HP Presses On as Votes Tallied

If independent election inspectors certify that HP has prevailed in its plan to purchase Compaq, then the real work begins, including integrating the products, people, services and cultures of two of the world's largest computer companies.

CUPERTINO, Calif.--Although an official tally has not been reached, Carly Fiorina, chairman and CEO of Hewlett-Packard Co., last week announced that, according to early results, company shareholders had approved HPs plan to purchase Compaq Computer Corp. for about $22 billion.

If independent election inspectors certify that HP has prevailed—an effort that could take several weeks—then the real work begins. Among the many challenges facing Fiorina are integrating the products, people, services and cultures of two of the worlds largest computer companies—a job that has been in the works for months by a 900-person integration team headed by HP.

"The thing that is most troublesome to both employees and customers is the uncertainty, and we want to ... remove that uncertainty as quickly as possible," Fiorina said, after the shareholder vote held here. "As soon as we have official vote certifications and legal closure, we will be speaking to our customers in great detail."

While details have yet to be released, HP is expected to seek to leverage Houston-based Compaqs market leadership in sales of fault- tolerant servers, Intel Corp.-based servers, storage devices and PCs, as well as its sizable professional services division.

Those capabilities, when combined with HPs highly profitable imaging and printing systems and its valuable Unix server business, will result in an unquestionably powerful company, said one industry analyst.

"By and large, the companies do fit together well," said Nathan Brookwood, an analyst with Insight 64, in Saratoga, Calif. "And even in those areas where they do overlap, I dont think theyll have a problem."

While critics have assailed the merger as an imperfect union of two largely similar companies, Fiorina counters that such a broad view fails to take into account the benefits that become more apparent when the details of how each company operates are examined.

For example, while both HP and Compaq sell PCs, HP is a leader in retail sales of PCs, while Compaqs strength lies in commercial PC sales.

In addition, Compaq in the last two years has made far more progress than HP in moving to a more efficient build-to-order PC business model that will prove critical to enabling it to compete on price against market leader Dell Computer Corp., of Round Rock, Texas.

Fiorina will also try to broaden the companys offerings and tap new sources of revenue. "We need to go after real growth opportunities," she said to shareholders, noting that includes "servers, storage, software, professional services and, yes, even the lowly PC."

But Fiorina also faces the task of healing internal company wounds, collateral damage of the often-personal campaign.

That damage was on full display at HPs raucous shareholders meeting here last week, where most of the 3,000 shareholders attending (HP has about 900,000 shareholders) were current or former employees who oppose the merger and Fiorinas leadership. "Im against it," said HP worker Shirley Soldin, citing "the spectacular incompetence with which most of the internal initiatives have been executed over the past two years, as well as the financial costs" of the deal.

Bill Boller, a shareholder and former employee of Agilent Technologies Inc., which was spun off from HP two years ago, agreed. "Irrespective of whether its a good deal or not, I think the probability of pulling it off is real low," Boller said. "Fundamentally, I think its a bad deal."

HP, of Palo Alto, Calif., has 85,000 employees; Compaq has 63,000. Officials from both companies estimate that 15,000 jobs will be lost when the companies merge. But some HP employees fear that something else will be on the chopping block: the worker-friendly "HP way" corporate culture.

Underscoring employee resentment of the buyout, Walter Hewlett, a board member and critic of the merger, received a lengthy standing ovation when introduced by Fiorina, who was later jeered when she declared that HPs internal surveys show most workers support the deal. "That is a fact," Fiorina said, raising her voice over booing from the audience.