HP-Compaq Merger Saga

With
Carly Fiorina claiming that shareholders had narrowly approved her $20-billion
plan to buy Compaq, the bitter-sweet saga of HP-Compaq merger comes to a close.
But not a definitive close because the dissident board member, Walter Hewlett
has refused to concede defeat.

The ballots cast by shareholders will be counted repeatedly in a tortuous
process to arrive at the exact number of votes for and against. In the
meanwhile, HP and Compaq are going ahead with the integration plans and what a
task they have ahead of them!

The toughest measure that both the companies have to take in the short term
is to lay off 15,000 employees. Some analysts suspect that this number will
double or treble over the next two to three years. This development will be
particularly hard on HP employees where the attrition rate is very low, below
five percent.

Next to the retrenchment issue, the other big task the top managers at HP
have at hand is to motivate employees to work wholeheartedly for the
integration. This has become critical because majority of the employees had
opposed the merger in the first place.

But Fiorina does not believe this. And for this belief of hers, she was booed
by the audience at the March 19th shareholders meeting when she said majority of
the employees supported the merger. Surveys done earlier to find out whether HP
employees supported the merger or not, had clearly indicated contrary to what
Fiorina was trying to project at the meeting.

Majority of the HP employees do not see much value for them in the deal which
otherwise creates a mammoth IT entity next only to IBM with an estimated
turnover of $80 billion. However, Fiorina believes exactly the opposite. That
the merger will work for the good of employees as well as shareholders.

Shareholders led by Walter Hewlett, son of HP co-founder William Hewlett, on
the other hand, want HP to remain independent and compete against Dell and IBM.
These do not want HP to get saddled by Compaq’s overlapping products.

However, one thing that has worked out well for Fiorina is that shareholders
and employees of Compaq have strongly supported the merger. While there was very
strong difference of opinion among HP shareholders, Compaq shareholders have
voted for the merger without reservations.

Among Compaq employees, few were against, which was evident at the 19th March
meeting where some employees from France were seen distributing leaflets with
appeals to vote against the merger. But majority of the Compaq employees seem to
be going with the merger.

What they do not visualize is that cultural issues could still come up as
stumbling blocks in the integration process. HP was started in a garage in the
Silicon Valley while Compaq is a Texas-based PC maker with different cultural
ethos. It will be a long time before these organizations understand each others
roots and build on them a solid organization that can give IBM a run for its
money.