Fiorina says pay no heed to Hewlett
Published: 28 Feb 2002 07:31 GMT
Sounding like a politician on the eve of an election, Hewlett-Packard chief executive Carly Fiorina jabbed at board member Walter Hewlett and urged shareholders on Wednesday to "focus on the reality of the industry" when considering the proposed acquisition of Compaq.
At an analyst meeting in New York, HP bombarded Wall Street with quotes from tech luminaries supporting the deal on two large screens as a warm-up. As Fiorina approached the podium at the Grand Ballroom of the Hilton she asked, "How is everyone doing today?" The audience responded with an awkward silence.
Undeterred, Fiorina started one of her last pitches to shareholders before a March 19 vote amid mudslinging and an advertising duel with board member Walter Hewlett. Hewlett said in a filing on Tuesday that Fiorina and Compaq chief executive Michael Capellas stood to reap a windfall $115m from a proposed compensation package if the deal were approved.
Fiorina, who didn't specifically address Hewlett's assertion in her opening remarks, painted a stark picture of the information technology industry, arguing that growth is slowing and companies will need scale to compete.
"The pure product era is over," she said. "The IT industry is consolidating to fewer, more capable players."
Fiorina said the IT sector would face slower growth, price pressure and increasing customer demand "with or without this merger."
Taking Hewlett's criticisms head-on, Fiorina urged shareholders to focus on the key issues: market leadership, profitability, customer service and whether the companies can execute.
"Our opposition would like to distract you because they can't win this campaign on substance," she said. "Ask yourself 'why am I hearing this now, why didn't you hear this in the boardroom?' They are trying to distract you with employee surveys in a small town in Oregon with 500 employees and half of them are retirees."
The chief executive took aim at many of Hewlett's proposals and his "focus and execute" plan. "Don't be distracted by the focus and execute plan," said Fiorina. "It's not a plan it's a press release."
Dismissing Hewlett's complaints about the merged company's PC business, Fiorina added that eliminating the PC business could potentially lose accounts and hurt the HP brand.
Fiorina kicked off an analyst meeting, which will feature a host of key executives including chief financial officer Bob Wayman, Ann Livermore, head of HP services, and others.
Wayman emphasised that the company's projected $2.5bn in "cost synergies" was conservative. "Because we know people are sceptical, we've been conservative about our assessments all along," Fiorina added.
The meeting is largely designed to promote the company's acquisition of Compaq, which is being opposed by some institutional shareholders and several heirs of HP's founders. One of the major determinants will be the recommendation of Institutional Shareholder Services, which advises money managers how to vote on proxies and other corporate governing issues. ISS is expected to make its recommendation before the 19 March vote.
HP has a daunting task; even assuming that most shareholders are split on the deal, HP still has 18 percent of votes against it. That's because HP's largest shareholder, the David and Lucile Packard Foundation, has said it would vote against the deal, as have several heirs of the company's founders: David Packard, the Packard Humanities Institute, Walter Hewlett and two other Hewlett sisters, who own a combined 8 percent of shares.
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