Mega-Merger Close to Done

After a five-month struggle to merge, Hewlett Packard looks ready to merge with struggling chip maker Compaq.

The results of the Palo Alto-based HP shareholder ballot remain heavily disputed. HP Chairwoman Carly Fiorina claimed a slim majority voted in favor of the 23 billion euro ($20 billion) purchase of Compaq at a shareholder meeting Tuesday. The deal’s most vocal opponent, Walter Hewlett, maintained that all of the 900,000 ballots had yet to be counted.

Company officials said that could take weeks.
After five months, Fiorina isn’t willing to wait that long.

"We think we have a slim but sufficient margin, and we think it’s important to let people know that," she said on Wednesday. Compaq shareholders are expected to vote overwhelmingly in favor of the deal on Wednesday.

The European Union has already come out in favor of the deal, preventing any possible resistance to Fiorina’s move in Europe.

The pros and cons

Those in favor of the deal see it as a lifesaver for both HP and Compaq, who have been struggling in the ultra-competitive, consolidating computing industry. With the merger, Fiorina said they would have a company to rival IBM with expected worldwide sales of 90 billion euro ($79 billion).

Walter Hewlett, son of one of the founders, has spent the last few months rallying descendants of the Hewlett and Packard families, who hold an 18 percent share in the company, against the deal. Hewlett believes the purchase of Compaq would be a multi-billion dollar mistake that would burden the company with low-margin computers and would present a merger extremely complex to carry out.

Wary shareholders, stock market

He seemed to be representing the interests of a majority of shareholders, who hammered Fiorina with questions during the two-hour meeting on Tuesday. HP employees, especially, are said to be wary of the merger, which is expected to cost HP 15,000 jobs.

"HP morale is very low, people feel very bad about it," David Chen an HP retiree, told wire services. The stock market has also reacted negatively to the merger in the past few weeks.

Fiorina, who has staked her job on the completion of the purchase, said she was devoting 900 people to work on making the fusion of the two companies seamless. In addition to lost jobs, the buyout is expected to uproot countless Compaq employees who will have to move from their current Houston headquarters to Palo Alto.