COMMENTARY--Carly Fiorina isn't the most arrogant CEO on the planet--Larry Ellison has that title all to himself. Nor is she the most desperate--that would be Compaq's Michael Capellas, who must secretly be going mad as he sees the face of Michael Dell peering at him from around every corner.
But Carly's close on both counts. With shareholders voting on the issue tomorrow, how else to explain why a seemingly rational person like her would pursue something as irrational as this merger with Compaq?
JUST LOOK at the history of computer-industry mergers and acquisitions. AT&T buys NCR and mayhem follows, with NCR eventually spun back out. Sperry and Burroughs form Unisys, but the company never really takes root. NEC buys Packard Bell, and Packard Bell does what it would have done anyway: Drop under the waves. Compaq buys Digital Equipment and then Tandem, and both acquirees seem to vanish.
In fact, the only big computer industry acquisition I can think of that worked was Steve Jobs's NeXT acquiring Gil Amelio's Apple. OK, I got that backward from a legal perspective, but it really is what happened. It was a truly special case of the visionary, charismatic founder returning home to wild acclaim.
Despite what you might read occasionally in this column, I'm not absolutely certain about too many things. But the fact that Steve Jobs is a smarter and craftier CEO than either Fiorina or Capellas is one of them. Do these two really think they are smarter than all the other merger maniacs whose once-in-a-lifetime deals went straight to hell?
In my experience, mergers tend to occur only when it becomes evident that one or both partners lack long-term staying power. They often result in one company buying a competitor that would have died anyway. This practice of paying for a competitor that, left alone, would waste away on its own seems like a very expensive way to buy market share or new technology.
MAYBE CARLY really is a visionary who sees opportunities and synergies the naysayers are missing. But as someone who's spent a long time in the industry and watched mergers that actually made sense go badly sour, I just don't see HP and Compaq working out.
When I first heard of the deal, I figured the two companies' management teams must have arrived at the same conclusion: They thought one or both companies were on the way out and their best hope of survival was as a combined business. I figured the end result, after perhaps 24 to 36 months, would be a single combined business about the size of the larger of the two partners, but perhaps better focused.
Now I am more concerned that Compaq isn't a five-year survivor, short of an economic or technological miracle, and the real danger is it'll take HP down the drain with it. There really is some merit to Walter Hewlett's beef that the merger increases exposure in the commodity PC business while diluting the value of HP's printer and imaging assets.
So even if the two companies can somehow be mind-melded together--which is the big "if" that's killed all the other big deals--the company you end up with could be in critical care right from the beginning. Why else do you think HP/Compaq's PC competitors seem as happy about the deal as sharks at a shipwreck?
I ALSO WONDER about the momentum HP has already lost--how many products and services didn't get developed--while Carly and Co. focused on this deal. And what happens if the vote tomorrow goes against her? How many more opportunities will pass as Carly faces the five stages--denial, anger, bargaining, depression, and acceptance--she will doubtless go through following a defeat?
Of course, it's expected that if the deal dies, Carly goes. But how soon? Then add time to find a new CEO, some new board members, maybe some top execs, and HP's misery drags out another year or more.
When I look at it that way--heads you lose, tails you lose--I wonder if it really matters whether HP shareholders approve the merger or not.
If it gets approved, do you think the HP-Compaq merger will work? If it fails, where will Carly go? TalkBack to me below.
