H-P chief claims win in Compaq merger vote
Wednesday, March 20, 2002
CUPERTINO, Calif. -- Hewlett-Packard chief Carly Fiorina claimed victory Tuesday in the nasty proxy fight over the $20 billion purchase of Compaq Computer Corp. Dissident board member Walter Hewlett insisted the vote remained too close to call.
Fiorina's claim followed a tense, two-hour shareholder meeting in which Fiorina was booed and Hewlett received a standing ovation as they made last-minute appeals over the fate of what would be the computer industry's biggest merger.
Fiorina, who has staked her reputation and perhaps her job on a successful merger, told a news conference that HP's proxy solicitor assured her that shareholders had narrowly approved it.
"We think we have a slim but sufficient margin, and we think it's important to let people know that," she said.
Her claim was disputed by Hewlett, who led a five-month fight against what he considers an ill-advised deal that would weaken the technology stalwart his father co-founded.
"In a proxy contest this close, where stockholders are changing their votes right up until the closing of the polls, it is simply impossible to determine the outcome at this time," he said.
It will take several weeks to determine the official result of what appeared to be the closest corporate election in years. Independent proxy counters must verify each vote, and each side can challenge whether the proper people signed certain ballots.
"We are very close to making this merger a reality," said Compaq CEO Michael Capellas, who would be second-in-command at the new HP.
A merger would wed HP, a 64-year-old Silicon Valley icon grounded in digital imaging, with the No. 2 personal computer maker. The deal has already received approval from U.S. and European regulators. HP and Compaq say the deal is essential for their survival in the consolidating computing industry. They believe that together they can dramatically improve their packages for corporate customers, their slumping personal-computer divisions and save $2.5 billion a year.
Hewlett says HP is paying too much for Compaq, would get bogged down in selling low-margin personal computers and services, and can't afford to risk the complex integration.
The disagreement within HP turned into one of the most intriguing episodes in high-tech history, largely because the company is one of Silicon Valley's marquee institutions and its late founders are still revered as visionary engineers.
Fiorina, who was hired to lead the giant computer and printer maker in 1999 and ordered to shake the company up, is expected to resign if the deal fails.
She had to overcome a hostile reaction from Wall Street after the Compaq deal was announced Sept. 3, and then the opposition of Hewlett and Packard family interests with 18 percent of HP stock. Several large pension funds also opposed the deal.
"She took a strong position based on what she believed in, and it's to her credit that she followed through whether she wins or loses," said Forrester Research analyst Charles Rutstein. "This has been a polarizing battle."
With the stakes so high, HP and Walter Hewlett each spent tens of millions of dollars to deluge HP's 900,000 shareholders with letters, advertisements, telemarketers' phone calls and multiple ballots.
"I feel like I stepped out of my life and into an alternative universe, if you will, but it was definitely a cause that needed to be taken up," Hewlett said after Tuesday's meeting.
Most investors mailed in their votes before the meeting, but many began lining up at dawn outside a Cupertino auditorium to cast ballots in person and watch Fiorina field questions.
Mike Beman, 24, of nearby Los Altos opposed the deal and came to the meeting to be part of Silicon Valley history.
"The thing that swayed me was that the Hewlett and Packard foundations are both against it," he said. "I really respect their opinions over that of the (HP) board."
Despite the savage proxy fight, the shareholder meeting was relatively civil. Hewlett thanked HP's employees and stockholders for listening to his arguments against the deal, drawing applause from from the audience of more than 1,000 shareholders -- and Fiorina.
When Fiorina told the crowd that internal surveys gave her confidence that most workers support the merger, many in the crowd booed.
Fiorina later said she hoped to put the rancor of the proxy fight behind the company, and hoped to work with the Hewlett and Packard families in the future.
When asked what she learned about herself during the contest, she replied: "I learned how much I love this company, and how much I'm willing to fight for what I believe in."
HP shares fell 45 cents, more than 2 percent, to close at $18.80 on the New York Stock Exchange. Compaq jumped 78 cents, 7.5 percent, to $11.14.
On the Net:
Pro-merger site: http://www.votethehpway.com
Opposition site: http://www.votenohpcompaq.com