March 19, 2002 10:05 AM PST

HP shareholders: Not a happy crowd

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A bundle of trouble if HP merger fails

March 18, 2002
CUPERTINO, Calif.--Hewlett-Packard shareholders converged here on a frosty Tuesday morning to vote on the proposed merger with Compaq Computer. And they weren't in a good mood.

See special coverage: A Fight to the Finish Although a few shareholders polled outside the Flint Center before the beginning of the HP stockholders meeting said they would vote in favor of the $20 billion merger, most said they were strongly opposed.

A smooth integration of the two companies would be impossible to achieve, many said, while many others theorized that management was merely trying to boost their own wealth at the expense of employees.

"We will face a critical situation with employment," said Michel Lalliard, a Compaq marketing employee in France, who was one of many who flew in from Europe to protest the vote. "More than 50,000 jobs will be lost by the end."

Although Lalliard had to brace himself against the bitter morning cold, he didn't have to worry about his opinion being heard. Reporters and TV camera crews swirled around the crowd of 1,000-plus investors as blow-dried anchors quizzed small shareholders about their opinion of the merger.

When Walter Hewlett arrived for the meeting, a swarm of cameras and microphones crowded around him as if he were a presidential candidate. Hewlett later received a standing ovation when he entered the auditorium.

In many ways, the merger vote transcends economic considerations. Those opposed generally say the deal goes against the grain of the HP culture, while proponents say that HP culture or not, it's a different world now.

"I was a friend of (HP founder) Bill Hewlett since he was 3 years old," said Wilson Harwood, age 89. "Our grandparents were friends, and our parents were friends. I went to Lowell High School and Stanford with him. I'm going to vote with my gut and for my godchild, who is Walter Hewlett."

"But that's no way to make a business decision," a woman who arrived with Harwood said, chiding him jovially.

Layoffs, integration main concerns
Layoffs and the difficulty of integration were the two biggest issues raised by stockholders attending the meeting. Others said the merger represented a move by large banks and executives to benefit at the expense of others. Many were also miffed when they found out they were standing in the wrong line to get into the auditorium.

HP shareholder meeting start delayed"No one knows if the merger will work," said Ann Lukezic, a shareholder from Livermore, Calif. "I don't like how they are going to lay off employees, and employees are the ones that make the company go." Lukezic said this was the first shareholder meeting of any kind she has attended in 20 years of investing. "It is going to be entertaining."

Pat Hendricks, content-editing supervisor at San Jose, Calif.-based Smartshop.com, said the vote was also a referendum on HP CEO Carly Fiorina and on female leadership.

"As a woman, I feel that a lot of this is a vote for or against Carly and for or against her status as an outsider and not a family member," Hendricks said. "I think women in executive roles in the future will be carefully scrutinized."

Overall, current and former HP employees held the strongest opinion about the merger. Since Fiorina took over in 1999, the culture of the company has changed for the worse, many said.

"This merger is going to be hopeless," said Fred Zack, an employee with HP spinoff Agilent. "It shows that the board doesn't have a clue about what they want to do."

Although Zack no longer works at HP, he said the mood within the company seems to have changed in the past few years. Of 10 friends that stayed at HP, three got laid off and six took other jobs.

"I've found one person at HP who supports the merger, but everyone else is against it," said one HP manager, who requested anonymity. "The integration would be an absolute nightmare."

Not a stellar merger record
Another former employee, who also requested anonymity, pointed out that HP has a terrible merger record. Both the Apollo and Verifone mergers didn't go well, the former employee said. Once, the company bought a small software company in Inglewood, Colo. The integration didn't go well, and the company was sold back to its founders at a profit to them. The former employee worked on that project.

Management's campaign to win employees over has also not gone smoothly.

"I'm not sure how I am going to vote," said Penny Hubbard, an HP employee in Cupertino, "but upper management is going to have to do some damage control with the employees and show them that they aren't out there for the money."

Corporate spam to employees was probably the most annoying part of the campaign, Hubbard added. Before the merger struggle, the company e-mail newsletter had touted contract victories and market-share gains. Lately, she said, "it's all merger, merger, merger."

By contrast, Monika Saksena, who works on middleware for HP, said the risks are worth it.

"Plan B is lacking in any sense of credibility," Saksena said. "It is a risk, but at least there is a chance."

 

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