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Technology Stocks : Hewlett-Packard (HPQ) -- Ignore unavailable to you. Want to Upgrade?

To: PCSS who wrote (524)	5/20/2002 11:16:19 PM
From: PCSS	Read Replies (1) \| Respond to of 4345

PART 5 OF 5 But even as the media continued its love affair with 'Carly', employees were growing increasingly resentful about her plans. The organisational inertia at HP was considerable, mainly because the culture was so strong. HP had been founded by two engineers in a garage and had become the standard by which other technology companies were measured. Its paternalistic and egalitarian management methods were the subject of books and business school case studies. Ms Fiorina, an east-coast outsider, did not take long to start shaking things up. She moved to centralise decision-making and she institutionalised the practice of firing the poorest-performing employees. Such moves were deemed necessary to shake up HP's over-comfortable culture. But Ms Fiorina also made some key public relations mistakes. Perhaps the most damaging was being photographed in front of a mock-up of the garage where Bill Hewlett and David Packard founded the business in 1938. To employees, the garage was sacred turf and Ms Fiorina was seen as laying claim to a legacy to which she had not contributed. Later, she acquired a reputation as an elitist - a tendency that is particularly unpopular in egalitarian Silicon Valley, where it is a badge of honour for the boss to 'muck in'. It was quickly noted that she did not seem to eat in the company cafeteria. There were even unfounded rumours that her contract had stipulated exclusive use of a corporate jet and a chauffeur. Painfully aware that her every action was being scrutinised, Ms Fiorina went to great lengths to avoid even the appearance of elitism. On one occasion, for example, she halted a limousine in which she was returning to headquarters when she discovered the rest of the party was travelling in company-owned Ford Taurus sedans and squeezed in with the others. Ms Fiorina was exasperated by false reports about her. 'They [local reporters] said I have a marble bathroom! Well, I use the ladies' room down the hall, just the same as everybody else,' she said in one interview. Nonetheless, such rumours were emblematic of the feelings about Ms Fiorina among her staff. Three small polls sponsored by David Packard, son of the company's co-founder, at several US HP sites indicated about two-thirds of staff were against the deal. HP countered with its own surveys, supported by independent analysis, showing that 66 per cent of staff supported the acquisition. Her standing in Silicon Valley was also mixed. Mr Hewlett's camp once described her as sprinkling 'Carly dust' to bewitch her conversation partners. But winning the respect and trust of the top movers and shakers proved difficult. 'A lot of chief executives here have built their companies from scratch,' said one long-time Silicon Valley denizen. 'She had never even run a company before. In the valley, you have to get your ticket punched.' Ms Fiorina's standing on Wall Street also began to diminish in late 2000. The first blow came in November 2000, when she was forced to announce the collapse of her proposed $18bn acquisition of PwC's consulting arm. On the same day she revealed the company had missed its earnings target, for the first time under her watch. The next three quarters would prove equally damaging. Yet in the end, it was Wall Street that saved her. Voting results indicated that she and her team managed to win the support of many of HP's largest institutional investors. They were at least in part swayed by the argument that the deal might have been the more risky strategy, but it would generate the greater growth. Most of the 10 most significant institutions, which controlled nearly 25 per cent of HP shares, were also concerned about what would become of the company if the deal fell through. It certainly did not hurt that most of these same investors also owned Compaq shares, and the deal was clearly beneficial for that company's shareholders. Doubts were also assuaged by steady support from the experienced Mr Capellas, who is seen as the more operationally minded of the two. However, it became all too clear in the first few weeks of March that the vote was going to be a nail-biter. A number of smaller institutions that had been less well briefed by HP announced their opposition. 'We're winning the elephants but being eaten alive by the fleas,' explained one person close to the deal. Ms Fiorina's problems were compounded by the policy of many large institutions not declaring their voting intentions. 'It's not my job to make your life easier,' one told management shortly before the March 19 shareholder meeting. 'My job is to act in the best interests of my investors.' Victory, once it apparently came, was not readily savoured. Following the March 19 meeting, looking weary, Ms Fiorina tentatively declared HP had won a 'slim but sufficient' majority of votes. By tersely refusing to answer detailed and repeated questions about the preliminary tally, she implied that the margin was razor thin. One week later, Mr Hewlett launched a lawsuit alleging that HP had lied to shareholders about the progress of the company's integration plans. And he argued that HP had improperly coerced or induced Deutsche Asset Management into switching 17m votes in favour of the deal just one hour before the March 19 meeting. The battle for the heart and soul of HP had moved from Wall Street into Delaware's Chancery Court, regarded as the leading US business court. The highlight of the three-day trial last week was Ms Fiorina's seven-hour turn on the witness stand. Peppered by accusations and repeated questioning, she sparred assertively with her interrogator and ultimately came out on top. In the end, Mr Hewlett's camp simply did not have the evidence it promised when it slapped the lawsuit on the company. Mr Hewlett's camp may yet appeal to Delaware's supreme court, but such a move would probably be seen as a long shot. It is now very likely that HP will get to launch the new company on May 7. HP's victory this week was a tribute to the selling skills and strength of Ms Fiorina as well as the unwavering support of the company's board, which with the exception of Mr Hewlett remained firm throughout the seven gruelling months. But she still has to demonstrate that she can implement her vision. That will almost certainly prove even more challenging.