Fiorina's reputation battered by merger fight
Apr 24, 2002 (The Dallas Morning News - Knight Ridder/Tribune News Service via
COMTEX) -- The increasingly personal battle over Hewlett-Packard Co.'s merger
with Compaq Computer Corp. is bruising the image of HP chief executive Carly
Fiorina and will likely weaken her effectiveness at the helm, analyst say.
Former HP director Walter Hewlett, son of a company's co-founder, has built his
case against the merger by accusing Fiorina of misleading shareholders about its
financial impact. Now he's doing it again in a lawsuit against HP, which
narrowly won shareholder approval for the merger.
Hewlett's lawyers have aimed at Fiorina's trustworthiness, grilling her for
seven hours on the witness stand Tuesday and Wednesday in Delaware about
internal documents and figures that weren't shown to shareholders, the
Associated Press reported.
The merger fight, and now the lawsuit, have succeeded in making many
shareholders doubt Fiorina's integrity, analysts said. That could bring major
repercussions for her later, even if the merger escapes intact from the lawsuit
and inquiries from the Manhattan U.S. attorney and the Securities and Exchange
Commission.
"The biggest problem is that the CEO has to be credible with investors,
especially large-scale institutional investors," said Rob Enderle of Giga
Information Group. "It may be difficult for them to perceive Carly as anything
but dishonest after all this, even if she didn't do anything wrong."
When Fiorina came to the HP helm from her vice presidency at Lucent
Technologies, she was known as a brash leader who wasn't afraid to take chances.
But her more unpopular decisions - a failed bid for PricewaterhouseCoopers'
consulting unit and the $19 billion stock swap for Compaq - have led some
investors to believe she's more concerned about making blockbuster moves than
protecting their interests, analysts said.
That's the image Hewlett has tried to exploit since he announced his opposition
to the merger in November. In letters to shareholders, he has called the Compaq
merger a gamble and portrayed himself as a champion of shareholder rights.
Fiorina and other HP executives have said they respect Hewlett while disagreeing
him and even planned to renominate him to the board until he sued the company.
But Fiorina also repeatedly dismissed many of his requests for more information
in the weeks leading up to the vote, rolling her eyes at a recent analyst
meeting in New York and accusing him of trying to distract investors.
Some investors didn't like that behavior, analysts said. "She's bringing a lot
of this on herself," said Needham & Co. analyst Charles Wolf.
Fiorina attracts more attention because she's one of only six women who run
Fortune 500 companies, said Nancy Keene, an executive search consultant at
Ambler Associates in Dallas. "They're all lightning rods for scrutiny," Keene
said.
Fiorina has been fighting against a very traditional way of doing business,
angering Hewlett and some longtime HP employees who adhere to the company's
founding philosophy, the "HP Way."
In court, Hewlett's attorneys have held up memo after memo from Fiorina and
other executives showing negative financial outcomes from the merger. Fiorina
and HP's attorneys have said the internal documents aren't the final, completed
figures and have been taken out of context, AP reported.
HP has also tried to depict Hewlett in a negative light, saying he isn't up to
speed with the fast-paced technology industry. HP attorneys prodded Hewlett on
the stand Wednesday to admit that he based his suspicions about the company's
wrongdoing mostly on rumor, AP said.
If Hewlett wins the case, the court could invalidate some proxy votes, demand a
revote or oust some executives.
The merger was worth $25 billion when it was announced Sept. 3, but investors
hammered HP's stock. HP shares dropped 80 cents to $17.24 Wednesday, and Compaq
stock rose 10 cents to $10.30.
"They're showing filings and internal memos that are different from what the
public filings say," said Jeffry Netter, a University of Georgia finance and law
professor. "You can't separate their strategy in the courtroom from their
strategy in the beginning of the merger fight, which was to discredit Fiorina."
Hewlett's lawyers have all but abandoned the portion of the suit many experts
thought would be the trial's main focus. The suit accuses HP of threatening to
take away investment banking business from Deutsche Bank if it didn't vote for
the merger.
That debate lost momentum after an independent proxy firm released the
preliminary merger vote tally last week. With 51.4 percent of the vote, HP would
have barely won even if Deutsche Bank had voted against the merger.
So the focal point became what Fiorina and her team disclosed and didn't
disclose to investors. That tactic could mark Fiorina's career for a long time.
"They've really reduced her effectiveness," Netter said. "The strategy seems to
be to get rid of Carly Fiorina, whether you win the case and stop the merger or
not."
---
By Crayton Harrison
The Dallas Morning News
CONTACT: Visit The Dallas Morning News on the World Wide Web at http:/
www.dallasnews.com/
Distributed by Knight Ridder/Tribune Information Services.
(C) 2002 The Dallas Morning News |
