HP Rivals May Benefit From Compaq Deal--Jack Welch
Hewlett-Packard Compaq Computer
Welch said in a television interview on Thursday with Fiorina that support for the deal among HP's competitors helped explain why European regulators had given the go-ahead to HP's proposed deal while rejecting GE's bid under Welch to buy Honeywell.
"Your competitors want this deal to go through. It will create chaos. They will clean both your clocks while you're doing all this. That's the one argument that rang a bell with me," Welch said, echoing an objection raised by the deal's main opponent.
HP's first bid to buy Compaq in September 2001. But the Hewlett and Packard families, which together hold an 18.5 percent stake, are opposing the bid, which is now worth about $22.7 billion.
The legendary GE executive made the comments during an appearance on CNBC financial television in which he sympathized with Fiorina in her battle to win support for the deal even as he challenged her on the threat competitors will pose should the deal go through.
He joined journalists of the GE TV unit in questioning Fiorina, who is waging a battle with dissident shareholders, like the Hewlett and Packard families, to push through the deal.
Opponents say the deal would saddle HP with a large, lwo-profit PC business and dilute the value of its printing franchise, while HP interests supporting the deal say it will create high-end computer and services powerhouse.
Fiorina responded to Welch by saying that this argument had been made by competitors since shortly after the Compaq deal was announced in September. But she said these boasts had quieted as HP rivals have faced financial pressures of their own.
"When we announced this deal our competitors were very noisy about all the business they are were going to take away from us," Fiorina said in the CNBC round-table interview.
She also took issue with Welch's assertion that Hewlett competitors had withheld their their objection to the deal with European regulators in the hopes it would go through and enable them to exploit the opportunities it would create.
Fiorina suggested that Hewlett-Packard's diplomatic skills had succeeded where GE's had failed. "We didn't politicize it and we didn't publicize it. We stuck to the substance of the case," she said of the European competition authority review.
Behind the scenes European regulators turned aside complaints from H-P rivals such as Germany's Fujitsu-Siemens. Less active in the regulatory debate were HP and Compaq's biggest rivals, including Dell Computer, International Business Machines and Sun Microsystems.
But European Commission authorities noted afterward there had been fewer complaints in the HP case, in contrast to the concerted campaign by GE rivals in the far more concentrated aircraft-engine market at issue in the Honeywell merger.
"You're a lot smarter than I am and you were able to do it more effectively than I could," Welch allowed, even as he argued that a basic difference existed in the dynamics of the two regulatory battles.
"My competitors killed me. They lived in Brussels," he said.
Welch has been cited by Hewlett merger backers for his support of Fiorina and her board against the challenge to the deal raised by outspoken board member Walter Hewlett.
Mr. Hewlett, a son of one of the company's co-founders, first voted for the deal, then turned around and mounted a proxy battle to reject it.
Six weeks ago, in an interview with Business Week, he decried the dissident board member's moves as a "unpardonable, it's a sin" -- and one that panders to employee nostalgia for a return to earlier days at the six-decade-old company.
Hewlett-Packard has set March 19 as the date shareholders will vote to accept or reject the deal.
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