Unlikely soldier leading charge against Hewlett-Packard merger

Mr Walter Hewlett did not expect to find himself at the centre of a battle over the future of Hewlett-Packard, the computing and printing group his late father helped to establish.

Mr Hewlett, the dissident member of Hewlett-Packard's board, says he thought the company's executive would have called off its controversial $23.1 billion (€26.5 billion) bid for rival Compaq once it became clear in early December that the heirs of Hewlett-Packard's founder all opposed the proposal.

The united opposition of the Hewlett and Packard charitable foundations in effect created a voting block, with 18 per cent of Hewlett-Packard shares aligned against the deal. With institutional shareholders clearly sceptical, most observers declared the transaction all but dead.

But Ms Carly Fiorina, Hewlett-Packard chief executive, and colleagues on the board have dug in their heels. Mr Hewlett, a private, unassuming family man, finds himself at the heart of an increasingly nasty fight that will define the future for the iconic Silicon Valley corporation.

There is little in Mr Hewlett's past to foreshadow his role in this drama. A physics major at Harvard University, he received a Master's in electrical engineering and operations research at Stanford University. A cellist and organist, he eventually indulged his love of music and received a doctorate of musical arts from Stanford.

Friends and colleagues say Mr Hewlett is an intelligent and thoughtful man who approaches his responsibilities in a thorough manner. While private in nature, he is not afraid to speak his mind once he has formed an opinion on an issue.

He serves on Harvard University's governing board and the Public Policy Institute of California, and as director of the Centre for Computer Assisted Research in the Humanities, which he founded to translate classical music into digital code. Like his father, William, the younger Mr Hewlett has a strong interest in philanthropy - but he is also deeply committed to the company.

Hewlett-Packard's management and board have gone to great lengths to discredit Mr Hewlett, arguing that he lacks the business experience to understand the serious challenges it must overcome to restore itself as a leader in the computing industry. Mr Hewlett contends that with 15 years' experience as a Hewlett-Packard director, as well as seats on the boards of Agilent Technologies and Vermont Telephone Company, he has sufficient experience to conclude that the Compaq deal is bad for HP shareholders.

Mr Hewlett vehemently disputes Hewlett-Packard's claim that the merger would strengthen its position as a leading provider of end-to-end computing solutions for corporate customers. He argues that the transaction is a "bet-the-company" strategy that would destroy Hewlett-Packard shareholder value by diluting the company's valuable printing operations and increasing its presence in the commoditised PC business.

People close to Mr Hewlett scoff at the suggestion he is acting as a "one-man band". Mr Jim Gaither, a member of the Hewlett Foundation board, points out that numerous technology analysts also believe Compaq would damage Hewlett-Packard.

Mr Hewlett's supporters note he has hired outside advisers, while the Hewlett Foundation conducted research before opposing the deal. Moreover, the Packard Foundation took advice from consultancy group Booz-Allen Hamilton before turning down the deal.

"If you take all of us, just the people on these two foundations, you will find more than [the board's\] 300 years of experience," says Mr Gaither.

Mr Gaither is one of numerous friends speaking out to defend Mr Hewlett, who refuses to respond to the personal attacks against him. His friends say they are taken aback by Hewlett-Packard's attempt to portray him as an introverted, emotionally driven heir who does not understand the business trends affecting the information technology industry.

No one, not even other Hewlett-Packard board members, questions Mr Hewlett's integrity and commitment to the company. What sets him apart from the rest of Hewlett-Packard's directors is his far more cautious approach to change.

Hewlett-Packard director Mr George Keyworth says the board has for several years felt it needs to do something dramatic to restore the firm to a leadership role within the IT industry. Ms Fiorina was hired as the agent of change. But Mr Keyworth says he realised only recently that Mr Hewlett did not share the board's sense of urgency.

Mr Hewlett refuses to speculate on what would happen if shareholders rejected the deal.

He insists that would not necessarily herald the end of Ms Fiorina's stay at Hewlett-Packard and he maintains he could repair relations with remaining board members. Others are less optimistic that the damage could be undone.

Mr Gaither suggests the Hewlett-Packard management campaign against Mr Hewlett is nothing less than an attempt to "break the bonds" between the two families and the company.

Whether or not those fraying bonds are repaired depend a lot on the institutional investors far from Silicon Valley, who are expected to vote on the deal next month. - (Financial Times Service)