Fiorina's job, legacy at stake if HP-Compaq deal fails

Andrea Orr

PALO ALTO, Calif.: Hewlett-Packard Co. chief executive Carly Fiorina has

staked her reputation and legacy to the increasingly doubtful chances of shaping

a technology powerhouse from a merger with Compaq Computer Corp., analysts said.

The failure of the deal, which was thrown into question on Friday when HP's

largest shareholder came out against it, would be read as a failure of her

leadership and could end her meteoric career as an outsider brought in to shake

up the company that put Silicon Valley on the map.

The David and Lucile Packard Foundation, HP's largest shareholder, which

holds 10 per cent of the company's stock, delivered a stinging rebuke to Fiorina,

saying it opposed the merger she had personally pitched to its trustees.

"Obviously, if the deal doesn't get done, she's done," said John

Buckingham, co-manager of the Al Frank Fund, which has small stakes in both HP

and Compaq.

Critics of the proposed merger wonder why HP -- which made an unsuccessful

bid to expand its services business by pairing up with PricewaterhouseCoopers a

year ago -- now wants to acquire Compaq, become the world's largest personal

computer maker and get further entrenched in that segment's brutal price war.

Fiorina, the first woman to head a top-20 US company, is no stranger to such

challenges, having climbed the sales ranks at AT&T and helping to drive the

highly lucrative initial public offering of Lucent Technologies.

But Fiorina has had a mixed record in Silicon Valley, where her aggressive

style -- and sky-high ambitions for the company -- coupled with a deteriorating

economy led HP to miss management financial projections four quarters in a row.

Then she stunned Wall Street in November when the company turned in

stronger-than-expected quarterly results that gave a new luster to her merger

plans. That lasted until the Packard foundation delivered its surprise verdict

on Friday.

"I guess Carly will be looking for a new job," said US Bancorp

Piper Jaffray analyst Ashok Kumar. "I don't see a scenario how she stays

on...This is basically her last straw to revive the company. This is going to be

her epitaph at HP."

Others say it is too early to count her out.

Widely recognized for her intelligence and commitment to detail, Fiorina who

studied medieval history and philosophy at Stanford University and quotes German

philosopher Friedrich Hegel in public, stands out in a management team heavy on

engineers.

She has also faced down skeptics since she was recruited to the top job at HP

in July 1999. Brought in as the first outside chief executive of the Silicon

Valley icon, she vowed to "reinvent" the 62-year-old company, which

critics had called stodgy and plodding.

More recently, however, critics have charged her with changing HP for the

worse. Fiorina argues Compaq's services and high-end machines make it the

perfect partner for HP. But so far the market does not seem to agree, and few

think that she -- or HP shareholders -- will want her to head the company if her

bold vision is ignored.

"I think the odds are against it at this point," said Bill DeRosa,

a fund manager with Badgley, Phelps and Bell in Seattle. "I'm guessing at

some point she is going to have to pay the piper."

(C) Reuters Limited.