SPECIAL REPORT - Tech money flows to Whitman, bypasses Fiorina

SAN JOSE/LOS ANGELES Fri Oct 29, 2010 4:21am IST

Republican candidate for the U.S. Senate Carly Fiorina answers a question as she participates in a debate at the Mohn Broadcast Center in Pasadena September 29, 2010.  REUTERS/Anne Cusack /Los Angeles Times/Pool

Republican candidate for the U.S. Senate Carly Fiorina answers a question as she participates in a debate at the Mohn Broadcast Center in Pasadena September 29, 2010.

Credit: Reuters/Anne Cusack /Los Angeles Times/Pool

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SAN JOSE/LOS ANGELES (Reuters) - The Valentine's Ball thrown by venture capitalist Alan Salzman and his wife Jillian Manus every year is one of Silicon Valley's hottest tickets. People are still talking about the Bailey's Irish Cream flowing from the nipples of ice sculptures at the soiree last year.

This year a "barrel full of monkeys" -- actually, live performers in monkey suits -- greeted guests to the couple's themed grounds in the swanky Northern California town of Atherton. The black tie and costume benefit for cancer draws CEOs, friends -- and up to $750,000 in donations.

Next year, Salzman said, his good friend and neighbour, former eBay CEO Meg Whitman, will be invited, possibly attending as the newly elected governor of California.

And Carly Fiorina, the former Hewlett-Packard CEO with a shot at unseating California's three-term U.S. Senator Barbara Boxer on Tuesday?

"I don't think she'll be at our Valentine's party ... Let's say it that way," Salzman, who invests in electric sports car maker Tesla Motors and a swath of advanced solar companies, told Reuters.

"Carly falls into the category of people who are at the extreme on all things related to climate change and cleantech," he said.

The power couple -- Manus is a literary agent and Republican activist -- are not alone in their affection for Whitman and wariness of Fiorina. Political contributions show that the technology industry has split its bet, backing Whitman but not Fiorina.

Atherton, one of the richest towns in America and home to such Silicon Valley luminaries as Google CEO Eric Schmidt, didn't even want Fiorina to run for office, judging by its political donations. Fiorina's Republican primary opponent, a moderate longtime politician from Silicon Valley, won the financial race in Atherton but lost the nomination.

On the surface, Fiorina and Whitman have so much in common they appear to be the same person. They were two of Silicon Valley's most powerful business leaders. They are Republicans. And they are both using their business record, and wealth, to start a political career at one of the top elected offices in California.

But in the place that made them household names, Meg and Carly, as they are commonly known in these parts, are seen as very different people shaped by very different jobs. Meg's the insider, Carly's the outsider. Meg's the builder, Carly's the fixer -- or destroyer. Meg's a detached analyst while Carly's a saleswoman who dreams big.

The two campaigns have also been informed by the debate over what it will take for the Valley to succeed in its next high-stakes endeavour -- replacing the petroleum-based economy with clean power and technology.

Whitman is ready to relax her free markets rhetoric just enough to build Silicon Valley into a cleantech hub, while Fiorina uncompromisingly sees disaster in California's attempt to make its own rules for a new industry.

SILICON VALLEY ASKS 'MY GOD, WHAT'S HAPPENED?'

The former head of Intel, the world's largest microchip maker, sees the differences between the two and thinks that Fiorina has been treated shabbily. But he also notes a thread between them that runs through Silicon Valley leadership.

Craig Barrett still uses an Intel email address, and he was born and raised in the San Francisco/Silicon Valley area, but he left California decades ago for Arizona.

California is broken, he says, and Silicon Valley CEOs looking up from their work of engineering-driven progress are aghast. "They look around and they say, 'My God, what's happened?'" Education, government investment in basic research, the business environment -- all are in perilous shape.

All three are themes used by Fiorina and Whitman in their respective campaigns, and Barrett sees their skills as former CEOs as perfectly applicable to political work. "You need data-driven problem-solving," he said. "Translating that into the political sector should not be that difficult."

But the executives lived very different lives, says Barrett, who worked particularly closely with Fiorina when she headed up Hewlett-Packard, his biggest customer. He's still loyal to her.

"They were totally different challenges," he said of the jobs that Whitman and Fiorina took on.

"EBay had a clever business model, very successful business model, it was really an issue of merely scaling that business model as the online acceptance grew," Barrett said, adding that Whitman had done well.

