From Yahoo News ~ Wednesday December 12, 2002, 09:06 AM EST
The Man Behind the Curtain in the Hewlett-Compaq Merger
By STEVE LOHR The New York Times
In the face of the rejection of a Hewlett-Compaq merger, board member Richard A. Hackborn is probably the best person to lend credibility to the plan.
With its merger with Compaq in serious danger, Hewlett-Packard will increasingly turn to a leading member of its board to sell the plan to large shareholders, whose votes will make or break the deal.
The board member, Richard A. Hackborn, a 33-year Hewlett veteran, is unknown outside the industry. But in the face of the rejection of the merger by the heirs of the Hewlett-Packard founders, he is probably the best person to lend credibility to the plan.
Mr. Hackborn, 64, tall and white-haired, pushed to bring the company’s chief executive, Carleton S. Fiorina, in two years ago from Lucent Technologies. He has been her adviser and mentor. To ease her transition and coach her, Mr. Hackborn took the chairman’s post for several months, before handing it off to her. He is the guiding hand behind a strategic rethinking at Hewlett-Packard that began even before Ms. Fiorina arrived, and that eventually led to the Compaq Computer bid.
Now, both companies must convince investors and the industry that the combination is the best way forward a risk, yes, but a carefully calculated one that is well worth taking.
Mr. Hackborn began his career at the company in the HP Labs as an engineer, and he was soon heading research-and-development teams. In 1977, seeking new challenges, he moved to Boise, Idaho, and he proceeded to build the Hewlett-Packard printer business, the corporate crown jewel.
He was known for contributing thoughtful, detailed strategy papers on various subjects from Boise. “I did it when I was asked, and sometimes when I wasn’t,” Mr. Hackborn observed during an interview last week at his large, ranch home in Boise, with a waterfall and a pond on a wooded three acres.
Three times over the years, William Hewlett and David Packard, the founders, came to his home, urging him to return to the Silicon Valley headquarters. The last offer was to become chief executive.
Yet Mr. Hackborn and his wife, Sondra, a native Californian who moved north reluctantly at first, had grown deeply attached to the natural beauty of Idaho and their local network of friends. He turned down the offer.
Mr. Hackborn retired as an executive vice president of Hewlett-Packard at 56. Shortly afterward, he got a call from Bill Gates, asking him to join the Microsoft board, which he did until last year when his work on Hewlett-Packard matters became increasingly time consuming.
Throughout the industry, Mr. Hackborn is highly regarded as both a skilled technologist and a shrewd strategist. And he commands respect in Silicon Valley in a way that Ms. Fiorina, an outsider who is seen as a general manager instead of someone who deeply understands technology, cannot.
“I’m not a big fan of Carly’s,” said one venture capitalist, who worked at Hewlett-Packard for years. “But if Dick Hackborn really supports the deal, you have to take it seriously.”
In 1998, in the midst of the technology boom, Mr. Hackborn said he became “really concerned” about what he saw as the festering troubles at Hewlett-Packard. The personal computer business trailed behind more efficient rivals, notably Dell Computer, and was losing money. The company’s business in larger computers, mostly data-serving machines running the Unix operating system, was not making much money, even when industry demand was surging. And Hewlett-Packard was not really embracing the Internet.
The company, Mr. Hackborn said, had become sluggish at a time when speed was essential. The first step was to bring in Ms. Fiorina, someone from outside the traditional culture to shake things up. “We needed a much greater push for change at the top, with more urgency,” he said. “We needed someone who could drive change and could articulate it.”
He credits her with learning at “lightning speed” a wealth of detail about the industry, customers and products. Not every step has been sure-footed, but Mr. Hackborn said he and the board backed Ms. Fiorina wholeheartedly. “She’s going through a massive learning experience,” he said. “We knew it was going to be a learning experience.”
The Hewlett-Packard board first discussed the possibility of acquiring Compaq at the end of 1999, but serious merger talks did not begin until last June. “None of us was convinced that Compaq was the exact right answer at the start,” Mr. Hackborn conceded.
The deal’s opponents contend that those initial reservations were the right instinct, and that the Compaq merger is a mistake. They say that the merger would reduce the size and profitability of Hewlett-Packard’s most valuable franchise the printer business in the combined company, while increasing the shareholders’ bet on the troubled personal computer business. And the critics point out that big mergers in the fast-moving computer business nearly always fail, as the two enterprises are distracted with internal matters as markets and rivals move ahead.
Mr. Hackborn, however, said he had come to believe firmly that the Compaq merger offered opportunities that Hewlett-Packard should seize now as the industry is consolidating in a slump.
First, combining with Compaq will help fix the PC business, giving Hewlett greater size and efficiency. The Dell model of selling PC’s directly instead of through resellers and other middlemen is the way to go, he said. “Compaq is moving there rapidly,” Mr. Hackborn said. “It’s not Dell yet, but it’s a lot further along than H.P.”
Second, he believes that there is a “huge opportunity” for the combined company in the future generation of data-serving computers, based on the new Itanium chip, jointly developed by Intel and Hewlett-Packard. Server computers using the high-performance Itanium chips will start to ship in large numbers by the middle of next year. They promise to bring the lower-cost economics of the PC world into corporate data centers, a lucrative stronghold for mainframes and large Unix machines, where I.B.M. and Sun Microsystems are leaders.
Because it helped develop the Itanium technology, Hewlett-Packard will be given certain advantages over other computer makers. It gets a head start of several months in bringing its Itanium-based machines to market, for example. The largest market for Itanium chips is expected to be on machines running Microsoft’s Windows NT operating system, though Itanium technology will also work well with Linux, a variant of the Unix operating system that is distributed free, and Hewlett-Packard’s flavor of Unix.
Working closely with Intel and Microsoft, Mr. Hackborn says, Hewlett-Packard can be the leading designer of Itanium-based server computers and supplier of related hardware and services.
As such, Hewlett-Packard sees its future as being the lower-cost alternative to I.B.M. and Sun Microsystems in the lucrative market of supplying the data centers of large corporations. And Compaq is a leading maker of PC-based servers and data storage systems and has a large corporate customer base all of which, Mr. Hackborn insists, should accelerate that strategy.
“This puts the new H.P. on a comparable footing with Intel and Microsoft,” he said.
The opponents of the deal, Mr. Hackborn argues, have no plan for Hewlett-Packard’s future. But should they prevail, he suggests, it will be a future without him.
“If the merger gets turned down by shareholders,” he said, “they will have to get a board and a management to fix the PC business and these other problems.”
Did you pay attention to his career and work life?
Did you pay attention to how things things actually worked out for H.P. vs. Hackborn's expectations?
What did you learn from this?
How will Hackborn be remembered?