It’s well known by now that GOP presidential hopeful Carly Fiorina has never held political office and is running on her business record. As many commentators have pointed out, that’s a dicey proposition since her highest-profile job as CEO of Hewlett-Packard from 1999 to 2005 was sort of a disaster.
But in an interview with Fortune contributor and Yale School of Management professor Jeffery Sonnenfeld, GOP frontrunner Donald Trump—who has made a habit of criticizing Fiorina—took aim at a different stage of her career.
When asked about what he thought of Fiorina’s failure to secure another CEO job following her departure from HP, Trump said her time off from private-sector leadership “is not a positive,” before he switched gears to blast her lesser-known tenure in charge of the largest division at telecom firm Lucent Technologies.
“You know, if you look at what happened at Lucent under her tenure it was not a good picture. I think it may have been worse than Hewlett-Packard,” Trump said. He reiterated that point in Wednesday night’s Republican debate on CNN.
That’s quite a statement considering the criticism Fiorina has received about her record at HP. On her campaign website, Fiorina trumpets her leadership at HP, stating that on her watch, the company “doubled revenues; more than quadrupled its growth rate; tripled the rate of innovation, with 11 patents a day.” Those figures gloss over some not-so-nice aspects of her stint as CEO.
HP’s revenues did indeed double, but that was due in large part to Fiorina’s 2001 decision to merge with rival Compaq—a deal aimed at making HP the dominant maker of personal computers that occurred right as PCs were starting their long decline. HP announced the spinoff of its PC business in 2014, a final indication that Fiorina’s gamble hadn’t paid off. Fiorina was also responsible for cutting the jobs of more than 30,000 HP workers while CEO prior to being unceremoniously fired from the position in 2005. Fiorina has defended her record as HP CEO by saying that her tenure there coincided with a “difficult time” for the technology industry, and that leading the company during that period required making “some tough calls.”
Fiorina’s time at the helm of HP has been well scrutinized. Less is known about her stint at Lucent. But Fiorina’s failed bid for a California Senate seat in 2010 prompted Fortune to give her time at Lucent a close look.
On the surface, Lucent performed well while Fironia worked there, with revenues, profits, and the company’s stock price surging. The company even added 22,000 jobs. But dig deeper and “the story grows more complicated and less flattering,” as Fortune reported. Fiorina landed at Lucent when her previous employer, AT&T, spun it off so the equipment maker could sell gear to AT&T competitors. The timing was auspicious since companies like Worldcom, Qwest, and Global Crossing were in the process of laying fiber optic cables around the country and the world. Lucent’s sales to service provider networks—which Fiorina oversaw—grew from $15.7 billion in fiscal 1997 to $19.1 billion in 1998. In 1999, they hit $23.6 billion and Fiorina landed at the top of Fortune‘s first list of the country’s most powerful women in business.
But the equipment companies’ rapid expansion was too good to be true. Fortune’s 2010 story explains:
As Wall Street became fixated on equipment companies’ growth, the whole industry entered a manic phase. With capital easy to come by, Qwest, Worldcom and their peers laid more fiber and installed far more capacity than customers needed. Much like the housing bubble that was just beginning to inflate, easy credit fed the telecom bubble.
Lucent and its major competitors all started goosing sales by lending money to their customers. In a neat bit of accounting magic, money from the loans began to appear on Lucent’s income statement as new revenue while the dicey debt got stashed on its balance sheet as an allegedly solid asset. It was nothing of the sort. Lucent said in its SEC filings that it had little choice to play the so-called vendor financing game, because all its competitors were too.
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Fiorina says in her autobiography that she pushed back against the pressure for short-term growth at any cost, and two former Lucent collegues with whom she remains friendly back her up. On the other hand, this 2001 Fortune story, which described Lucent’s irresponsible growth habits, cites sources saying Fiorina made it known that Wall Street would generously reward companies that emphasized and delivered robust revenue growth. And an executive who sat across the table from Fiorina in a big vendor financing negotiation, when asked this week about what he remembers of the bargaining, described Fiorina as being dead set on chalking up a huge sale. He adds: “The press release was always very important to her.”
Whatever the exact extent of Fiorina’s role, Lucent was soon sucked in deep, making big loans to sketchy customers. In an SEC document filed just after Fiorina’s departure, the company revealed that it had $7 billion in loan commitments to customers — many of them financially unstable start-ups building all manner of new networks — of which Lucent had dispensed $1.6 billion.
Such vendor financing deals, Fortune explained, would have a similar impact on the telecom industry that sub-prime mortgages eventually had on housing: public companies extended loans to customers who were betting that the good times would continue while those same loans helped inflate lenders’ short-term financial results and stock prices. (Fiorina’s campaign at the time of the 2010 article said comparisons of the vendor financing deals Fiorina worked on to subprime lending were “disingenuous” and “almost libelous.”) The vendor financing deals met the same fate as sub-prime mortgages: the market turned and the debt collapsed. By the time the fallout finally hit Lucent—its shares eventually crashed to less than $1, and in 2006 it merged with Alcatel—Fiorina had moved on to HP.
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Fiorina’s campaign did not immediately return a request for comment on this story.
Comparing Fiorina’s tenure at HP to her time at Lucent is a toss-up of bad vs. worse. In the end, neither is a shining example of her executive leadership, and Trump certainly won’t be her only opponent to use them as a point of attack. Yet her improving poll numbers, which earned her a spot in CNN’s primetime Republican debate Wednesday night, suggest that voters—at least for the time being—are looking past her resume blemishes or simply cheering for her as the comeback candidate.