"And Hewlett-Packard, quite to the contrary, was a major corporation caught in the winds of a major tech slowdown. The tech slowdown of 2000 made this last little economic depression that we hit look like child's play."

HP: LEGACY OR FAILURE?

Fiorina helped build her identity as an outsider. Her autobiography, "Tough Choices," is all about overcoming fear, such as early in her career when she went to a strip club for a client meeting, earning the grudging admiration of the older male colleague who had booked the lunch.

She arrived at HP, the company known as the original Silicon Valley startup, just before the dotcom implosion. Her picture popped up all over the campus as she shook hard on the gentle "HP Way," earning the enmity of the founding families who opposed her bid to buy Compaq Computer, the largest technology merger to that point.

In the middle of the 2001 takeover battle, Fiorina acknowledged her own future was tied to the deal she forced through. "I think the company's success will be my legacy," she said. "The company's failure will be my failure, with all the predictable consequences of that."

Fiorina's reputation is front and center in her campaign. Her opponent, Senator Barbara Boxer, has hammered her for laying off or outsourcing 30,000 jobs, but Fiorina says she saved the company by doing so.

"When you lead a business, whether it's a nine-person business or 150,000 people, you sometimes have to make the agonizing choice to lose some jobs to save more," Fiorina said in one debate against Boxer.

"This is the 21st century. Any job can go anywhere," she added, arguing California needs to cut regulation. "We are destroying jobs and others are fighting harder for our jobs," she said, listing Texas, India, China and a host of others.

Hewlett-Packard shares fell more than 65 percent from the day Fiorina was named CEO in 1999 to the day before she was fired in 2005, underperforming IBM, Dell, Intel and the Nasdaq, Dow Jones Industrial and Standard & Poor's 500 averages.

But since the day the merger closed in May 2002, HP has outperformed the same group, raising the question of whether her actions set the stage for success.

Legendary venture capitalist Tom Perkins was one of the HP board members who fired Fiorina, but he supports her campaign. The firing was about personnel decisions, and he doesn't regret it, but he credits Fiorina's strategy for turning HP into the biggest tech company in the world.

"She's quite strong-willed but also charming. She doesn't dodge tough issues," he said, adding that the HP board, before his time, had hired her because of her difference.

"They wanted somebody to really shake up HP -- and she did," he said. "Meg never had those kinds of problems." Perkins has raised money for Fiorina and also supports Jerry Brown, Whitman's Democratic opponent, who he thinks is better able to handle the byzantine state politics.

Fiorina's determination to stick to her tough conservative convictions might not appeal to many liberal Silicon Valley venture capitalists, he added, but her candor and refusal to compromise her principles is refreshing in a politician.

Morten Hansen, a professor at The University of California, Berkeley, ranked 2,000 CEOs for Harvard Business Review based on the their company's stock performance during their tenure.

Fiorina finished in the bottom 20 percent of the list, and Hansen questioned the idea that Fiorina had set the company on course to thrive after she left. "If that were true you would see an improvement earlier than you did," he said. "You should have seen better numbers at the end of her tenure but you don't."

Former HP employees are still fighting it out. "She practically destroyed the HP brand with her stunts. No one liked her at HP," one anonymous reviewer reported on the honestly.com rating service.

"Carly brought some much needed pizazz into the HP product portfolio," responded another. "She was gone by the time the strategies started paying dividends, but her fingerprints are all over it."

And in the corner offices of greater Silicon Valley, there are similar questions. "There is not a lot of argument about what Meg did at eBay and there is a fair amount of history and revisionist history and unclear history about, you know, what Carly did and how successful she was," said Carl Bass, the chief executive of software maker Autodesk, and a contributor to Fiorina's opponent, Senator Barbara Boxer. "Carly was seen as more of an outsider. I don't think anybody I know in the Valley confuses the two."

ADULT SUPERVISION

Despite being the 'insider' to Fiorina's outsider, Whitman's 1998 start at eBay was only a year before Fiorina took the helm of HP. Whitman left Hasbro for tiny eBay, which already was growing by leaps and bounds and had almost no fixed costs -- a dream business which Hansen called "a rocket about to take off."

"She made that rocket take off and it didn't implode during the journey like so many other dot coms did," said Hansen, who ranked her 8th overall among CEOs. "So this was an amazing performance from Whitman, but from an extremely small base to start from."

Whitman frequently jokes that she was brought in as "adult supervision" by founder Pierre Omidyar, who has high praise for Whitman but stops short of endorsing her for governor because they part company over her tough position on immigration and her opposition to gay marriage.

