Hewlett-Packard Co. chief executive Carly Fiorina claimed to have enough support for the company’s $20 billion purchase of Compaq Computer Corp., after a contentious proxy battle ended with the final voting of HP shareholders March 19.
If Fiorina is correct, the mega-merger’s effects are sure to be felt by the school technology field. Together, the two companies account for 11 percent of the installed base of computers in K-12 schools, according to market research firm Quality Education Data.
HP director Walter Hewlett, who led a fierce five-month campaign against the deal, insisted the shareholder vote was too close to call, especially since investors can change their minds several times, with only their last ballot counting.
But Fiorina said HP’s proxy solicitor had assured her the company would have enough votes to win.
“We think we have a slim but sufficient margin, and we think it’s important to let people know that,” she 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.
No such drama was likely in Houston, where Compaq shareholders are expected to approve the deal overwhelmingly March 20 because the company has been struggling and HP is paying a premium for its shares.
Once both shareholders’ votes are certified, HP and Compaq then can begin working together. Compaq chief financial officer Jeff Clarke said he expects the deal to take three weeks to close.
“We are very close to making this merger a reality,” said Compaq CEO Michael Capellas, who would be No. 2 at the new HP.
HP’s claim of victory came as somewhat of a surprise, because when the day began, nearly one-fourth of HP shares were publicly in Hewlett’s camp and less than 10 percent had come out in favor of the deal. But HP had claimed for a while to have a “silent majority.”
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 end-to-end packages for corporate customers, improve their slumping personal-computer divisions, and generate $2.5 billion a year in cost savings.
Hewlett contends HP is overpaying for Compaq, would get bogged down selling low-margin personal computers and services, and shouldn’t risk the complex integration of the companies’ huge organizations.
That disagreement became one of the most intriguing episodes in high-tech history, largely because HP is one of Silicon Valley’s marquee institutions and its late founders are revered as visionary engineers.
Fiorina, who was hired to lead the giant computer and printer maker in 1999 and ordered to shake up the company, had staked her reputation on the deal and was expected to resign if it failed.
She had to overcome an initially hostile reaction from Wall Street after the Compaq deal was announced on 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.
Many customers have told independent surveys they worry they’ll be neglected while HP and Compaq figure out how to work together.
On the other hand, some big Compaq and HP clients have offered high praise for the deal. And the companies contend customers have nothing to fear because the merger is being planned better than any in recent memory.
Patricia Dunn, chief executive of Barclays Global Investors, said she always thought buying Compaq would strengthen HP’s technology products for businesses, but worried whether HP could come up with an integration plan that would work.
She became sold after seeing how the 900 HP and Compaq employees planning the integration have studied what went wrong in failed mergers, and made clear decisions on which products and brands will survive and how the new HP’s sales and service organizations will work if the deal is approved.
“It’s been: ‘Make tough decisions, make it clear which way we’re going, and then get on with it,'” Dunn said in an interview with the Associated Press. “I think they can pull it off.”
Although HP traditionally has focused more on the business market than on education, Compaq education customers who spoke with eSchool News said they weren’t concerned about the pending merger.
“The information we have from Compaq is that we do not expect any significant change in the services or products they are providing to us,” said Daniel New, executive director of technology program management for the Richardson Independent School District in Texas. “I don’t expect any impact on the services we receive.”
Compaq provides a full turnkey solution for Richardson ISD’s approximately 16,000 computers, including delivery, installation, and maintenance. The district’s agreement with Compaq, worth between $30 million and $35 million over five years, is scheduled to continue through August 2006.
New said he expects Compaq will take “the existing organizations that support usthe laptop and desktop manufacturing and distribution service organizationsand merge them into HP as they are now. Bottom line: We expect the merger to be transparent to the support they provide us.”
Compaq Computer Corp.
Richardson Independent School District