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...Kumar, senior analyst for Institutional Shareholder Services, who has heard the stump speeches of both sides. "We try to confine ourselves to logic." Kumar's rationale counts more than most. Next week the influential ISS will mail a widely awaited report to pension funds and other big holders of HP stock. Because the family foundations opposing the merger control 19% of HP shares, Fiorina needs around two-thirds of institutional investors on her side...
...which way is Kumar's logic leaning? He won't say, but the wind may have started to turn in Fiorina's favor. In HP's latest earnings announcement, quarterly profit was a whopping three times last year's level, thanks largely to strong Christmas sales of cameras and printers. Hewlett seized upon that, saying it showed how well HP can do on its own, but others were pleasantly surprised--and more inclined to give Fiorina the benefit of the doubt...
...wouldn't say she's got the Big Mo, but there's clearly a change in investors' willingness to view the merits of the deal," says Joel Wagon-feld, research analyst at Banc of America Securities, which had previously been skeptical of the merger. Indeed, the gap between what HP wants to pay for Compaq shares and how the market values them--a key measure of merger confidence, called the arbitrage spread--has narrowed from a toxic $4.35 in November to $1.70. In another tacit sign of support, the company's top five shareholders have been quietly adding to their...
Hewlett certainly can't rely on regulators to scuttle the deal. The European Union rubber-stamped the merger without attaching conditions. The FTC will likely do the same. Support for the merger within HP has climbed to 65% from its 55% low, according to internal polling. (That HP has taken internal polls shows just how dicey things were.) And Hewlett's fellow board members have been increasingly eager to point out that Fiorina is not riding roughshod over them. "It's unfair to say this is Carly's deal," says Bob Knowling, a former CEO of Covad. "Compaq just makes...
...more service business is to buy a consulting firm like PricewaterhouseCoopers, which Fiorina tried but failed to acquire in 2000. But there is another way. Call it the Gillette strategy. Just as that company virtually gives away razors to make a killing on blades, HP could opt to gather more strength in the PC and low-end server businesses in order to sell more service contracts as part of the package. "I certainly don't see PCs as white elephants," she says. "Getting on the desktop brings you a lot of opportunity...