Hewlett-Packard declared victory yesterday in its bitterly fought contest to win shareholders' support for its planned purchase of Compaq Computer, the largest merger ever in the computer industry.
Yet the struggle over Hewlett- Packard's future ended as it began, in disagreement and challenge. And while the vote wound up yesterday at a spirited, and sometimes rowdy, shareholder meeting in Silicon Valley, the matter has not been conclusively settled.
Walter B. Hewlett, an heir who led the opposition to the Compaq merger, said that the shareholder vote was too close to call and that he was "optimistic about the final result."
The official tally of shareholder votes will be done by a specialist firm of corporate election inspectors, IVS Associates of Newark, Del. That firm did not say when it would announce a result, but the process will take weeks, according to Michael Barbera, a vice president of IVS.
But Carleton S. Fiorina, the chief executive of Hewlett-Packard, declared a tentative triumph after the shareholders' meeting. Ms. Fiorina, who has championed the Compaq merger as necessary to give the company the breadth to compete in the Internet era, said, "We are gratified that H.P. shareowners recognize the compelling strategic and economic benefits of the merger."
The company noted that its announcement was based on a preliminary estimate of votes by the firm advising it in the proxy campaign, but it acknowledged that those results were "not an official vote."
If the vote for the merger is upheld, it will be a triumph for Ms. Fiorina, 47. She was recruited from Lucent Technologies (news/quote) in 1999 to reinvigorate Hewlett-Packard, a founding force in Silicon Valley, but one that has become sluggish.
The Compaq merger has been a big part of her answer, and that of the Hewlett-Packard board, to the question of what the company's future should be. But it has proved to be a controversial, even divisive, step, as shown by the proxy contest and scenes at the meeting yesterday.
Outside the Flint Center in Cupertino, Calif., where the meeting was held, there was a carnival atmosphere. People clad in green costumes, the color of the "vote no" proxy cards, banged drums as disgruntled shareholders ?and even some union representatives from France, where Hewlett-Packard and Compaq have operations ?carried signs and placards. Among the pithy slogans of discontent were "Carly's Dream Is a Nightmare for Workers" and "Merger Today . . . Chapter 11 Tomorrow."
Inside, Mr. Hewlett got a standing ovation when he rose to speak briefly from the floor of the arena and thanked shareholders for their support. When Ms. Fiorina spoke from the dais, there was polite applause mixed with scattered boos.
Still, if Ms. Fiorina has prevailed, it will be a testimony to her ability to lobby large institutional shareholders. The contest has also shown her resilience in pressing ahead to win approval for the deal despite considerable criticism, much of it personal.
"She has handled herself well under incredible pressure," said Steven M. Milunovich, an analyst at Merrill Lynch (news/quote). "She's earning her stripes as a chief executive."
Ms. Fiorina and her team found themselves scrambling to save their merger plan almost from the time it was announced in early September. Wall Street was skeptical initially, selling off Hewlett-Packard shares and sending the price down sharply. But the real blows came in November and December, when first Mr. Hewlett and then the Packard family and its large foundation announced that they would vote their shares against the Compaq merger. Suddenly, a block of 18 percent of the shares was against the deal.
"People had given us up for dead," said Alan Miller, co-chairman of Innisfree M&A, a proxy solicitor working for Hewlett-Packard.
With its dueling press releases, frequent mailings, attack ads in newspapers and telephone canvassing to get out the vote, the Hewlett- Packard proxy contest has often been compared to a political campaign. The contest has resembled the politics of the era before television, when the secret to success was winning over small numbers of influential people who could deliver large numbers of votes.
The institutional investors, who hold 57 percent of Hewlett-Packard's shares, are the equivalent of those critical political delegates.
To sell the deal, Ms. Fiorina and her team took to the road, trying to persuade large shareholders to vote for the deal. Ms. Fiorina alone logged 99,000 air miles, visiting institutional shareholders face to face, often in meetings lasting an hour or more.
Her message, put simply, has been that the computer industry is maturing and thus will inevitably consolidate into fewer large companies, just as other industries, like automobiles and chemicals, have in the past. In this environment, she has argued, Hewlett-Packard's best future will be to combine with Compaq to create a company that will be able to help corporate customers cope with the complexity of Internet-era computing by offering packages of hardware, software and services. In doing that, Hewlett-Packard would be emulating the I.B.M. (news/quote) business model.
Among individual investors, Mr. Hewlett's side apparently did comparatively well, getting half the votes and perhaps more, according to his proxy adviser. So if the company has been able to overcome that strength and the 18 percent held by the founders' heirs opposing the deal, Ms. Fiorina must have done quite well with institutional investors. Indeed, Ms. Fiorina pointedly noted that the company had collected a "decisive majority of shares" outside the Hewlett and Packard families and their foundations.
Mergers are typically approved overwhelmingly by shareholders. Mr. Hewlett, 57, was responsible for a most unusual display of corporate democracy because a friendly merger was decided by a razor-thin margin in the shareholder vote.
In a news conference yesterday, Mr. Hewlett ?an academic, musician and philanthropist who has been a Hewlett-Packard director for the last 15 years ?observed that in heading the proxy campaign, he had felt as if he had "stepped into an alternative universe."
But he added that he firmly believed that fighting the Compaq merger was "definitely a cause that needed to be taken up."
Mr. Hewlett said he had no intention of giving up his seat on the Hewlett-Packard board.
"I fully expect to be active in H.P.," Mr. Hewlett said. "I think I can add value to the company."
Mr. Hewlett's argument against the merger has been that by purchasing Compaq, Hewlett-Packard would greatly increase its dependence on the brutally competitive personal computer business, with its scant profits. In the bargain, Mr. Hewlett has said, the role of the company's lucrative printer business would be diminished. Besides, he has argued, big mergers in the fast-moving computer business rarely, if ever, succeed.
Win or lose, some analysts said, Mr. Hewlett has provided a rare, inspiring example of a director's taking a principled stand to oppose the course set by the management.
"He showed that being a dissident and standing up for what he thought was in the best interests of the shareholders had enormous appeal to the shareholders," said Charles Elson, director of the Center for Corporate Governance at the University of Delaware. "In that respect, he won." |
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