Hewlett-Packard Co CEO Carly Fiorina won't be able to satisfy investors even if she alters terms of the planned US$22.7 billion purchase of Compaq Computer Corp, investors and analysts said.
"It's not a matter of price, as the whole rationale for the merger is incorrect," said Thomas Rath, fund manager at Safeco Asset Management Co, which owns 1.34 million Hewlett-Packard shares. Redoing the deal would be "a modest plus but it doesn't change my mind. I don't like the direction they're going."
The largest stakeholder, the David and Lucile Packard Foundation, said last week it has "preliminarily" decided to vote against the deal, prompting some analysts and investors to speculate Fiorina will try to alter the acquisition's terms in ways that would reverse dissent. Ideas include lowering Compaq's purchase price and diminishing the impact of low-profit personal computers, maybe by spinning off the business.
Officials at both H-P and Compaq say they're not interested in restructuring the deal. Even if they change that decision, analysts and shareholders said it won't matter. Compaq investors won't accept any changes, they said.
"If H-P came back to try to restructure the deal, I can't imagine that it would be proper for Compaq to accept," said Bob Sutherland, an analyst with Technology Business Research Inc. "If this is something that H-P is considering, it's a reflection of their desperation right now."
The Packard Foundation's decision came after a November announcement that H-P director Walter Hewlett, son of co-founder William Hewlett, will oppose the deal. Hewlett, who's waging a proxy fight to defeat the purchase, may be getting pressure from the company to leave the board, analysts said.
Investors said they want him to stay. "Just because you're on a board doesn't mean you have to have a bunch of `yes people,'" said Steven Salopek of Banc One Investment Advisors, which owns 5.7 million Hewlett-Packard shares. "That's just what shareholders don't want."
Hewlett has no intention of stepping down, spokeswoman Joele Frank said. He wasn't available for an interview, she said.
Shares of Palo Alto, California-based H-P fell US$0.07 to US$21 on Friday and have declined 9.5 percent since the Compaq announcement on Sept. 3. Compaq rose US$0.09 to US$9.48 and has fallen 23 percent since Sept. 3.
Compaq's board, which met twice over the weekend, had a regularly scheduled meeting yesterday. The Houston-based company isn't interested in renegotiating the terms, one board member said before the meeting.
"There is no talk or intention to renegotiate the deal," Thomas Perkins, founder of venture-capital firm Kleiner Perkins Caufield & Byers, said in an interview. "It's a good deal, and it's solid."
H-P doesn't want to renegotiate either. "It's not on the table," spokeswoman Rebeca Robboy said. "We intend to bring the deal we announced in September to a shareowner vote."
Speculation about a revised deal started with one word: preliminarily. Analysts saw that in the Packard Foundation's press release and heard that Hewlett-Packard planned to issue new information that might make the group change its vote, and they said that meant a new deal could be in the works.
The Packard Foundation said "preliminarily" because the proxy isn't available yet, and it wasn't meant as a sign that the group would reconsider if the terms were different, said board member and chief executive Richard Schlosberg.
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