Hewlett: Fiorina Gone If Merger Fails

 
 
By eweek  |  Posted 2002-03-13 Email Print this article Print
 
 
 
 
 
 
 

Walter Hewlett, touting growing opposition to Hewlett-Packard Co.'s proposed $22 billion buyout of Compaq Computer Corp., this week predicted that HP Chairman and CEO Carly Fiorina will be ousted if the deal is rejected by shareholders next week.

Walter Hewlett, touting growing opposition to Hewlett-Packard Co.s proposed $22 billion buyout of Compaq Computer Corp., this week predicted that HP Chairman and CEO Carly Fiorina will be ousted if the deal is rejected by shareholders next week. "This will be her second aborted merger in less than two years, and she wont have the credibility to lead the company," Hewlett said on Tuesday in a conference call with investors and industry analysts.
Hewlett asserted that HPs large shareholders were not swayed by last weeks favorable report on the proposed merger by an influential advisory group, Institutional Shareholder Services, and predicted most would vote against the deal.
That claim gained considerable weight Wednesday when HPs third largest institutional shareholder, Banc of America Capital Management, which owns a 2.73 percent stake in the company, announced it would vote against the deal. However, Banc of America can only vote for about 12 percent of the 53.4 million shares it owns, since most of its shares are controlled by its clients. Excluding shares controlled by Hewlett and the Packard families, who have also denounced the merger, three of HPs top shareholders have declared their opposition to the merger. The other two are Brandes Investment Partners and the California Public Employees Retirement System. In one of his most dire assessments of the proposed buyout to date, Hewlett warned that should HP acquire Compaq and move to become an end-to-end solutions provider, it could ultimately lead to the companys demise.
The merger "could will lead to a lack of focus, and that has lead many conglomerates to their downfall," he said. If shareholders reject the deal, Hewlett said he would help guide efforts to find a replacement for Fiorina. While Hewlett did not suggest a possible candidate, he did offer a damning assessment of Fiorinas performance since she was named CEO in July 1999, at which time she was serving as president of Lucent Technologies Global Service Provider Business. "I believe we will look for a current CEO with a track record for creating shareholder value and not get a CEO who again is learning on the job," Hewlett said. The fate of HPs proposed buyout of Houston-based Compaq will be determined March 19 when the computer makers investors will vote on the merger at a special gathering in Cupertino, Calif. While the boards of HP and Compaq have approved the deal, the merger must win the approval of more than 50 percent of each companys shareholders. While Compaq shareholders are widely expected to approve the buyout when they vote March 20 in Houston, HPs vote is considered a tossup, due to heavy lobbying against the merger by Hewlett, an HP director who initially joined in a unanimous vote in favor of the merger by the companys board of directors. In November, a month after the deal was announced, Hewlett criticized it and initiated a proxy fight. In December, the Packard family foundation announced that it, too, opposed the deal. Together, the families control about 17 percent of HPs stock. HP executives contend the merger would give the company market leadership in six core business segments, double its services revenue, lead to $2.5 billion in annual cost savings, and dramatically boost its ability to compete in an increasingly competitive industry. Hewlett claims that massive high-tech mergers nearly always fail, and that this deal would undermine profits, reduce shareholder value and increase HPs exposure to the slumping PC market. Instead, hes proposed an alternative strategy, which he calls "execute and focus," that would focus leveraging HPs leadership in imaging and printing, increasing product profit margins through technological innovations, and reducing operating costs in its PC and server businesses.
 
 
 
 
 
 
 
 
 
 
 

Submit a Comment

Loading Comments...
 
Manage your Newsletters: Login   Register My Newsletters























 
 
 
 
 
 
 
 
 
 
 
Thanks for your registration, follow us on our social networks to keep up-to-date
Rocket Fuel