In one of the last big public forums to take place before her company's impending merger vote, Hewlett-Packard Chairman and CEO Carly Fiorina Tuesday made another push for a shareholder "yes" vote. This time she came armed with the thumbs-up merger recommendation given earlier in the day by independent proxy advisory firm, Institutional Shareholder Services Inc. (ISS).
Speaking at a keynote event Tuesday night at Morgan Stanley's Semiconductor and Systems Conference 2002, in Laguna Niguel, Calif., Fiorina sought to distance the HP/Compaq merger from the ghost of failed mergers past and took time to shed light on a few general storage plans for the two companies after the merge. She also urged shareholders and investors to "get past the headline of high-tech. mergers" and "get into the specifics" of this merger.
The event was also Webcast live.
In referencing the ISS nod of approval for the merger, Fiorina mentioned the independent nature and experience of ISS in evaluating "thousands of mergers," and the months the company spent assessing the HP/Compaq merger. She pointed to the final ISS pro-merger recommendation as a sign for many institutional investors to now decide to vote yes to support the HP/Compaq deal.
In an HP release yesterday about the ISS recommendation, ISS Vice President Patrick McGurn was quoted as saying, "We believe the Compaq merger provides an excellent means of maximizing shareholder value," he said."We really believe this is a deal that's going to work... we think this is a winner."
Yesterday's boost from ISS comes at a critical time for HP. It has been embroiled for months in one of the most difficult proxy wars in its 60-year history, due in large part to disagreements made public by HP board member Walter Hewlett, son on HP founder William Hewlett, about the merits of the merger. Both HP and Compaq have been gearing up for a "yes" vote by March 19 (for HP shareholders) and March 20 (for Compaq shareholders) when proxies must be cast for or against the merger. Fiorina refused to elaborate much last night on Walter Hewlett's motivation for making public claims against the merger, and said "none of his issues did he ever raise in the board room. None of them."
While industry commentators have pointed to previous, failed IT mergers as a sign of impending doom for the potential HP/Compaq merge, Fiorina maintained clear distinctions last night between the two scenarios. "Most high tech mergers have been mergers of diversification, not consolidation," she said. "That's why they fail."
Fiorina went on to differentiate the HP/Compaq merger as a one of consolidation, noting that the two companies have the same businesses (PCs, servers, storage, professional services), the same customers, and work in the same 163 countries. Consequently, HP believes it would be easy to consolidate duplicate positions. In fact, she referred frequently to the exhaustive efforts made by HP's and Compaq's combined 600-person integration planning team to iron out just such details of the merger in advance.
Other reasons she gave for failed past mergers included faulty merger-timing during a hot market, and the fact that most failed mergers had been hostile in nature. Fiorina refuted both of these failure scenarios for the upcoming HP/Compaq merger vote, claiming they timed the merge "at the bottom of the market" and that this has been a "highly friendly" merger between the two giants from the outset.
Still, some questions remained about what the merger could mean for HP's and Compaq's core businesses, storage being chief among them. Noting Compaq's overall market leadership position and its current dominance in the fastest-growing enterprise storage segment -- midrange storage networks -- Fiorina said that the companies had prepared a detailed product roadmap for the next three years, but were awaiting regulatory approval to share it with the public.
She then went on to add that HP's assets at the high-end with its OpenView storage management offering played significantly in the upcoming integration plans. Fiorina also stated that HP and Compaq are prepared to incur as much as a 5% revenue loss on their storage businesses as a direct result of the merger due to "some small segments, overlapping business lines." However, Fiorina was quick to add that it would be easy to outperform such potential storage loss expectations, due to the growth and opportunities inherent in the market.
Fiorina's final remarks boiled down to four questions she asked HP shareowners to ask themselves before the vote: Whether the merger could create market leadership, whether it would improve operating expense, whether they believed the merger could be executed effectively, and whether they believed the board had done its job of analyzing and deliberating on the impact of such a merger. Fiorina concluded her session, saying, "Just remember. The answer is yes, yes, yes and yes."
FOR MORE INFORMATON:
HP press release: ISS recommends HP and Compaq shareowners vote for merger,
News round-up of HP/Compaq merger in our SearchStorage featured topic.