CUPERTINO, Calif.--Hewlett-Packard claimed victory Tuesday in its hotly contested battle to merge with Compaq Computer, while opponents maintained that any such declaration is premature.
About an hour after polling closed at a shareholder meeting here, HP issued a statement saying that "based on a preliminary estimate of shareowner proxies by its proxy solicitor, it believes it has received sufficient votes to approve HP's merger with Compaq Computer Corporation." The company noted that the results are not official.
At a press conference, HP CEO Carly Fiorina described the margin as "slim but decisive," but would not provide details. She added that an official vote count will take four to six weeks.
"It's now time for all of us--those who supported the merger and those who opposed it--to pull together for the benefit of the company," she added.
Compaq said in a statement it is "pleased" that HP believes it has enough votes to complete the merger.
"Over the past several months, there has been a groundswell of support from customers, partners and shareholders who are favorable toward the merger as they examine its strategic rationale," Compaq CEO Michael Capellas said.
At his own press conference, dissident HP board member Walter Hewlett refused to concede defeat.
"We have released a statement and we stand by that statement that the results are too close to call," Hewlett said. "It is simply impossible to determine the outcome at this time."
Hewlett also said he would remain active at HP, regardless of the outcome, but noted that he is not likely to be holding more press conferences.
"I will resume my life as an academic and a musician," he said, poking fun at HP's characterization of him during the bruising fight. He added: "I would like to stay on the Hewlett-Packard board...I believe I can add value to them."
Remarking on the bitterness of the campaign, Hewlett said, "The only thing I have taken personally is the drop in the stock price."
After the victory declaration at midday Tuesday, HP shares fell from about $20 to a closing price of $18.80. Compaq shares closed up 78 cents, at $11.14.
When the merger plan was announced last September, HP shares were trading around $23.25, and Compaq's were at $12.35. The share-price erosion has reduced the value of the deal to about $20 billion from $25 billion in September.
A busy morning
HP's and Hewlett's statements came after the shareholders meeting at the Flint Center here. Hewlett arrived to a rock star's welcome, with throngs of photographers trying to get a shot of the deal's most vocal opponent and cheers of "Walter! Walter!" coming from his supporters. Many Hewlett allies were clad in green, the color of the proxies used to cast a "no" vote on the merger.
Fiorina started off the meeting with a formal welcome. Then Hewlett stepped up to speak, receiving a standing ovation as he was introduced.
"The spirited debate about this merger has also been a debate about the soul of this company," Hewlett said. "What we have heard has reinforced what we have been saying. We are gratified by the support we have received."
Hewlett also said HP is not a company in crisis. "I truly believe this has made us a stronger company," he said.
Fiorina applauded as Hewlett finished and received another standing ovation. Then Fiorina began taking questions from shareholders.
A shareholder asked Fiorina about the acquisition's impact on employee morale, citing surveys from opponents that showed HP workers oppose the deal by a 2-to-1 margin.
Fiorina countered that HP's own surveys showed the opposite.
"The majority of our employees understand and support this merger," Fiorina said, drawing a chorus of boos. "Ladies and gentlemen, that is a fact," she responded. "I did not say retirees, I said active employees."
The remark drew another chorus of boos from the crowd, many of whom identified themselves as HP workers or former workers before asking their questions.
The acquisition is likely to result in the elimination of thousands of jobs at the two companies, a topic that Fiorina also addressed Tuesday. At her press conference, she said the "bulk of the positions" that will be cut will be identified within six to nine months after the merger occurs.
"As painful as losing 15,000 positions over two businesses is, returning important businesses to profitability is something we have to do," Fiorina said. "We have 36,000 people in businesses that are not profitable.
"Our NT server business today is not doing well," she continued. "We are losing money, we are losing momentum, and we have been doing so for the past two years."
Going into Tuesday's meeting, Hewlett had publicly lined up roughly 24 percent of shareholders, while HP had about 9 percent, with the remainder being undecided or choosing to keep their intentions private. As a result, analysts had said the vote was too close to call.
Shortly before Fiorina opened the polling, sources close to the vote indicated that Capital Research & Management, HP's largest shareholder, with a 3.45 percent stake, was likely to vote in favor of the deal. If Capital Research & Management voted for the merger, HP would have the support of four of its top five shareholders.
|Gartner analyst Paul McGuckin says whether merged or separate, HP and Compaq will likely use the decision to
justify radical housecleaning of products.
A spokesman for Capital Research & Management said the firm would not make "any sort of announcement now or later about our voting intentions."
Most shareholders had already submitted proxy cards by mail to HP's independent proxy solicitation firms, rendering the actual shareholder meeting little more than a symbolic finale to the computer industry's largest proposed corporate merger--and its most contentious.
Results of Tuesday's vote will have dramatic consequences for executives and workers at HP and Compaq, and the tally will have ripple effects throughout the computer industry. Hewlett has called the merger proposal "a $25 billion mistake" that would ruin both companies and provide rivals such as Dell Computer and IBM key footholds among burned customers of HP and Compaq.
HP executives, led by Fiorina, say the recession and bitter competition from IBM and Dell have left the companies few choices but to consolidate to cut costs and streamline product categories.
Many of HP's largest and most high-profile investors had announced plans to vote against the merger.
Those institutions voted by mailing their responses to proxy solicitors--not unlike absentee voting in a political election. HP asked shareholders to send back white cards indicating support, while Hewlett and other enemies of the merger asked shareholders to return green cards indicating opposition to the deal.
Proxy solicitors for both sides will add up the votes. A representative from Newark, Del.-based IVS Associates, which is handling the vote tabulations, will then take the paper ballots back to IVS's headquarters for counting.
Michael Barbera of IVS Associates would not say whether the IVS representative would fly back in a commercial or private jet--or whether the agent would fly at all. The IVS worker's transportation plans will remain top secret to protect the worker from getting robbed of proxy statements by an unscrupulous shareholder or interested party.
"You laugh, but it happened once before," a harried Barbera said Monday.
Once the statements arrive in Newark, IVS will begin the equally top-secret process of counting votes. It's unclear how long the counting will take, but Barbera said it could continue for several weeks, depending on how close the vote is.
"I won't know how long it's going to take us until I get all the material here," Barbera said. "This is not a one- or two-week job, but it's not a two-month job. It's somewhere in between."
It's not over until Compaq votes
Compaq shareholders were expected to be more likely to approve the deal--in part because HP is paying a premium to acquire the Houston-based computer maker, and in part because few Compaq shareholders have vocally opposed the plan.
Compaq shareholders will host a shareholder meeting at 2 p.m. CST Wednesday at the Wyndham Greenspoint Hotel in Houston to approve or reject the merger.
Compaq spokeswoman Stacey Paull wouldn't estimate the number of likely attendees, but the conference rooms at the hotel fit a maximum of 1,000 people. The Compaq meeting, which will include a speech by CEO Michael Capellas, is scheduled to last roughly an hour. The majority of Compaq shareholders have already voted by mailing proxy statements or voting by e-mail.
With no outspoken family members trying to scuttle the deal, the Compaq vote is expected to proceed quickly. But 100 percent approval is unlikely. Some of HP's large institutional investors opposing the merger own shares in both companies, and many workers who own shares oppose the deal because of the expected layoffs.
Approval from Compaq shareholders must also pass a higher hurdle than approval from HP shareholders.
At least 50 percent of all Compaq shareholders must approve the deal for it to go through; those who don't vote at all are essentially voting against the deal. By contrast, only 50 percent of HP voters who cast ballots had to approve the deal for it to go through on the HP side. Those who didn't vote had no concrete impact on whether the merger would go through.