"We recognize that integrating two cultures -- each with its own distinct heritage -- is a challenge. But the success of the combined company depends on building a strong common culture."
-- Hewlett-Packard management statement, September 2001
A day after Hewlett-Packard and Compaq pumped an estimated $180 million into advertising to air their dirty laundry worldwide, H-P CEO Carly Fiorina claimed victory over anti-merger foe Walter Hewlett, the renegade board member, family heir and defender (in his eyes) of "The H-P Way."
For his part, Hewlett was not ready to concede that H-P shareholders wanted to merge with Compaq, remaining cautiously optimistic as both sides wait for their votes to be counted. This could take weeks, and probably will lead to more than one comparison with the Florida debacle between Bush and Gore.
Although it's too early to declare a winner in this messy public-relations nightmare, it is easy to see who will ultimately lose: the thousands of workers who'll be downsized after a) the merger is defeated, causing the two companies to retrench and cut short-term costs, or b) Fiorina wins and the "synergies" created by combining two companies that make essentially the same products render many jobs "redundant" -- corporate for layoffs.
More than 2,000 people showed up at the Flint Center, an arena in Cupertino, Calif., for the vote, making the event seem more like a rock concert or political convention than a shareholders' meeting. Amid plainclothes cops and metal detectors, those protesting the merger, from disgruntled retirees to union reps, carried anti-Fiorina placards and fretted about the loss of jobs and possible bankruptcy.
In stark evidence of where the crowd stood, Hewlett was cheered when he rose to speak inside the hall, while Fiorina received a hardy round of boos and catcalls. Naturally, after so much publicity and such divisiveness, it's hard to imagine a scenario in which the merged companies can rebuild and move toward a common culture. And culture is critical: Only a stronger combined company will have the chops to compete with industry leader Dell, whose success over the last two decades fueled the need for the merger.
Top officials at H-P and Compaq have already announced that they've found about $2.5 billion in overlap from the combination of the companies, in areas from marketing and sales to legal and human resources. A figure that high translates into many, many jobs for employees at the lower levels of the corporate ladder.
Another route H-P and Compaq will take includes closing down businesses and product lines that aren't competitive or competitive enough, similar to the moves Jack Welch took at General Electric in the mid-1980s. In his "Neutron Jack" days, tens of thousands of workers were shown the door and divisions that did not rank first or second in their fields were shut down.
Perhaps the most damning evidence of employees' fear about losing their jobs in a combined company was released last week. That's when it was revealed that 66 percent of the employee plan voters were against the merger. Anyone who has ever spent time in a large company can attest that this is a telling statistic.
It is the people at the ground floor who will make or break the merger, and they're uniquely attuned to the rumors, gossip and internal planning process. They have also read the stories about the spanking new two-year contracts Fiorina and Compaq CEO Michael Capellas will receive after the merger, totaling $117.4 million in salary, bonuses and stock options.
Michel Lalliard, a Compaq marketing employee in France who flew into California to protest, told online news service CNET that he expects more than 50,000 jobs will be cut. Company officials at H-P and Compaq have already acknowledged that 15,000 positions could be eliminated. In Houston, Compaq workers are reportedly awaiting their pink slips and severance packages.
History proves that downsizing is most often the quick fix for corporate America when business leaders yearn for a short-term solution to sagging revenues and stock prices. Neither company is shy about letting go of employees. H-P announced nearly 11,000 layoffs last year, while Compaq got rid of 8,500 employees. And these figures are in addition to the 15,000 merger-related positions that will be axed.
The testy battle over the merger guarantees that there will be no true victors. Winning by a small margin does little for Fiorina or the new management team that must try to overcome months of headlines, press releases, and wicked Web sites to convince customers and remaining employees that they've done the right thing. If the proxy is defeated, Fiorina is little more than a lame duck, a blow that will send H-P spiraling.
Either way, it is the frontline employees at both companies that have the most to lose. Significant staff reductions are a guarantee regardless of the outcome. This particular fight reveals the weaknesses in an economic system in which workers are expendable.
