Citing a "slim but sufficient" majority of shareholder votes, Hewlett Packard CEO Carly Fiorina claimed victory today in her bid to merge the 63-year-old Palo Alto-based technology giant with Houston-based Compaq.
While representatives of her primary opponent, board member William Hewlett, declared the vote "too close to call," Fiorina's proclamation likely marks the end to a bitter, six-and-a-half-month proxy fight that put Hewlett Packard's management at odds with the children of the firm's famous founding pair, Bill Hewlett and David Packard. "This is a proxy contest we did not anticipate and we wish it had not happened," Fiorina said. "But faced with a choice between embracing the future of our industry and maintaining the status quo, shareholders made the choice to lead."
Fiorina made the announcement in a press conference 30 minutes after a special shareholder meeting at Silicon Valley's De Anza College, where 1,000 shareholders gathered to question Fiorina and officially cast their votes on the deal. These types of town-hall style meetings are required by law, but tend to provide more in the way of theatrics than offer a true reflection of shareholder sentiment. Most attendees were retirees, and many had festooned themselves in the color green, signifying their solidarity with Walter Hewlett's opposition to the $20 billion merger.
Joining an already long line at 6:30 in the morning for the 8:00 a.m. meeting, one retiree, Sy Corenson, expressed a common sentiment. He said the merger, which calls for at least 15,000 layoffs across both companies, takes a dismissive attitude toward employees. "The company's philosophy has always been that its people are the greatest asset," said Corenson, who worked at HP for more than 30 years.
Another former HP employee who was also against the deal said she had been laid off in last August's cutbacks--a move Fiorina said was necessary in the face of the declining fortunes in the tech industry. "I was told Tuesday and instructed to get out by Friday. The way it was done was not the [gentler] way it was done in the past."
As shareholders waited to get inside the meeting, union members from Compaq's offices in France, who had flown in to protest the merger, met them with placards and hand-outs referring to Fiorina and Compaq CEO Michael Capellas. "Carly and Michael: Just Married, Bound to Divorce," said one sign. "Merger Today, Chapter 11 Tomorrow" said another. Nearby, a man draped in a green turban solemnly beat a drum in protest.
Later, in the two hour-long question and answer session with Fiorina, employees and retirees took turns at the microphones. Most of them expressed similar disgruntlement at the deal, and anxiety for the future of the company that claims to be one of the original tenants of the former apple orchards now known as Silicon Valley.
Still, the true battle behind the HP Compaq merger had already fought, behind the scenes, over the past six months. After Walter Hewlett declared his opposition to the deal last September--among other things, he claimed it concentrated the company's prospects too heavily in the commodity business of selling PCs--both sides hired professional proxy firms and began blanketing shareholders with phone calls and mailings.
And both Hewlett and Fiorina traveled the country extensively, visiting large institutional shareholders and trying to get their message out in media interviews and newspaper ads. By some accounts, each side spent in excess of $50 million on their campaigns over the company's future. But it now appears that Fiorina won the war with her tenacity and persuasiveness in convincing the large institutional shareholders like mutual funds and pensions that hold HP stock. "I'm gratified in having received a decisive majority of institutions not affiliated with the Hewlett and Packard foundations," Fiorina said at the press conference.
The final tally on the vote may not be known for several weeks. The proxy cards are now being shipped to the Delaware offices of IVS Associates, an independent monitor of proxy elections. The process of sorting through 900,000 votes will be complicated by the fact that shareholders could vote as many times as they liked--but only their final ballot counts. That makes the monitor's job of reaching a conclusive tally all the more difficult. Challenges to the vote count or even lawsuits from disgruntled shareholders could also prolong ths issue. But they are not likely to stand in the way of what now appears to be an inevitable consolidation of the technology industry.