Hewlett-Packard Co director Walter Hewlett, who's leading a proxy fight against the planned US$22.6 billion purchase of Compaq Computer Corp, said it will be harder to combine the companies than managers think.
"Neither H-P nor Compaq management has a track record of leading a transaction of this scale and complexity," Hewlett wrote in a letter to shareholders. "However, in the last two years, they do have a track record of being overly optimistic."
H-P Chief Executive Carly Fiorina contends that buying Compaq will bolster the computer maker where it is weakest, in servers and services. Walter Hewlett argues that it will make the company too dependent on low-end PCs and hurt profit as executives struggle to weave the two operations into one.
Both sides are conducting campaigns to sway investors.
Walter Hewlett said Thursday that managers will need to combine 145,000 employees at more than 66 locations and two "widely different business styles." He said the process will take "a lot longer" than the 18 months to 24 months executives have predicted.
"In the technology industry, 18 to 24 months is a lifetime," he wrote in the letter, which says that big purchases never work and that Hewlett-Packard will lose business during that period.
Shareholders of H-P will vote on the purchase on March 19. Company spokeswoman Rebeca Robboy said the letter takes quotes from analyst reports and executives out of context and that the deal is still the best alternative to address the computer maker's challenges.
The company has said that the purchase is closer to deals in more mature areas like oil and aerospace, where big transactions have paid off.
Separately, Compaq filed with the US Securities and Exchange Commission the text of an interview with Chief Executive Michael Capellas, who will be president of the combined company.
Capellas contends that Compaq learned a lot from its 1998 acquisition of Digital Equipment Corp. The companies need to announce clear product roadmaps for customers and "take care of" the sales force, he said.
Despite a rough start, he said Compaq got a lot out of the Digital deal. "These are among the most profitable assets we have," he said.
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