December 05, 2001 11:42
Houston Community Hopes for Best in Hewlett-Packard Bid for Compaq
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By Jennifer Files, San Jose Mercury News, Calif.
Dec. 5--HOUSTON--In an effort to convince outsiders that this muggy metropolis is more than an outsized oil town, local boosters promote the nickname "Silicon Bayou" and point to Compaq Computer, its homegrown computer giant.
So much for bragging rights.
On Sept. 5, Compaq and Hewlett-Packard announced a $25 billion deal that would fold the Texas PC maker into Silicon Valley's HP.
The proposed merger, which has since drawn opposition from some of HP's biggest shareholders, initially looked like a loser for Houston. After assurances from HP executives in Palo Alto that the Texas workforce eventually could grow and that the company's support for Houston civic groups would continue, some employees and community leaders say they're coming around. But many remain uneasy.
From workers to civic leaders to local philanthropy officials, Houstonians worry about the consequences on economic and civic life not only from merger-related layoffs but from the loss of a corporate headquarters.
"The bottom line for a lot of us is, `Where do I fall?'" said one Compaq employee in Houston.
HP and Compaq plan to eliminate 15,000 jobs, or about 10 percent of their combined global workforce. The companies won't say how many of those cuts will come in the Houston area, but many here fear that Compaq's headquarters operations would suffer disproportionately. Compaq already laid off 1,500 of its Houston area workers this year, leaving about 10,500 here, or 15 percent of Compaq's workforce.
Compaq supports dozens of Houston philanthropic endeavors, from an annual marathon to groups that help teach kids to read.
"One of my biggest nightmares was that the headline in the paper one morning would be that Compaq was leaving Houston. This one was pretty tough," said Jim Kollaer, president of the Greater Houston Partnership, the region's largest chamber of commerce.
"Compaq has been a very good corporation for Houston. The first thought in any of our minds... is how are we going to exist without them?" said Carrie Moffitt, chief executive of Volunteer Houston, an organization that has received tens of thousands of dollars in equipment and cash to help match volunteers with community groups.
Compaq executives say the combined company won't cut support for Houston non-profit groups, and Moffitt wants to believe that, but she still worries. "I don't know anybody who has ever gotten anything from HP in Houston."
Not that there isn't more to Houston than Compaq. The city is the nation's fourth largest, with a population of just under 2 million. Its economy -- valued at about $200 billion a year according to Kollaer -- is larger than Hong Kong's.
But Houston is also reeling from high-profile business troubles, including this week's bankruptcy of energy giant Enron and layoffs at Continental Airlines. Even in better economic times, attracting large high-tech companies to balance a traditional overdependence on the energy industry is a challenge.
Outsiders "think that Houston is a dusty, dirt road, no trees, no green, no-quality-of-life kind of city," Kollaer said. Compaq's well-known brand helped to offset that reputation.
"Compaq was kind of that icon" that symbolized Houston's economic diversity, said Barton Smith, a professor of economics at the University of Houston. The company's suppliers also moved their operations to the region, and workers bought homes in the developments that sprang up around Compaq's northwest Houston campus.
Since its establishment two decades ago, when its three founders sketched out a personal computer on a place mat at Houston's House of Pies, Compaq was one of this city's most visible corporations. First-year revenue of more than $100 million set a U.S. record and, for Houston, the company represented an economic foothold outside the energy industry -- a step away from the city's vulnerability to the ups and downs of oil prices.
Now, though, faced with an increasingly cutthroat PC market and a sour economy, Compaq is struggling to return to profitability. Merging with rival HP, the companies' executives say, will ultimately mean staying power -- and eventually growth.
"There has been this resignation that this was the best deal that Compaq could come up with," said Smith. "The high-tech industry is so soft that if you still have your job at Compaq, you feel lucky. You don't go to Austin, because Dell's not hiring. You don't go to California, because they're not hiring. You've taken your lumps and you have to live with it."
The deal has been criticized by Wall Street from the start and could very well fall through. The sons of HP's co-founders came out against it last month. Compaq executives describe the brewing fight as a Hewlett-Packard issue, but Chief Executive Officer Michael Capellas is scheduled to join HP CEO Carly Fiorina today in pitching the acquisition to the David and Lucile Packard Foundation. The foundation is HP's largest shareholder, with a 10.4 percent stake, and its support is seen as critical to the merger's chances.
Shortly after the merger announcement, Fiorina flew to Houston. The Sept. 11 terrorist attacks -- less than one week after the acquisition was announced -- thwarted plans for a meeting of all the company's employees, but she and Capellas addressed Compaq employees in small roundtable sessions in the weeks that followed. Days after the announcement, they met with Houston Mayor Lee Brown, who issued a statement supporting the merger, and Capellas, a member of the Greater Houston Partnership's board, made a presentation to the group's board emphasizing Compaq's need to become large enough to rival IBM in the lucrative enterprise and services markets.
Kollaer, for one, grew more optimistic about the deal after the companies said that once the new Hewlett-Packard begins to grow again, it would be more likely to expand in Houston than in Palo Alto, largely because of the relatively low costs of doing business in Texas. "Right now, based on what we know about the market, I think the completion of the merger would ultimately be good for Houston," said Kollaer.
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To see more of the San Jose Mercury News, or to subscribe to the newspaper, go to sjmercury.com
(c) 2001, San Jose Mercury News, Calif. Distributed by Knight Ridder/Tribune Business News. CPQ, HWP, ENE, CAI,
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12/05/01 14:26 PM EST |
