Fiorina victorious in merger fight

Peter Henderson

SAN FRANCISCO: She won. Hewlett-Packard Co. CEO Carly Fiorina, the most

powerful and visible woman in American business, emerged both victorious and

vindicated on Tuesday as a Delaware court upheld her $18 billion plan to buy

Compaq Computer Corp., ruling she had not lied to shareholders or bought votes.

The court ruling and a subsequent concession by merger opponent Walter

Hewlett means the merger can go through next week as planned, nearly eight

months after the deal was announced, and with Fiorina at the helm of a global

technology powerhouse that she says will challenge No. 1 computer maker

International Business Machines Corp.

Fiorina had staked her career and reputation on the success of the merger

during a hard-fought proxy battle that pitted her against Hewlett, a scion of

one of the company's founding families, that took on the dimensions of a major

political campaign.

When Hewlett sued on March 28, accusing HP of buying votes and covering up

information damaging to its case for the merger, Fiorina took the allegations

personally. HP lawyers asked the court to clear her name, something it did

Tuesday.

During two days of testimony in Delaware court last week, Fiorina appeared to

rebuild her self-confidence, beginning in soft-spoken, short sentences but

ending in the confident, even brusque tones of a chief executive used to having

her way.

"Sir, you are accusing the CEO of a publicly traded company of a

lie," Fiorina told Hewlett lawyers toward the end of last week's trial on

the Hewlett lawsuit. By late Tuesday, Hewlett had thrown in the towel --

withdrawing his challenge to the merger vote and the threat of a longshot legal

appeal, saying he would "now do everything possible to support the

successful implementation of HP's acquisition of Compaq."

First outsider to lead HP



That marked a key victory for Fiorina, the first outsider to lead the company
that put Silicon Valley on the map and also the first woman to ever run a top-20

US company. The merger vote has been seen as a referendum on her tenure at the

top, as she offered no compromises on her vision for Palo Alto, California-based

HP.

Fiorina has grappled for nearly three years to recast a family-style

management legacy, the "HP Way" credited with inspiring intense

loyalty at the 63-year-old company, which was founded in a garage as one of

Silicon Valley's first start-ups.

Texas-born Fiorina is no stranger to such challenges, having climbed the

sales ranks at AT&T Corp. and helping to drive the highly lucrative initial

public offering of Lucent Technologies. Her aura of success and her reputation

as a leader ready to take risks shook up HP, a company which had faded as its

consensus-driven management style ossified and turned bureaucratic.

Glowing press reports followed the decision by HP's board to turn over the

company to Fiorina in July 1999. Fiorina's smiling picture adorns HP lobbies,

alongside those of founders Bill Hewlett and Dave Packard, but HP's new slogan

-- "Invent" -- is decidedly hers. From the start, her style rankled

HP's culture of straight-talking engineers.

She reorganized the company from dozens of divisions to four, but the

transition proved tough, and her stewardship did not show instant success. Word

of an attempt to buy the consulting arm of accounting firm

PricewaterhouseCoopers leaked in late 2000, but talks broke down over price,

dashing hopes that HP would, in a single stroke, join the elite in the

fast-growing market for technology services.

About that time, her sky-high ambitions for company growth collided with the

deteriorating economy, leading HP to miss its financial projections four

quarters in a row.

Layoffs seen as harsh



In the clearest indication yet that Fiorina had a new idea of the "HP
Way", the company embarked on three rounds of layoffs in 2001. Those cuts

were seen as a harsh measure at a company whose founders made their reputation

as managers who took care of their employees.

Fiorina's eventual plan to buy Compaq hinged on boosting the bottom line by

cutting 15,000 jobs at the merged firm. But as Wall Street and much of HP's rank

and file turned away from Fiorina, she found a new ally in an unexpected place:

rival computer maker Compaq.

An offer from Fiorina to license HP computer technology stirred interest in a

deal from Compaq chief executive Michael Capellas, who in June last year called

Fiorina and asked her to consider buying his company, a plan the two hammered

out and sold to their boards in less than three months.

The two announced the plan to stunned investors and analysts on Sept. 4. HP's

shares sank, and founding family members, controlling 18 per cent of HP stock,

lined up against the plan, but Fiorina never blinked. HP's board threw itself

behind the chief executive, with the exception of merger opponent Walter

Hewlett, who took on Fiorina in a fight that spilled out of the corporate board

room into the national spotlight, becoming increasingly bitter.

HP management tried to undermine the Hewlett and Packard families, calling

Walter Hewlett an academic and a musician who "flip-flopped" on the

issues. Walter Hewlett said HP needed a new CEO who would not "learn on the

job". By the time of the Hewlett-Packard shareholder vote on March 19,

Fiorina had tied her own fate to that of the deal.

"I think the company's success will be my legacy," she said in

October. "The company's failure will be my failure, with all the

predictable consequences of that."