Thomas Lee:
From private equity to HP, Chris Hsu has brought order to chaos
About six months into the job, Chris Hsu was starting to sweat a bit.
“Meg, I want my private-equity lifestyle back,” Hsu half jokingly told Meg Whitman, the CEO of Hewlett-Packard, at the time.
Who could blame him? Prior to joining HP in 2014 as a senior vice president, Hsu enjoyed a relatively cushy (and lucrative) job as a top executive at private equity giant KKR (formerly known as Kohlberg Kravis Roberts). There, Hsu advised struggling companies how to shape up and make more money. But at HP, Hsu had to actually execute the strategy.
He quickly discovered there’s a big distinction between telling and doing.
“When you’re at the top of an organization, they don’t bring you the easy stuff,” Hsu recently told me. “There’s always something. ‘Oh my god, we have to make a decision about doing this or this. Is it red or is it white?’ So that is a challenge, and I’ve learned that being an adviser and being an investor is different than sitting in the seat and being on 24/7.”
Hsu obviously must have done something
right. After overseeing the split of HP into two separate publicly traded businesses last year, Whitman recruited Hsu as her second-in-command at Hewlett Packard Enterprise, the spinoff that focuses on businesses. (HP Inc. retained printers and computers for consumers).
Come September, Hsu, 46, won’t be second fiddle. He’ll be the CEO of Micro Focus, a British software firm that is combining with Hewlett Packard Enterprise’s software business in a deal worth $8.8 billion.
“Chris has been an invaluable member of HPE’s leadership team over the past several years,” Whitman wrote in an email. “His business savvy, energy and passion for the work make him a great fit for his new role as CEO of Micro Focus. I’m confident Chris will deliver the results and help take Micro Focus to new heights.”
That Whitman spoke up for Hsu is a testament to the impression he made on his boss. He was born in Baton Rouge, La., one of four siblings. His father had fought in the Nationalist army against the Communists during the Chinese civil war. After the Nationalists lost, Hsu’s dad fled to Taiwan and later moved to the United States.
After graduating from West Point in 1992 with a degree in economics, Hsu commanded a squadron of M1-A1 tanks and later ran a U.S. Army operations center in Germany that coordinated the deployment of tanks, helicopters and troops to Bosnia.
Hsu’s business career reflects his military service: He’s brought order and discipline to organizational messes.
After earning a master’s degree in business administration from Northwestern University’s Kellogg School of Management, Hsu worked at General Mills and the McKinsey & Co. consulting firm before joining KKR in 2007. He led turnaround efforts at companies including Dollar General, U.S. Foodservice and Del Monte Foods.
“Chris consistently delivered impact and importantly, he was religious about ensuring the change was sustainable,” Bill Cornog, a top leader at KKR, wrote in an email.
“With enough resource and force, it is reasonably easy to drive a short-term bump in results,” Cornog added. “What is much more difficult is to build the muscle (organization, processes and systems) for sustainable change. Chris was particularly good at helping our companies build the muscles for sustainable change.”
Given his lack of tech experience, Hsu would seem like an odd choice to help run a Silicon Valley firm, never mind a storied one like HP. But Hsu’s career at KKR, in which he learned how to break apart and reconfigure pieces of a company to shareholders’ benefit, was what Whitman needed at HP.
“We think Hsu is taking a page from his former employer KKR’s playbook and helping focus HPE much like a private-equity owner would,” Management CV analysts wrote in a research report.
After years of corporate dysfunction and strategic misfires (acquiring Compaq, overpaying for Autonomy), HP needed to get smaller — and fast.
“I came to HP not because it was a stable environment, but because Meg Whitman communicated to me a mission for what she believed was a very important thing ... saving an American icon,” Hsu said. “My whole career has been about running to the fire and being at the front line of transformation.”
Splitting HP in two was no doubt complicated. But given the rise of mobile devices and cloud computing, Whitman and Hsu concluded that breaking apart offered the company’s disparate businesses the best chance to survive.
“There was so much intrinsic value in the products and offerings that HP had,” Hsu said. “If you look at HP before we started to split it up, there was 15 different categories or more that we competed in.”
The goal, he said, was to create “world leaders” in specific categories of technology. As independent companies, these businesses will be able to attract more capital and thus grow faster than had they remained inside HP, he said.
Renny Ponvert, CEO of Management CV, said HP’s split has no doubt created significant value for the original shareholders.
But the flurry of spinoffs and divestitures has sown confusion among newer investors, he said. Losing someone like Hsu, whom Ponvert calls an “impressive character,” will hurt Hewlett Packard Enterprise.
Hsu should have been the one to succeed Whitman, given his energy and outside experience, Ponvert said. At the same time, Hsu thinks Micro Focus — in some sense yet another HP spin-off — enjoys better growth prospects than Hewlett Packard Enterprise.
“Hsu is doing the right thing,” Ponvert said. “He’s going to do very well at Micro Focus.”
Micro Focus boasts a solid portfolio of cloud management, data analytics and security, analysts say. For fiscal 2017, the company said revenue grew nearly 11 percent from the previous year to $1.38 billion,and profit jumped 19 percent to $651.1 million.
Once Micro Focus joins with Hewlett Packard Enterprise’s software business, the company will be in a better position to look for new deals, Hsu said.
“Now we create this global platform to do larger mergers and acquisitions across an industry that’s ripe for consolidation,” he said. “We’ll be right in the middle of it.”