HP/Compaq merger latest: Fiorina claims victory

Hewlett Packard shareholders have approved the firm's $22bn mega merger in a personal triumph for HP boss Carly Fiorina.

The outcome is a major boost for Fiorina who pushed institutional shareholders to back the deal and hinted she would stand down if the vote went against her.

"Given the choice between embracing the future of our industry or attempting to preserve the status quo, it appears our shareholders today have made a decision not only to embrace that change but to lead it," HP CEO Carly Fiorina said.

"It's now time for all of us - those who supported the merger and those who opposed it - to pull together for the benefit of the company," she added.

At a press conference after the meeting, Fiorina called the margin "slim but decisive," but would not provide details. She added that an official vote count will take four to six weeks.

"I'm hopeful we can put this contest behind us, find common ground and move forward," she said.

Compaq said in a statement that it is "pleased" that HP believes it has enough votes to complete the merger. "Over the past several months, there has been a groundswell of support from customers, partners and shareholders who are favorable toward the merger as they examine its strategic rationale," Compaq CEO Michael Capellas said in the statement.

Despite a positive recommendation from the Institutional Shareholder Services and big name backers such as Intel and Barclays Global, victory was uncertain as co-founder Bill Hewlett's son Walter had led the calls for a no-vote and had gathered significant momentum behind his no campaign.

Dissident HP board member Walter Hewlett, who has led a fierce campaign against the merger, said at his own press conference, that he refused to concede defeat.

"We have released a statement and we stand by that statement that the results are too close to call," Hewlett said. "It is simply impossible to determine the outcome at this time."

Hewlett also said he would remain active at HP, but noted that he is not likely to be holding more press conferences. "I would like to stay on the board...I believe I can add value to them."

Remarking on the campaign, Hewlett said: "The only thing I have taken personally is the drop in the stock price."

But now, after six months of discussions, the newly merged company will gear up to do battle with IBM should Compaq shareholders follow suit as expected and approve the merger later today (Wednesday).

Opponents to the deal, which Hewlett claims numbered twenty institutions, feared that it will not best serve shareholders as it will help commoditise the PC business and create complex integration challenges.

Cecelia Dennett, editor of HP Computer Users Association UK newsletter said: "Opponents of the merger have concerns over big mergers of the past and point out that Compaq itself is still trying to digest Digital Equipment since its acquisition in 1998."

A survey of European and US corporate information officers by Merrill Lynch revealed concerns over the loss of competition in the market place and that services might suffer during the integration.

Meanwhile HP employees will not be happy with the green light according to a survey of 445 employees conducted by Field Research. It revealed that 38 per cent of workers strongly oppose the deal with only 11 per cent that want it.

Anthony Miller, research manager Ovum Holway said that confirmation the merger is going ahead would mean: "They will spend vast amount of management time trying to knock two ailing hardware businesses together."

He added that further drawbacks are that they will "completely take their eye off the services ball leaving the services business to languish in even worse state than before".

The Channel too, has given the news a mixed reaction.

"It is not the HP way and I do not think it will help its customers," said Ian Kilpatrick, group managing director at distributor Wick Hill.

"The HP way is to grow organically through innovation but this is merging for restructuring purposes and HP does not have to do it."

"This is a merger of weakness because they are merging because their PC businesses are both weak. This will help them in this area but not in others."

Tony Kingston, marketing manager at reseller Deverell, which sells HP and Compaq desktop and server products, feared that Compaq's partner programme may be a casualty of the merger.

"Compaq has a strong channel programme which is much stronger than HP's and we would like to see this continue," he said.

Nick Patching, sales manager at reseller Grantham Sutch Associates, which also sells both Compaq and HP kit added: "I just want it all to be sorted out so we know where we are. People say its business as usual but this is not true because [resellers] have to align their businesses months ahead.

"I think it will be a good thing for resellers if it goes ahead and I hope it does."