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March 18, 2002
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    Sarah Schmelling  
    December 18, 2001
    Family Matters

    Here’s a major sign that the “new ways of doing business” for the “new economy” are on the wane: A merger between two major corporate entities is put into question by members of not only their boards of directors, but of the companies’ founding families as well. This is exactly what we’re seeing now with HP and Compaq, and really, we shouldn’t be that surprised.

    The proposed merger was announced with much fanfare on Sept. 4 by the companies’ CEOs, Carly Fiorina and Michael Capellas, who also said the deal was worth $25 billion. Just a day later, with investors already questioning the move, that figure sank to under $20 billion. In those few days in early September, when big business was still the biggest news, the media speculated at length about the synergies between the companies, about the number of employees who would have to be laid off, about new executive titles and moving corporate headquarters.


    What nobody seemed to consider was the history of the companies, and, in short, what the families of the founders thought. You know you’ve got a problem on your hands when your company is called Hewlett-Packard and you’re finding opposition from well, the Hewletts and the Packards.

    Walter Hewlett, son of co-founder William Hewlett, announced with several siblings and his family trust that he opposed the merger on Nov. 6, with David Packard, whose father of the same name was also a co-founder, following suit the next day. Reasons for the opposition ranged from everything from believing HP shouldn’t get mixed up in the PC business, to Compaq being too much of a services organization, to the large amount of employees, a proposed 15,000, to be laid off as a result of the merger. On Dec. 7, the David and Lucille Packard foundation threw in their opposition. This group, along with the two families, own 18 percent of HP shares.

    Now things have gotten just plain odd, with Walter Hewlett writing a letter last week to the boards of both companies, pleading them to drop the idea, while several HP employees have been sending petitions around to drum up support from their colleagues, an interesting move, considering how many may lose their jobs as a result of the merger. And while the two companies’ executives continue to praise the benefits of the partnership, it’s also no secret that they’re also preparing their companies for life without each other.

    The whole extravaganza seems to show very clearly why the late ’90s merger mania is no longer the business growth method of choice in this century. Yes, HP had to do something to come up to speed against IBM, but it seems the way not to do that would be to anger its own investors, employees, and keepers of its legacy. And true, Walter Hewlett originally supported the merger, and who knows how much investor doubt influenced the family opposition. But still it seems, somehow, somewhere, the high-powered executives could have communicated better with the sons and daughters of the two men who started messing around with machines in a Palo Alto shed in 1939. The idea in business is to always remember your past mistakes, right? Well it should also be to simply remember your past way of doing business.

    Because really, you can propose all the big mergers in the world, but if you don’t have your own company behind you, what do you have?


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