Analysts are warming up to the marriage of Hewlett-Packard and Compaq Computer, while shareholders watch internal strife continue.
HP CEO Carly Fiorina and Compaq CEO Michael Capellas have been on a non-stop roadshow, promoting the merger with press conferences, letters to shareholders and briefings with Wall Street analysts and investors. But that hasn't stopped the internal strife at HP from becoming a monthly soap opera, as executives and board members publicly debate with Walter Hewlett, an heir of co-founder Bill Hewlett and the man who oversees the Hewlett Family Trust and Foundation.
In its most recent response to Hewlett's criticism of the merger, seven directors and Fiorina sent a letter to HP shareholders calling Hewlett a "dissident shareholder", and describing him as a musician and academic who has never worked at the company or been involved in its management.
Compaq executives appear to be immune to the public strife within HP. On January 25, the company held its annual stockholder/investor meeting and reiterated that the merger would help its growth plans for 2002, says Arch Currid, a spokesman for the company. Currid dismissed reports that the company's meeting was intended to serve as a public forum to air a "Plan B" if the merger failed to be approved.
"Until the merger is complete, we have to conduct ourselves as an independent company," says Currid. "At that meeting, we outlined the strategies and accomplishments we achieved in 2001 and talked about our goals and objectives for 2002. Among the topics we talked about was how the merger would accelerate our strategy."
The letter that Fiorina and other HP directors sent out to shareholders spelled out some very specific claims as to how the merger could help HP shareholders, including:
-- Cost savings of $2.5 billion annually, adding $5 to $9 to present HP share value.
-- The ability to lead the market in servers, storage and management software.
-- A doubled sales force that could reach 160 countries.
Research firm IDC appears to concur. On Monday, the company issued a report analysing the HP/Compaq merger that drew the conclusion that the two companies would be better off together than apart. However, IDC also concluded that the two companies face a host of challenges, including how to best combine their organisations, their sales teams and their corporate cultures.
One of the key benefits of the merger would be that HP and Compaq could combine and streamline their workforces to avoid slipping further down in the current economic slump.
IDC notes that HP and Compaq could create integrated systems and software combinations to provide a one-stop shop. For example, HP's OpenView systems management software and Compaq's StorageWorks storage business could both work with servers from both companies.
IDC also noted some potential negatives resulting from the merger, including layoffs of 15,000 employees and disruption to existing customers and channel partners.