HP-Compaq merger: Oppositions unlimited

HP CEO Carly Fiorina suffered two new set-backs in her effort to merge HP

with Compaq. First the Packard Foundation made it clear that there is no chance

the group will change its mind on last week's decision to vote its shares

against the merger. Then a key Compaq's board member effectively shut the door

on any notion Compaq would be willing to re-negotiate the merger terms in order

to persuade investors to vote for the deal.

After the Packard Foundation said last Friday that it could not support the

merger, Fiorina said she hoped the company's largest shareholder could still

change its mind because the decision had been termed "preliminary."

But foundation president, Richard Schlosberg, this week said that while the

group would not actively join a battle over the merger, there was no chance it

would change its position. "The decision was only preliminary in the sense

that HP has not yet scheduled a vote," Schlosberg said. He added that the

12 foundation board members had voted unanimously to oppose the merger.

"We don't have any real expectation to change." On Wall Street,

analysts this week said the chances the merger will be approved is now

considerably less than 50 per cent. But Compaq board member Thomas Perkins,

co-founder of the legendary Silicon Valley venture capital firm Kleiner,

Perkins, Caufield & Byers, said he and the rest of the Compaq board remain

firmly behind the merger. But he also put a resolute end to any notion that

Compaq would be willing to renegotiation the price and other terms of the

merger. Some analysts had speculated that if HP could get a better deal, the

Packard foundation could be swayed to change its vote.

Perkins said Compaq was not interested in going back to the negotiating

table. Opposition to the merger stemmed from its strategy rather than its terms,

including the price of the deal. "There's no thought about changing the

terms of the deal. And I can't conceive that if the terms of the deal were

changed, that it would have affected the Packard foundation vote," said

Perkins.

The only good news for Fiorina this week was Schlosberg's statement that the

Packard Foundation would not share the analysis of the merger that was prepared

by the Booz-Allen financial consulting firm. Merger opponents had hoped the

report would boost their case. "We expect it to remain private,"

Schlosberg said.

Nor will the foundation join HP board member Walter Hewlett in persuading

other shareholders to vote against the merger. "We are not going to be

involved in the campaign. We made our decision based on what we believe is in

the best interests of the foundation, and that doesn't really imply anything

about how another shareholder may look at that, frankly."

According to Perkins, Fiorina's position remains very strong with HP's board

and she is not about to be fired. The Hewlett-Packard board, with the exception

of Walter Hewlett, remains solidly behind Fiorina, he said. "She's in rock

solid with the board of directors. She's not going to be fired under any

scenario that I can see."

Perkins said that Hewlett-Packard's future, if the deal doesn't go through is

unclear. If the merger is voted down by shareholders, both Fiorina and HP's

entire board of directors are likely to resign, he said. "Who's going to

run Hewlett-Packard? Walter Hewlett, the music professor and David Woodley

Packard, the professor of Greek Mythology? Are they going to run this thing? One

of the largest companies in the world?"