24 January 2002 The sons of the co-founders of Hewlett-Packard (HP) have renewed their attacks on HP’s proposed $25 billion (€27.9bn) acquisition of its rival Compaq Computer.
In the latest bout of mud-slinging between the two families and HP executives, Walter Hewlett and David Packard have accused the company of misleading stockholders and denigrating the legacy of their fathers.
In a 31-page analysis, Hewlett said that HP was understating the costs and being over-optimistic about the potential benefits of the merger. He countered claims that the deal will add between $5 (€5.7) to $9 dollars (€10.3) to HP’s share price, by saying that a reduction of almost $5 (€5.7) per share was more likely.
Hewlett added that HP’s estimate for an increase in its share price did not take into account the cost of generous staff retention bonuses, re-location payments and the closure of facilities that would be an integral part of the takeover. The combined company would lose 10% of its revenue, twice the fall predicted by HP, claimed Hewlett.
Packard used a full page advert in the Wall Street Journal to criticise HP CEO Carly Fiorina for “misappropriat[ing]” his father’s principles and for personal assaults on Hewlett.
The advert was in response to a campaign that HP has been running that suggests that its founders would have approved of the deal if they were still alive today. Packard has also been angered by Fiorina’s claim that the vast majority of HP’s employees also favour the deal, when his own contact with staff indicates strong resistance.
HP responded by saying that the arguments of the two sons had already been discredited and revealed nothing new. In mid-January 2002 HP filed a report to the Security and Exchange Commission (SEC) stating that the merger would save $2.5 billion (€2.8bn) a year.
But with a shareholder vote not scheduled until June 2002, three months later than originally planned, the accusations and counter-accusations look set to continue in one of the largest and increasingly bitter mergers that the IT industry has ever seen.
