Hewlett-Packard Co Chief Executive Carly Fiorina declared victory Tuesday in her US$20.3 billion bid to acquire Compaq Computer Corp, and Compaq investors gathered in Houston to vote on the purchase yesterday.
Analysts expect Compaq holders to overwhelmingly approve the combination because no opposition has emerged there. Fiorina said Tuesday that a "slim, but sufficient" majority of the larger computer maker's investors voted in favor of the deal.
For his part, Walter Hewlett, the dissident HP board member and family heir who has been battling to block the deal, refused to admit defeat, saying the vote remains "too close to call."
"We stand by our statement that the results of today's vote are too close to call ... it is simply impossible to determine the outcome of the vote at this time," he said.
Investors in Compaq, whose stock has dropped 40 percent in the past year, say they're hoping the transaction builds a bigger, better player in the competitive market to sell server computers and corporate services. Compaq has struggled on its own as personal-computer sales growth slowed and prices fell, one of the reasons Hewlett-Packard director Walter Hewlett started a proxy fight to block the combination.
"They're two giant companies in an industry that shifts dramatically in a very short time frame with significant competition," said Bruce Raabe, who oversees US$500 million as chief investment officer at Collins & Co, which voted yes with its Hewlett-Packard shares.
The high stakes have created a big challenge for Fiorina, as she tries to integrate the far-flung operations and mesh rival cultures into one company. While the purchase would double her company's sales force and plug gaps in the product line, she would need to manage 145,000 workers in 160 countries and still find ways to meet her target of US$2.5 billion in cost savings.
"That is a significant problem," said Daniel Szente, chief investment officer at McMorgan & Co, a unit of New York Life Insurance Co that manages more than US$25 billion and voted for the purchase. "When you look back, a lot of major tech deals haven't exactly had stellar performance."
Hewlett-Packard has about 1.94 billion shares outstanding, and the margin is about 10 million shares, or half a percentage point, according to a person close to Walter Hewlett. The difference may be as wide as 50 million shares, or 2.6 percentage points, said a person familiar with Hewlett-Packard.
The closeness of the Hewlett-Packard vote demonstrates a hurdle that will still be there, even if the deal is completed, investors said. Fiorina will have to overcome more than six months of acrimony and name-calling from the proxy fight and smooth things over with employees who had hoped for a different outcome.
At Hewlett-Packard's investor meeting yesterday, when Fiorina said employees favor the purchase, the audience booed.
"The biggest challenge is to get everybody working toward the merger and trying to forget the difficulties of the last couple months," said L. Roy Papp, whose L. Roy Papp & Associates owns 800,000 Hewlett-Packard shares and voted yes.
Fiorina said she and the 900 people on the integration team are working on final plans, including listing customers' new salespeople and details about how they'll interact with the company.
The computer makers plan "cultural workshops" to teach employees about how the other firm does business, such as when they use e-mail and when they prefer voicemail. "I'm hopeful we can put this contest behind us, find common ground and move forward," Fiorina said at a press conference Tuesday.