"She knows how to put together strong teams," Omidyar said in a statement released to Reuters through his office. "She relies heavily on data to inform her decision-making and thoroughly understands and analyzes situations before creating solutions."

Before taking the helm at eBay Whitman worked at consumer giant Procter & Gamble and consulting company Bain & Co., where future Massachusetts governor and presidential candidate Mitt Romney became her mentor.

Along the way, she was sometimes criticized for flashes of temper. Jim Buckmaster, chief executive of classified ad site Craigslist, told a 2009 jury he recalled being told by an eBay executive that "there were two Meg Whitmans."

Craigslist had penned a deal with "the good Meg," he said. "But there was another Meg, the Evil Meg ... (and) that Meg could be a monster when she got angry and got frustrated." The eBay executive denied using those words.

Whitman has detractors as well. "Tone def (sic) and deeply incompetent," one honestly.com reviewer wrote. "Her most significant contribution, the acquisition of Skype, was a $3 billion blunder." Another called her "hands-on, detail-oriented, compassionate, articulate and fair," adding "The company hasn't been the same since she left."

BLOOD SPORT

On the campaign trail, Whitman offers a technocrat's mastery of figures and hews to her main points: that she has the experience and 'spine of steel' to reform education, state spending and the business climate.

Her opponent, Democrat Jerry Brown, by contrast, is much more unpredictable and far-ranging, and in debates he has made the race personal, chiding Whitman for her treatment of a former housekeeper, for example, and equating her attitude toward illegal immigrants to a feudal society.

Whitman paused to call Brown's attacks a lie, but she kept returning to her plan, with a set smile on her face. In a town hall meeting with the employees of Internet equipment maker Cisco, she told Chief Executive John Chambers that the campaign trail was hard. "Politics in America has become a blood sport, and it's a shame," Whitman told friend and supporter Chambers.

Fiorina, by contrast, goes straight for the jugular and never retreats. That has raised hackles in the genteel -- frequently liberal -- surroundings of Silicon Valley.

When she decided Hewlett-Packard should buy rival computer maker Compaq, the families of HP's founders opposed her. She fought back with a strength and determination that left some shareholders bewildered, belittling opposition leader Walter Hewlett as an "academic and musician."

And now one of her strongest weapons against Barbara Boxer, the outspoken liberal Senator who had sailed to reelection in previous campaigns, is disdain.

One Fiorina ad shows a clip of Boxer calling climate change a security issue, then flips to Fiorina, hair shorn short, looking straight into the camera. "Terrorism kills. And Barbara Boxer's worried about the weather," she says, with the barest hint of incredulity.

In debates she hasn't backed down in the face of questions about the layoffs at HP, her opposition to an assault weapons ban, and even her anti-abortion rights position.

"My husband's mother was told to abort him. She did not," Fiorina said in one debate, drawing from her personal life to back her position, as she frequently does.

Her biggest gaffe came when she was caught in front of an open microphone poking fun at Boxer's hairdo, a matter especially interesting since Fiorina lost her hair during a successful fight with cancer just before she hit the campaign trail. "God what is that hair?" she quoted a friend saying about Boxer, and broke into chuckles. "So yesterday!"

TECH MONEY FOLLOWS WHITMAN, FORGETS FIORINA

With the campaign in its final days, Fiorina is performing better than Whitman in the polls, narrowing the gap with Boxer while Brown has erased the early lead that Whitman had.

A mid-October Reuters/Ipsos poll showed Boxer ahead of Fiorina by a single percentage point among likely voters despite her status as an incumbent and a 2 million advantage in registered Democrats over Republicans in California.

The same poll showed Brown topping Whitman by four points -- despite being heavily outspent by the billionaire who has donated to her campaign a record-shattering $140 million, making the California governor's race the most expensive nonpresidential election in U.S. history.

But that was not the sense on a recent bright day in the heart of Silicon Valley, on the leafy San Jose campus of Cisco. CEO Chambers, a Republican and one of the most important leaders in the Valley, is supporting Boxer as well as Whitman.

"Barbara has been with us on every major high-tech issue," Chambers gushed at the meeting, a meet-the-candidate forum Webcast to employees. He focused especially on the question of repatriating foreign earnings, where Boxer has supported him. "If she was just a Republican she'd be almost perfect," he quipped.

Fiorina's campaign pointed out that Fiorina and Chambers had much in common, including past layoffs that Boxer railed against -- when Fiorina did it.

