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Updated Friday, September 30, 2011 5:53 pm TWN, By Jordan Robertson , AP

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HP hires Goldman to tame activists: report

SAN FRANCISCO--Hewlett-Packard (HP) is beefing up its defenses in an effort to fend off activist investors who, with enough shares, could demand drastic changes at the company, according to a published report.

The Wall Street Journal reported Wednesday on its website that Hewlett-Packard Co. has hired Goldman Sachs to help formulate a strategy for guarding against shareholder activism. The Journal cited people “familiar with the matter” who were not named in the report.

Asked about the report, an HP spokesman said only that the company “has long-term relationships with a large number of investment banks.”

With the Palo Alto, California-based company's market value down some US$60 billion since former CEO Mark Hurd resigned under pressure last year, HP is under intense pressure to engineer a turnaround.

Last week, HP fired Hurd's replacement, Leo Apotheker, after less than a year on the job, citing poor communication. Apotheker was replaced by former eBay Inc. CEO Meg Whitman, who got a mixed reaction from Wall Street.

HP's depressed stock price makes it a target for activists, who could demand changes up to and including the breakup of the company. HP is already trying to sell or spin off its PC division, but the company has also indicated it may keep the business.

If “HP were looking for more ways to anger investors, this will fit the bill,” Steve Diamond, an associate professor at the Santa Clara University School of Law, said of HP's reported hiring of Goldman.

The culture of Silicon Valley has generally frowned upon aggressive attempts to thwart shareholder actions because of a widely held view that “a vibrant market for corporate control is a healthy disciplinary device on ineffective boards and management,” said Diamond, who specializes in corporate law.

Also Wednesday, Oracle Corp., an HP rival and partner whose outspoken CEO Larry Ellison has publicly mocked the HP board's latest decisions, tweaked HP some more with a pointedly worded news release.

Oracle disputed suggestions from Mike Lynch, the CEO of Autonomy, a company HP is buying for US$10 billion, that Autonomy hadn't tried to sell itself to Oracle. Oracle's Ellison said last week that Autonomy was shopped to Oracle and that Oracle passed. The price HP is paying is “absurdly high,” Ellison said. Lynch appeared to refute that in media interviews, suggesting that Autonomy hadn't been directly shopped to Oracle, but may have been presented as a possible takeover candidate by investment bankers.

In the news release Wednesday, Oracle said that Lynch and his banker met personally with Oracle executives on April 1 to discuss a possible sale, and that Oracle still has the PowerPoint slides to prove it.

Oracle has been a thorn in HP's side ever since Oracle decided to buy server maker Sun Microsystems last year for US$7.3 billion and Ellison decided to hire his tennis buddy Hurd to serve as an Oracle co-president. HP is a leading server maker, and Oracle's acquisition of Sun puts the longtime partners into direct competition with each other.

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