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American Morning

HP-Compaq Merger Decision Expected Today

Aired March 05, 2002 - 09:34   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JACK CAFFERTY, CNN ANCHOR: Critical decision today that probably will determine the outcome of that Hewlett-Packard-Compaq proposed merger. Very loud, very expensive proxy battle going on for four months at Hewlett-Packard over the proposed acquisition. Andy Serwer, "Fortune" magazine editor at large, is here now with -- I guess, they are turning for home as they come out of clubhouse turn.

ANDY SERWER, EDITOR AT LARGE, "FORTUNE": I've just about had it with this thing. It is almost like Enron. I'm getting a little sick of it.

But March 19th is the big date, two weeks from today, but the deal will be sealed today, probably. We'll get into that in a second. First of all, biggest tech deal ever. $25 billion transaction, and why do we care? Well, million of Americans either work there, either buy these products or are shareholders. So, it impacts all kinds of people, and of course, this is make-or-break day for HP CEO Carly Fiorina.

CAFFERTY: And who does the the final ballot come down to? It's an interesting story, isn't it?

SERWER: Yeah, it really is, Jack. We're going to talk about this a little bit. When you get one of these proxy battles, there's this group in Maryland -- Rockville, Maryland, called Investors Services. And the guy who decides how all these big institutions are going to vote is a 32-year-old guy. There he is. Ram Kumar. Ram does not even rate a window. This guy does not have a window office. He is a 32-year-old analyst, and he basically recommends how all these big shareholders vote on this deal, and he is going to say what he thinks this afternoon. His recommendation will come, and basically what he says today will decide how the deal goes down on March 19th.

CAFFERTY: Why would these big institutional money managers take the word of a 32-year-old guy on a deal this big?

SERWER: Well, very interesting. Because they basically want to slide the responsibility off to someone else. You know, if the deal looks bad, if it goes bad, they can say, Hey, this independent analyst, we were merely following his advice. Now, he has other people working with him, truth be told, but this guy has an incredible amount of power, and this group sort of came out of nowhere, and sort of crowned itself, We're the people who decide on how mergers go. And there you have it. This guy is going to make the whole thing make or break.

CAFFERTY: Wow. What else?

SERWER: Else. Michael Dell sent me a very interesting e-mail about this transaction. Let's see if we can get it. There it is. You can see that there, that's a picture of a Hewlett-Packard sign with a rock thrown through it. Michael sent me this thing, and said, Apparently not all the HP employees are excited about the merger.

CAFFERTY: Oh, now. Of course, it should be pointed out that Michael Dell has got a dog in this fight.

SERWER: Yes, he sure does.

CAFFERTY: Big time.

SERWER: He is the competitor to both of those companies. But interesting, I've asked him, I said, What do you think, what would be better for you as a competitor if Hewlett and Compaq are put together or not?

He said, I don't care, we are winning anyway. Which is absolutely true, because Dell is so strong right now.

CAFFERTY: Which way do you think it is going to go?

SERWER: You know, it is so hard to tell. At first, it looked like it wasn't going to go down, because both the Hewlett and the Packard family were against Carly Fiorina here, but lately, the company has been doing better, so it is almost too close to call. But you should know, of course, that usually these deals go down without a fight, so the fact that there is a fight is bad news for Hewlett- Packard. If it doesn't happen, she will probably lose her job.

CAFFERTY: Let me ask you once more. Which way do you think it is going to go?

SERWER: I think it is not going to happen, how about that.

CAFFERTY: There you go.

SERWER: I'll go out on a limb there.

CAFFERTY: I guess we will know soon enough.

SERWER: All right. Ram Kumar.

CAFFERTY: Thanks, Andy. All right. Andy Serwer, editor at large, "Fortune" magazine -- Paula.

PAULA ZAHN, CNN ANCHOR: You successfully got him to go out on a limb there this morning.

SERWER: Yeah, I know. I tried to hide, Paula.

ZAHN: It's not going to happen. CAFFERTY: He was doing that Gary Condit thing with me there.

SERWER: Oh come on. Don't call me that.

CAFFERTY: I'm not going there, I am not going to answer that, I won't talk about...

SERWER: Don't say that to me, Jack. Come on.

ZAHN: But in the end, he distinguished himself because he went there.

SERWER: All right.

ZAHN: Way to go, Andy.

SERWER: Thanks. We'll see.

ZAHN: Let's just see if you're right.

SERWER: Yeah, right.

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