A controversial merger and the 'HP Way'

When the time comes for Hewlett-Packard shareholders to vote on the largest merger in the history of the computer industry, Judy Anderson won't hesitate for a moment. Her 500 shares aren't much, she knows, but she'll pledge them all against the effort to join with Compaq Computer.

It's not that the longtime Hewlett-Packard employee dislikes Compaq - or even thinks that the move makes bad financial sense. Rather, she opposes any such merger solely because it's not the "HP Way."

The blockbuster deal is already in peril: Wall Street remains skeptical, and at the beginning of this month, the heirs of founders Dave Packard and Bill Hewlett had pledged their 18 percent of HP stock against the merger.

For many HP employees and shareholders like Ms. Anderson, though, the vote is about much more than the bottom line: It's about the soul of one of America's most storied businesses - the original Silicon Valley start-up.

Laid out by founders who have since been revered as the Lewis and Clark of Silicon Valley, the "HP Way" embraces a love of technology, a bond with the community, and a deep respect for employees. Much of the unanimity, however, ends there, and the Compaq merger has become the touchstone for a debate over what comes next.

Some, including CEO Carleton "Carly" Fiorina, want to stay true to the founders' vision by innovating and reshaping a company that lost its direction in the Internet Age.

HP ceded business during the last decade to companies such as IBM and Dell that found profitable niches in the tech marketplace. Now, HP has to catch up to stay at the vanguard of innovation, and tough decisions are a part of that process, Ms. Fiorina says.

But others look at the estimated 15,000 jobs that would be lost in the merger and wonder whether the nurturing workplace pioneered by Packard and Hewlett - one in which employees voluntarily took unpaid days off so the company could avoid layoffs - will be destroyed.

The conflict is not uncommon in the business world. Companies ranging from Digital Computers to Ford Motor Co. have been torn between the traditions that served well in the past and the need to adjust to a changing marketplace. But widespread concerns that HP is needlessly undermining its unique corporate culture - for a dubious deal - could scuttle the tech world's most ambitious merger to date, and oust America's most powerful woman executive.

"Someone looking to criticize [HP's direction] would find this a particularly opportune moment," says Haim Mendelson, a professor at Sanford University's Graduate School of Business here.

There has been no shortage of critics. In Silicon Valley, Hewlett-Packard is more than just a busines. It is a cultural icon, and any attempt to tinker with the vision laid out by its founders is akin to revising the Bill of Rights.

Decades before Apple, before Microsoft, before the dotcoms, Hewlett-Packard was two guys in a garage tinkering with technology and laying out a vision for the future. The company they founded would become the symbol of how Silicon Valley does business, with a fun and relaxed atmosphere, employees working in collaborative teams rather than under centralized managers, and executives walking freely through the cubicles to talk about the company they loved.

It was progressive. It was egalitarian. And it eventually became the pioneer of many aspects of the modern American workplace.

"Hewlett-Packard is very iconic. It's the kind of company that represents the best of what Silicon Valley can be," says Jan English-Lueck, an anthropologist at San Jose State University.

Now, the perception that this ethos is changing has turned the Compaq deal into something of a Waterloo for those who disagree with HP's direction under Fiorina.

The grumblings date back to Sept. 4, well before the merger was announced. From the start, Fiorina was controversial simply because she was brought in from Lucent Technologies - a departure from the long-held policy of promoting from within. Since then, she has been derided as more aloof than previous executives and more cutthroat than Packard or Hewlett ever would have been.

Packard's oldest son, for one, opposes the Fiorina-brokered merger in part because the massive layoffs that would ensue goes against the company's emphasis on loyalty. Indeed, statistics show that while turnover was near 30 percent among tech firms in the Valley during the late 1990s, it never rose above 5 percent at HP.

"Laying off 15,000 employees is not my idea of HP," agrees Ms. Anderson, who left HP recently after nearly 30 years with the company, but still has ties to HP and asked that her real name not be used. "If that merger goes through, the 'HP Way' is dead."

Others, though, take a more practical view of what lies ahead. "I never assumed that the 'HP Way' meant long-term employment," says Betty Sproule, an engineer who has worked here for 15 years. "To use the 'HP Way' as an entitlement is to hide behind an excuse."

When shareholders vote on the Compaq merger sometime in February, she says she'll vote yes. But according to a recent employee poll by HP itself, she appears to be in the minority. Some 64 percent say they "don't see the benefits" of buying Compaq, or they "need more convincing."

Ms. Sproule worries that some of her colleagues maintain an overly romantic view of the past. She hopes they will look at the merger and the future through realistic eyes. "I respect and admire Dave Packard and Bill Hewlett more than I can say, but the myth that they were superhuman is destructive," she says. One shouldn't "compare today's leaders with those of the past."