Packard Foundation to cast crucial vote against Hewlett-Packard-Compaq deal
Saturday, December 8th 2001, 12:00 am
By: News On 6
SAN FRANCISCO (AP) _ Hewlett-Packard Co.'s largest shareholder, the Packard family's charitable foundation, plans to vote against the company's $25 billion acquisition of Compaq Computer Corp., a severe blow to the deal and to HP leader Carly Fiorina.
The decision announced Friday means that Hewlett and Packard family interests now have about 18 percent of HP shares lined up against the deal, which will require the majority of votes cast to win approval.
``I don't know how they dig out from underneath this,'' said analyst Rob Enderle of the Giga Information Group. ``I think for all practical purposes, the merger is dead.''
Packard Foundation Chairwoman Susan Packard Orr, a daughter of HP co-founder David Packard, said in a statement that ``after thorough study and analysis the board has preliminarily decided, on balance, that the best interests of the foundation would be better served by Hewlett-Packard not proceeding with the proposed transaction.''
HP spokeswoman Rebeca Robboy said the company was disappointed but still firmly committed to the deal. She said HP would keep stressing the deal's potential benefits to the public in hopes of persuading the Hewlett and Packard heirs to change their minds. A date for the shareholder vote has not been set.
``We continue to believe that this merger is the one best way to deliver the earnings growth our shareowners expect and our employees deserve,'' she said.
The news pleased Wall Street, which has had a mostly negative reaction to the deal. HP shares rose 19 cents to $23.52 on the New York Stock Exchange before the announcement, and climbed to $25.15 in after-hours trading. Compaq gained 21 cents to $11.32 in regular trading.
The Packard Foundation's decision came after weeks of deliberation and meetings with Fiorina and outside advisers.
The foundation, based in the suburb of Los Altos, has 10.4 percent of HP's outstanding shares, making up about 80 percent of the foundation's $6.4 billion in assets. Its trustees include three of David Packard's daughters, plus former HP chief executive Lew Platt and former chief operating officer Dean Morton.
The foundation does not include Packard's only son, David W. Packard, who announced his opposition to the deal along with HP board member and heir Walter B. Hewlett last month.
Walter Hewlett said Friday he has been meeting with other HP shareholders and has found ``sizable and widespread opposition to this transaction.''
Palo Alto-based HP and Houston-based Compaq believe they could form a behemoth to rival IBM, with increased ability to define high-tech industry standards. Executives say Compaq would double HP's services business, add heft to its lineup of computer servers and improve the cost structure of its struggling personal-computer division.
But critics say Compaq, which lost $499 million in its most recent quarter, would dilute HP's profitable printing business. Even some analysts and investors who see merits to the deal believe the complex integration of Compaq and HP is too risky.
Other opponents have accused Fiorina of losing sight of the company's core principles, the fabled ``HP Way.'' David W. Packard has said he was distressed by management's plans to cut 15,000 jobs after the deal closes.
Earlier Friday, the HP executive overseeing the acquisition plan said HP can affirm its traditional principles while still improving its future prospects.
Webb McKinney, a 32-year HP veteran, said the HP Way has always held that change is essential for the company, and he added that debate over it is nothing new. When HP stopped providing free doughnuts for employees in the 1980s, many people complained it was the end of the HP Way, he said.
``There are a lot of misrepresentations about Carly and the HP Way,'' McKinney said in an interview. ``A lot of people come to HP on a quest for finding out what the HP Way is, like there's a tablet somewhere. The corporate objectives change every few years. It's always been an evolution. ... We will continue to change with or without the merger.''