If HP Swallows Compaq, Is It Still HP?

In 1949, Hewlett-Packard co-founder David Packard attended a gathering of business leaders. “I suggested at the meeting that management people had a responsibility beyond that of making a profit for their stockholders. I said that we … had a responsibility to our employees to recognize their dignity as human beings, and to assure that they should share in the success which their work made possible. I pointed out, also, that we had a responsibility to our customers, and to the community at large, as well. I was surprised and shocked that not a single person at that meeting agreed with me.”

This reminiscence is quoted by James C. Collins and Jerry I. Porras in their book Built To Last: Successful Habits of Visionary Companies. The spirit that Packard articulates there is a good part of what made the company founded by him and William Hewlett one of the most celebrated tech companies ever. There is something close to mythology in the way the firm’s story is told over and over, from the garage (an actual garage!) where it was born in 1939 through the creation of a corporate culture so distinct it came simply to be known as “the HP way.” The aspect of this that so many find attractive is the simple idea that there is more to a business than the bottom line; that there is, or can be, a greater purpose. What Collins and Porras liked about this was that Hewlett and Packard had thoughtful answers to the question of why their company existed—answers that transcend the pursuit of profit and are what ultimately made the firm a (profitable) success.

So, with the news that Hewlett-Packard now plans to swallow up a company as big as Compaq, it’s reasonable to wonder whether “the HP way”—or whatever intangible things seemed to make the company special—can survive. The new company will be called Hewlett-Packard, but will it really be Hewlett-Packard?

The firm famously reached outside to land its current CEO, Carly Fiorina, whose arrival has coincided with a tough time for the tech business and whose tenure has won decidedly mixed reviews. Partly because it’s far too early to judge her actual effectiveness, there’s something jarring about her decision to merge with Compaq. There’s something about the plan that smacks of an attempt to solve everything in one bold stroke. If the deal goes through, it will take a long time to evaluate whether and how it makes sense—which is always the case with bold strokes.

The early round of chatter and analysis is rather insistently focused on management’s responsibility to make a profit for shareholders. In fact, it sounds almost like a direct rebuke to Packard’s musings above. It’s no surprise that a figure that seems to have caught everyone’s attention is the promise to save $2.5 billion in the next several years. “This has got to be an epitome of cost cutting,” one analyst told Reuters. “They can’t afford the luxury of being nice.”

Maybe so. Certainly there isn’t an immediately obvious story to be told about a greater purpose in the merger or even about growth opportunities the two companies would have when merged that they might not have enjoyed separately; it’s true that the new firm would be the market leader in PCs, for instance, but right at the moment that’s not a pitch that many people are going to be excited about. As it turns out, HWP shares have been punched down more than $3 (or almost 15 percent) today.

But that’s a short-term issue. The long-term question is whether the HP that was once an inspiration to many can survive—or whether, in an era when pleasing the shareholders is all that matters, that HP has already ceased to exist.