Time running out on Fiorina
Palo Alto, California, Nov. 7 (Bloomberg) -- 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 $21.4 billion, the Hewlett family and a related foundation, which own about 5 percent of the company's shares, yesterday said they oppose 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.''
Yesterday, company director Walter Hewlett, his sisters Eleanor Hewlett Gimon and Mary Hewlett Jaffe, and the William R. 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.
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Hewlett-Packard has reiterated several times that the board supports Fiorina and this purchase. Fiorina has been adamant that she will submit the deal for shareholders to decide, regardless of how low the stock slipped.
``We're not going to back off this deal prior to a shareowner vote,'' Fiorina said in an October interview. ``Period.''
Still, her support appears to be cracking now.
Walter Hewlett said he's planning to call each of the eight other board members and discuss his feelings. If he wins them over -- or convinces the Packard family foundation to join him -- it would be tough for Fiorina to recover.
The two families account for 15 percent of the outstanding stock and still command the respect of other investors. The foundation started by David Packard, who founded the company with William Hewlett in a Palo Alto garage in 1939, is the company's largest shareholder. A spokeswoman said yesterday the foundation hasn't decided how it will vote.
``They carry a lot of weight with their opinion,'' Collins & Co.'s Raabe said. ``This will change the way the vote shakes out, absolutely.''
Presumably HP would have to come up with the $600+ M (IIRC) deal-breaking penalty in the contract with Compaq. No matter how the deal goes, forward or not, it seems as if the CEO and maybe the HP board should be carefully looking over their shoulders, watching for irate shareholders...
Cheers,
Scott.