CPQ::RIP
Indeed.
Anyone who has been around long enough knows that a public breakout of high-level dissension of this magnitude on the board doesn't merely mean high odds against the deal closing. It indicates that the if the deal *does* close, the resulting wounded entity will collapse within 18 months.
Of course 'collapse' will be expressed in the usual tech-executive-discourse code, i.e., all the management goes to the recycle bin and 'We're reorganizing and downsizing so that we can concentrate on our core competency of plastic MP3 players, toner cartridges, and remaindered 1994-97 BayWatch calendars that best serve the needs of our key customers. We will come out of it a leaner, stronger and more focused company yadda yadda yadda stop me before I Chapter 11 again.'
To me the WSJ article below is the dull blade which cuts the final, overstretched, pitiful strand restraining the Carly Catapult. PLOOOOOSH! And it does indeed mean that CPQ is dead meat. Parking lot sale time. Euthanize the whole shebang and get it over with. Sun needs some good news and this qualifies. Talk your way out of this one, rudedog <g>.
--QS
David Packard Supports Hewlett Family
In Opposing H-P's Compaq Acquisition
By MOLLY WILLIAMS and GARY MCWILLIAMS
Staff Reporters of THE WALL STREET JOURNAL
Opposition increased to the proposed $20.9 billion merger of Hewlett-Packard Co. and Compaq Computer Corp., with another son of an H-P founder speaking out against the proposal.
Meanwhile, the two companies scrambled to shore up backing for the deal, with the boards of both issuing strong statements of support.
David W. Packard, 61 years old and the eldest child of H-P's late co-founder David Packard, said that he was against the merger, in part because the deep payroll cuts it would require are contrary to what he said were H-P's founding ideals. "I'm not trying to publicly say shame on [H-P Chief Executive] Carly Fiorina," said Mr. Packard in an interview on Tuesday night. "I just wanted to let people know what I think."
That came shortly after Walter B. Hewlett, 57, the oldest son of the late William Hewlett, also came out against the plan, saying it would make the company too vulnerable to the cutthroat personal-computer industry.
Analysts said that while the recent statements are more evidence of trouble for the merger, which was announced in September, they do not mean it is dead, in part because the two heirs, along with foundations associated with them, own about 7% or so of the company's stock.
However, the David and Lucille Packard Foundation, which owns 10% of H-P's shares, said Wednesday that it has hired an outside analyst to study the deal before the foundation casts its vote on the deal next month. Most analysts say that opposition from the foundation would be fatal to the proposal.
In any event, the opposition to the proposal from the Hewlett and Packard families is a setback for Ms. Fiorina, who is not expected to remain at H-P's helm should the deal fall apart.
What's more, the continuing controversy is adding to the uncertainty at H-P and Compaq that analysts say is hurting the companies' businesses.
Ashok Kumar, analyst at US Bancorp Piper Jaffray, said competitors such as International Business Machines Inc., Dell Computer Corp. and Sun Microsystems Inc. have been making inroads with H-P and Compaq customers because of the question marks hovering over the companies.
In an effort to put such fears to rest, the boards of the companies put out statements reiterating their support of the merger, with H-P board member Dick Hackborn saying that "the new H-P will continue to be an innovation leader with a culture focused on trust, teamwork, accountability and contribution." Compaq's board said it "is more convinced than ever that the merger serves the best interests of shareholders, customers, partners and employees."
In an interview, Thomas J. Perkins, a Compaq director and Silicon Valley venture capitalist, said the statements were issued to counter the public opposition from the founders' children, which he admitted was "not good." Before those statements, he said, the managements of the companies had been making inroads in convincing Wall Street of the value of the deal. "We were starting to get much stronger vibrations from the analysts," Mr. Perkins said.
While Mr. Hewlett cited Compaq's recent warning of further losses in explaining his opposition, Mr. Perkins said he doesn't see any reason for the deal to unwind -- including the recent sales downturn. "The synergies haven't changed; the same facts exist," he said.
Still, the merger remains unpopular with many investors, who fear a combination of two hard-hit technology companies won't result in the powerhouse that H-P and Compaq have promised. One small investor, Matrix Asset Advisors, has written letters to the boards of the companies opposing the proposal, but big shareholders have yet to weigh in. Wall Street's general aversion to the deal was evidenced on Tuesday, when shares of H-P rose 17% after the first reports of Mr. Hewlett's opposition gave some investors hope that the merger might be dead.
Shares in both companies declined Wednesday, with H-P closing at $19.18, down 63 cents, and Compaq closing at $7.99, down 51 cents, or 6%, as of 4 p.m. in New York Stock Exchange composite trading.
Write to Molly Williams at molly.williams@wsj.com3 and Gary McWilliams at gary.mcwilliams@wsj.com4
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