Campaign contribution data shows it's not just Chambers who is splitting his vote, although complete records are still being processed. In the primary, Fiorina was not even in the top 10 recipients in federal races in tony zip code 94027, which includes Whitman's home town of Atherton, but Boxer was number six, according to opensecrets.org, operated by the Center for Responsive Politics.

The analysis of big donations -- over $200 -- also showed Boxer getting early broad support from the technology industry: the computers/Internet industry put more than $316,000 behind her campaign, compared with around $85,000, or less than a third as much, for Fiorina.

Google, microchip equipment maker Applied Materials, Intel, Microsoft, Oracle, even HP have donated to Boxer through corporate or employee-directed political action committees.

Silicon Valley's capital, San Jose, was among Boxer's top geographical areas of support in the primary, while Fiorina relied on the traditionally very conservative pockets of California, especially Orange and San Diego counties.

Followthemoney.org, a project of the National Institute on Money in State Politics, shows Whitman winning plenty of tech industry backing in her race against Jerry Brown.

The Computer Equipment and Services industry has given almost $900,000 to Whitman through September, with Securities and Investment firms -- including venture capitalists -- giving even more.

Brown had backing from some big companies such as Applied Materials, Microsoft and Oracle's CEO, Larry Ellison, though, suggesting Fiorina, who created the world's largest technology company, may run last for tech industry contributions of the four main governor and Senate candidates.

That said, federal contribution rules are tougher than state, Fiorina faced a Silicon Valley home boy in the primary, and her campaign says that she is winning support as she becomes better known as a candidate.

"Barbara Boxer is a three term incumbent Senator who over the course of her decades in office has developed a reputation for being both powerful and punitive, so it's not shocking that many companies would make their political giving decisions with that in mind," spokeswoman Andrea Saul said by email.

NEW KIDS ON THE BLOCK

The races for both California governor and U.S. Senate have centred on the urgent theme of how to create jobs in a state with more than 12 percent unemployment, a superficially closed budget gap expected to yawn wide open again any day, the gridlocked state legislature and a limping construction industry.

Whitman and Fiorina focus on job creation through cutting stifling government regulation and taxes, enough to win endorsements from the Silicon Valley Chamber of Commerce.

But one key difference stands out: how to establish Silicon Valley in cleantech, which many see as its next great industry, following computers and the Internet.

The division is manifested in Proposition 23, a ballot measure that would put the state's global warming law on hold for years, until unemployment falls to 5.5 percent or less for four straight quarters, putting a target to get a third of state electricity from renewable sources, a market for trading of greenhouse gases, and other measures in limbo.

Whitman and Fiorina both were pushed kicking and screaming into taking a stand on the issue, and Whitman came down against the change -- she favours leaving the law on the books -- while Fiorina backs the measure to put the climate law on hold.

"If you want a clear distinction, there is a clear distinction between the two," said Jonathan Wolfson, chief executive of green fuel maker Solazyme. "It is amazing to me that instead of talking about a Manhattan project type initiative, we're contemplating whether to roll back one forward-thinking state's very modest and rational carbon regulation," he added, disparaging the idea of a former technology leader who would not advocate for the latest tech industry, cleantech.

Polls by Reuters/Ipsos and others show the proposition headed for defeat, but Fiorina says California should not act alone on climate change. "All scientists agree on this: the only way to impact global warming is to act globally. A state acting alone will make no difference," she said in one debate before she announced her position on 23. She promised to work on a national energy bill and focus on research and development.

Whitman's position is nuanced -- some say hedged -- she plans to use powers in the law to put some or all of it on hold for at least a year, aiming to be "smart and green" by cutting regulation short-term.

Ironically, the end result could be the same thing as the position Fiorina backs, but her friend Salzman sees it differently, hoping Whitman will reconsider once she is elected.

"If you are looking at creating jobs and industry and you don't believe the future of this country or any advanced society is everybody working in fast food restaurants, where is your industrial base going to come from, if not these industries?" he said. "Meg understands the role of innovation."

But Fiorina, higher in the polls than Whitman, might understand a bit more about politics -- thanks to her Silicon Valley days. "Politics happens in a boardroom as well," Fiorina told Reuters in September, recalling her firing.

Voters should see her record as standing up to adversity, she said. "People who drive change sometimes get arrows in their back."

(Additional reporting by Poornima Gupta, Jack Reerink and Alexandria Sage; Editing by Jim Impoco and Claudia Parsons)

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