Year in review: HP's Compaq conquest

Hewlett-Packard spent the first half of the year trying to seal its deal to acquire Compaq Computer and the second half trying to prove it had made the right decision.

The company began the year in a dogfight with opponents of the deal--led by board member Walter Hewlett--who seemed to have the upper hand. But HP won a key endorsement from Institutional Shareholder Services in March, which seemed to turn investor sentiment in its favor. At a special shareholders meeting on March 19, HP declared victory--only to have Walter Hewlett take it to court, alleging that the company his father co-founded had improperly induced Deutsche Bank to vote in favor of the deal. When all was said and done, though, HP narrowly won shareholder approval.

The first days of the merger saw a slew of announcements, with HP unveiling product plans and a combined Web site immediately. Soon enough, stumbling points emerged, such as a spat between the company's IT department and its services organization, both of which wanted control over the company's internal technology. HP also raised its estimates for job cuts from 15,000 to more than 17,000.

Strong financial reports and aggressive cost-cutting eventually helped HP overcome some of the skepticism that greeted the deal. In particular, analysts seemed pleased that the company was able to narrow its losses in both the PC and enterprise computing businesses during the quarter ended Oct. 31.

Nonetheless, doubts surrounding the deal remain, including whether HP can stem losses of market share and whether it can avoid alienating its resellers as it tries to grow its direct sales to customers.

Also, with the November departure of President Michael Capellas, it remains to be seen whether CEO Carly Fiorina might be taking on too much responsibility by not replacing her second in command.

No love lost for Walter Hewlett
Hewlett-Packard bashes the dissident director, whose father co-founded HP, for his opposition to the Compaq merger, labeling him "a musician and an academic" who never worked for the company or took part in its management.

The merger gains momentum
An influential advisory firm recommends that shareholders vote in favor of the multibillion-dollar deal. HP Chief Executive Officer Carly Fiorina calls the action a "crucial milestone" in the long journey toward union with Compaq.

A fight to the finish
With an 11th-hour legal ruling and the withdrawal of a key opponent, investors get the final say in the blockbuster merger battle. When all the votes are cast, they approve the deal by a "slim but decisive" margin.

Closing the book on the deal
After an eight-month proxy fight, a three-day trial in a Delaware courtroom, countless speeches, a blizzard of regulatory filings and a bitter boardroom squabble, Hewlett-Packard completes the largest technology merger in history.

Trouble in post-merger paradise
While still smiling in public, newlyweds HP and Compaq endure their first marital spats. A key issue: Who runs the internal computer operations of the combined company?

A change of course for direct sales
HP scales back the "hard deck" policy, in place for more than a year, that helped quell conflicts between its direct sales force and its resellers.

Sailing without a second in command
With the departure of Michael Capellas, HP joins a growing roster of Silicon Valley's best-known companies without a clear No. 2 executive.