cohen writes, although “she knew almost nothing about technology,” and ordered a redesign of eBay’s technology infrastructure. She also replaced technology chief Wilson, an eccentric and beloved figure at the company.

Whitman moved into the company during the crisis, Dutta recalled, and “ate and slept and showered in there days on end until the problems were fixed.”

In a recent interview with Wired magazine, Whitman identified the blackout as a significant mistake, saying, “We did not really understand how fast this company would grow. And we didn’t build in enough cushion. … I probably did not have the right people in the right job at the right time to be focused on that.”

After the site outage, Dutta said, Whitman made another difficult decision: The company would refund listing fees to users who were unable to sell during the blackout, although the reimbursement might not be legally required and might cause the company to miss its profit targets.

“She looked around and said, ‘Guys what is the right thing to do? The right thing to do is we have to make the refund,’ and she walked out the room,” Dutta recalled. “It was sort of clarifying … Not only was it the right thing to do but it earned us an amazing loyalty from a lot of the customers.”

That crisis ended up being just a bump in the company’s meteoric rise.

Some moves questionable

In 2000, eBay nearly doubled its revenue while online companies all over Silicon Valley were perishing in the dot-com bust. By then, eBay was redefining not just e-commerce but capitalism itself while leaving competitors such as Amazon in its dust.

Until she stepped down as CEO in 2008, Whitman tried to keep that momentum going by expanding to foreign markets and tirelessly seeking acquisitions – with mixed results.

For example, eBay purchased such lucrative companies as the money-transfer firm PayPal but also paid what many considered an inflated price for the online telephone company Skype without acquiring its underlying technology.

“They clearly made some decisions that in hindsight don’t look so hot,” said industry analyst Peter Zollman.

The technology issue ended up sparking a lawsuit between eBay and Skype’s former owners that was settled last year before eBay unloaded a majority share in Skype.

eBay’s stake in the classifieds site Craigslist also spurred litigation, with eBay accusing Craigslist of illegally diluting its shares in Craigslist and stripping it of a seat on Craigslist’s board.

Craigslist filed its own lawsuit accusing eBay of misusing its board position to glean intelligence for eBay’s own classifieds site, Kijiji.

Craigslist’s court filings portray Whitman as a duplicitous partner who went back on promises to not seek more of the company. In testimony last month, Craigslist CEO Jim Buckmaster said he was warned that Whitman could become a “monster” if she didn’t get her way in negotiations.

Whitman testified that she had made her intentions clear to Craigslist from the very start.

“I said, ‘Listen, we want to be a good partner. In the end we would like to own all of Craigslist,’ ” Whitman testified.

Zollman said Whitman was only playing the kind of hardball to which executives must resort to meet Wall Street growth expectations.

“I don’t see that Meg should have been faulted with doing what every hard-nosed businesswoman does, which is cut the best deal you can cut and work for the best future interest of your company,” Zollman said.

Whitman, however, may have fallen short by Zollman’s measure. Nearly two years after her resignation as CEO, eBay’s future is uncertain, with its stock price about 40 percent of its peak November 2004 value.

eBay needs reinvention?

Analysts widely see eBay as a company in need of reinvention as revenue from its core auction business drops and as shoppers choose fixed-price online retail sites dominated by Amazon and other competitors.

A May 2009 Wall Street Journal story about eBay’s “identity crisis” noted that the company “has had sliding revenue and profit in the past two quarters, while Amazon has reported record earnings.”

In analyst Krasilovsky’s view, Whitman left eBay at the perfect time.

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