Some day there will be a book written about the HP-Compaq merger that will
become a must read in every business school around the world. The title will
likely be something like "Against Better Judgement" or "Against
All Odds." HP CEO Carly Fiorina hopes for the latter as she thinks she can
pull off something that has never been done in high-tech industry history:
merging two colossal high-tech companies with vastly different corporate
cultures and business philosophies and with central organizations located
thousands of miles apart.
If the merger history of HP and Compaq is any way to size up Fiorina's
chances, the odds for success are not very good. HP has botched most of the
acquisitions it attempted, starting with Apollo Computer in the mid 1980s.
And Compaq has slaughtered Digital Equipment and Tandem Computer. One sign of
trouble is Fiorina's seemingly growing willingness to deny the obvious. It all
started with the poor choice of trying to merge with Pricewaterhouse Cooper.
This week, Fiorina insisted that the Compaq merger would not be a major
distraction to the management of the two companies. Well, I've never run a $60
billion company. But spending every waking moment these last four weeks selling
the deal to Wall Street analysts who have universally condemned it, would seem
like one huge distraction to me. And having the combined management of the two
mega-size companies figure out the infinite number of large and small details
involved in combining their organizations and product strategies, at a time of
national and international political and economic crisis, would have to be the
"mother of all distractions."
Perhaps Fiorina's biggest mistake, and the cause of her ultimate downfall is
that she has set aside one of the cornerstones of HP's corporate culture in
which the employee was always regarded as the company's most valuable asset. HP
has had few, if any lay-offs and only resorted to such action as a last resort.
But Fiorina appears more concerned about ensuring the deal will go through than
the well-being of the employees. She almost matter-of-factly said that some
20,000 more people would need to be fired in order to save $2.5 billion in
combined annual expenses.
Company morale is likely at an all-time low at HP, a company that has ranked
at America's most admired company for the better of the past four decades. Many
at HP are viewing Fiorina as a wrecking ball on the loose and the Compaq merger
is only making that wrecking ball bigger and more destructive.
Already the buzzards have begun to circle overhead. Michael Dell did not
declare the merger to be the "dumbest deal of the decade" without
having carefully considered his reasoning behind such a bold proclamation. Dell
sees the merger as the best opportunity to expand his business that has come
along in a long time. IBM and others, while less vocal, are probably not far
behind Dell in courting HP customers to jump ship. When will the HP board of
directors wake up and smell the coffee?