Hewlett-Packard Co Chief Executive Carly Fiorina may be facing the beginning of the end of her tenure, investors said, as the family of co-founder William Hewlett promised to vote against the acquisition that is the cornerstone of her turnaround plans.
After a 27 percent stock slide since Fiorina unveiled plans to buy Compaq Computer Corp for US$21.4 billion, the Hewlett family and a related foundation, which own about 5 percent of the company's shares, Tuesday said they opposed the deal. The stock rose 17 percent on the news, its biggest jump in at least 20 years.
Fiorina, 47, already stood on shaky ground with investors, who have complained for a year about missed sales targets and a lack of focus. Many say she hasn't done a good job selling the acquisition. If the emotional weight of the Hewlett family's decision sways other wary shareholders, the purchase may fall apart. If that happens, investors don't expect Fiorina to last much longer.
"If it doesn't go through, I think there is a new CEO," said David Katz, chief investment officer of Matrix Asset Advisors, who opposes the deal and last month urged the companies to drop the acquisition. "It really opens the door for the boards to re-review the transaction."
On Tuesday, company director Walter Hewlett, his sisters Eleanor Hewlett Gimon and Mary Hewlett Jaffe, and the William Hewlett Revocable Trust said they intend to vote their stake against the acquisition. Together with the William and Flora Hewlett Foundation, they own more than 100 million Hewlett-Packard shares.
Buying Compaq would boost Hewlett-Packard's position in the personal-computer market, where annual sales are forecast to fall for the first time in more than 15 years. The Palo Alto company is worth more on its own, Walter Hewlett said.
Fiorina, who built her reputation as a star saleswoman at Lucent Technologies Inc, has had a mixed track record at Hewlett-Packard since arriving in July 1999. She won kudos early on for rejuvenating the sales force and forging closer ties between divisions. Lately, she's been criticized for not cutting costs fast enough or introducing new products quickly.
Her credibility has been questioned. In last year's fiscal fourth quarter, she missed her earnings targets by US$0.10 a share, and then chopped her profit estimates mid-quarter for three straight periods.
For the quarter that just ended, she didn't even give a formal forecast.
Last year, she considered buying PricewaterhouseCoopers LLC's consulting arm for as much as US$18 billion, then abandoned those plans, leaving investors wondering about her strategy.
"It's difficult for Carly to point to anything in her career as CEO as an accomplishment," said Bob Sutherland, an analyst at Technology Business Research Inc who doesn't own the stock.
Then came Compaq. After the acquisition was announced Sept. 3, Fiorina touted new services capabilities, broader product offerings in server computers and a well-rounded company that could mount a bigger challenge to International Business Machines Corp.
Investors quickly made their feelings known. The stock slid 19 percent the following day -- the biggest drop since 1987 -- and still hasn't fully recovered, even with Tuesday's jump. Compaq shares fell 5.5 percent Tuesday and are trading at their lowest levels since 1996.
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