Hewlett-Packards and Compaqs boards are largely made up of present or past chief executives. As a result, their backing of the HP-Compaq merger comes from a perspective that values share price, strategic positioning and share price.
Theres nothing unusual about this, which is what makes the objections to the merger from the Hewlett and the Packard families so extraordinary. David W. Packard, oldest son of HP co-founder David Packard and sounding like a union boss, fears massive layoffs, which run counter to the companys ideals.
HP, critics of Packards position could argue, has long since broken out of the paternalistic cocoon that the companys founders provided. Worrying about job loss fails to recognize business harsh realities, they could say.
But whats not to like in Packards position, even though he can afford to vote his heart more than most HP shareholders? Employees are scarcely mentioned in CEO Carly Fiorinas passionate defenses of the proposed merger, and when they are, its never to address what counts most—their jobs. But employees are rarely considered in mergers, anyway, and I cant recall when theyve ever had such an influential advocate.
What does count, then?
This merger is solely about the increased clout HP and Compaq would wield in the marketplace. Its not about employees, customers or partners, although the usual lip service is paid to these groups. IT never benefits from industry consolidation. Having fewer options progressively restricts leverage and flexibility, as IBM proved for 40 years.
In also attempting to shoot down the merger, Walter Hewlett, the other family member making news, sees HP dragged down by the consumer PC market. Based on the latest quarterly results, indeed, HPs reliance on computers of all types will rise from 38 percent today to nearly 55 percent if the companies merge. That could eclipse HPs prized imaging and printing franchise, which accounted for 41 percent of the recent quarters sales.
Hard-nosed shareholders will almost certainly discount the families sentiments as foolish and whimsical. Nonetheless, HPs enduring company values havent been forgotten by everyone.
Fiorina has done a good job at HP. After failing to reel in PricewaterhouseCoopers management and IT practice last year, the only missing feat on her résumé is catching the big fish. With the boards of both companies hooked on the merger, she thought the big fish just had to be netted.
Now she may fail a second time for reasons and critics she never saw coming.
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