CUPERTINO, Calif.—The contentious debate raging around Hewlett-Packard Co.s proposed acquisition of Compaq Computer Corp. spanned more than five months, but the vote by shareholders that will determine the mergers fate lasted less than two hours this morning.
But during that time, the several thousand shareholders on hand—most of whom appeared to be current or former employees—made clear their objections to the $22 billion deal.
When Chairman and CEO Carly Fiorina introduced board member Walter Hewlett, the most vocal opponent of the merger received a rousing two-minute standing ovation. And most of the questions posed to Fiorina came from shareholders who said they were going to vote against it.
Later, when Fiorina said that most of the companys employees "understand and support this merger," she was met by vocal opposition from the crowd. "That is a fact," Fiorina said, trying to quiet the shareholders.
But while the shareholders in the Flint Center here overwhelmingly opposed the deal, it will be the institutional shareholders, who hold about 50 percent of the shares, that will be the determining factor, and most observers believe they will approve the merger.
During his brief statements to the shareholders, Hewlett, son of one of the companys cofounders, said he believed the deal will hurt the company. Though he was not specific this morning, Hewlett over the past few months has said a merger with Compaq will hurt HPs core businesses, including printers, while exposing it to the more volatile and less attractive PC market.
Most of the shareholders said they feared jobs would be lost in the merger, and they questioned the value of the deal.
Fiorina argued that HP executives spent months reviewing the financial aspects of the merger, and that Hewletts concerns about its value were reflected in a depressed market after the Sept. 11 terrorist attacks.
Still, shareholders interviewed before and after the meeting said they worried that the merger would financially hurt HP and that they questioned whether Fiorina and the HP executive team could pull of the chore of integration two massive companies.
Shirley Soldin, an employee and stockholder, said before the meeting that financial issues and the actions of HP executives are prompting her to vote against the deal. She cited "the spectacular incompetence with which most of the internal initiatives have been executed over the past two years, as well as financial costs."
"Theres speculation that the company will go bankrupt in three to five years" if the deal goes through, said Soldin. If it fails, "I think there will be a lot of chaos for the next year, but I think we will recover from it and we will be stronger from it."
Bill Boller, a shareholder and former employee at Agilent Technology, which was spun off from HP, 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."
Like Soldin, Boller sees a good future for HP if the deal is rejected.
"I think the company will pick itself up by its boot straps like it always has and will find another alternative."
Adriana Vela, another former employee and shareholder who left the company in 1995, said her decision to vote against the deal was a difficult one.
"I can see the merits on both sides," said Vela, who also is a board member fo the HP alumni association. "But the bottom line is that execution is going to be key. You can have a brilliant plan, but if you cant execute it, or your ability to execute it is low, it wont matter in the end."
Todays vote is as much a referendum on Fiorinas tenure with the company as it is for the merger. If the deal is rejected and Fiorina leaves the company, HP should look for "somebody who is able to capture the hears and minds of the employees, who at the end are going to execute," Vela said.
As shareholders slowly moved inside the building, a handful of merger opponents walked around wearing signs displaying such messages as "Merger today, Chapter 11 tomorrow—Vote No on Merger."
Only about 3,000 to 5,000 of HPs 900,000 or so shareholders are expected to be on hand this morning to personally cast their ballots either for or against HPs plans to buy Houston-based Compaq.
In general, most shareholders taking part in todays vote are believed to have submitted their ballots either by mail, fax or proxy representatives over the last few weeks. Those ballots will be submitted during todays gathering.
Official results arent expected to be announced for several days, although representatives of both sides said theyll likely know the outcome of the vote within a day or two. So far today, the vote has had little impact on the stock prices of either company. Compaq saw an 8-cent drop in share price, but HPs jumped 45 cents.
The gathering today was presided over by Fiorina and the companys general counsel, Ann Baskins.
Overall, HP must secure the support of more than 50 percent of votes cast, a challenging task given that two of the companys largest shareholders, the Hewlett and Packard families, have announced theyll vote their 17 percent share of HP stock against the deal.
While several major shareholders in recent days have publicly announced their decisions on the merger, the vote is still seen as too close to call.
In the meantime, Compaq shareholders will hold their own vote Wednesday as to whether to accept the acquisition, and therefore, the demise of what for seven years was the largest PC maker in the world.
Fiorina and her supporters on HPs board of directors contend the merger provides the company the best opportunity to dramatically boosts its market share as well as product and service offerings that will be crucial to its future success.
Merger foe Hewlett contends the deal will undermine the companys profits, increase its exposure to an already slumping PC business, and dilute the value of HPs market leading position in imaging and printing.
While Hewlett has stated hell remain active in the company no matter what the outcome of todays vote, Fiorinas future remains in doubt. Should Fiorina fail to win shareholder support for the merger, Hewlett said its most likely the company will be looking for new leadership.
"This will be her second aborted merger in less than two years, and she wont have the credibility to lead the company," Hewlett said in a conference call with investors and analysts last week, noting Fiorinas failed $18 billion bid to buy PriceWaterhouse Coopers last year.
No matter which way shareholders vote, HP faces a number of challenges ahead, said Dan Niles, an analyst with Salomon Brothers, in San Francisco.
"If the deal happens, well executed integration is going to be necessary to making this successful," he said. "If it doesnt happen, HP will need a CEO, obviously, and it will likely forgo a lot of revenue as the company moves to get out of the PC business. None of those things are particularly good. Well just have to wait and see how it works out."