2010

Hewlett-Packard Co. closed its $13.9 billion deal for Electronic Data Systems Corp. Aug. 26, suggesting, as Corporate Dealmaker's Suzanne Stevens noted, both companies are strongly behind it, given the short four-month period from announcement to completed deal.

Three months after Hewlett-Packard Co. settled a civil suit brought by the California Attorney General stemming from an investigation into the company's boardroom leak scandal, charges against the company's former chairman Patricia Dunn and three other defendants were dropped March 14.

Alongside Dunn, who resigned in connection with the matter, HP's former senior counsel Kevin Hunsaker, and private detectives Matthew DePante and Ronald DeLia will have charges dropped in exchange for 96 hours of community service.

Shortly after the news emerged from the Santa Clara County Superior Court, HP investors voted down changes to the company's bylaws that would have made it easier for shareholders with a stake of 3% or more eligible to nominate directors to HP's board. In February, the California Public Employees' Retirement System and the California State Teachers Retirement System, which together hold $1.2 billion in the tech giant's stock, began lobbying publicly for the proposal. CalPERS put a similar proposal in front of UnitedHealth Group Inc., which is itself trying to recover from a stock options backdating scandal. For more on the backdating options story, see a related Dealwatch.

Hewlett-Packard Co. said Dec. 7 it would pay a modest $14.5 million to settle a civil suit brought by the California Attorney General stemming from an investigation into the company's boardroom leak scandal--just weeks after reporting its net income for the fourth quarter leapt to $1.7 billion, or 325% beyond the $400 million it earned in the same period a year earlier.

HP wasn't found liable, but will pay $650,000 in statutory damages, $350,000 to reimburse the AG's office for investigation-related costs, and agreed to set in place some internal controls. The bulk of the settlement payment, however, $13.5 million, will go toward creating a privacy and piracy fund for the state of California.

But, as The Deal's Scott Stuart points out, HP's $52 per share takeover of Mercury is more than just a $4.5 billion union, it marries two of the biggest scandals of late--HP's woes and an SEC investigation into Mercury for backdating options.

BRINGING IT TO LIGHT

During a September congressional hearing connected to the leak investigation, Dunn denied knowing the pretexting tactics employed by investigators she sanctioned were improper or illegal, she also expressed the belief that some of the methods involved in HP's probe are employed by other companies, as well. At the time, Florida Republican Rep. Cliff Stearns said the HP affair reminded him of Enron, according to a Washington Post article.

Earlier that day, HP's general counsel Ann Baskins resigned after 24 years with the company. The fourth to leave the company in connection with the investigation, she followed Dunn, internal investigator Anthony Gentilucci and Hunsaker out the door.

On Tuesday, Sept. 12, Dunn stepped down from the HP board, with CEO Mark Hurd replacing her as chairman, effectively drawing more media attention than Bristol-Myers Squibb Co.'s ousting of CEO Peter Dolan and general counsel Richard Willard after, most notably, a $2.5 billion accounting scandal. Days later, Dunn was inducted into the Bay Area Business Hall of Fame.

PROCEEDING WITH CAUTION

After IBM Corp.'s $1.3 billion purchase of security software maker Internet Security Systems Inc. in August, analysts suggested HP needed to boost its own holdings with a similar play.

The buzz comes just months after HP's chief financial officer Robert Wayman told The Deal it might employ some of its $14 billion cash on hand for hefty acquisitions. But since coming on board at HP last year, Hurd had been slowly making small-ticket acquisitions to fill out the company's portfolio. He has steered the company through several deals:

• In August 2005, HP grabbed Israeli printing technology maker Scitex Corp. Ltd. for $230 million.
• The next month, the company paid $425 million for Peregrine Systems Inc., which makes software aimed at several of the IT functions companies frequently want to automate, as well as storage area network management software maker ApplQ Inc. for undisclosed terms.
• In October 2005, HP took RLX Technologies Inc. for undisclosed terms.
• The next month , HP grabbed identity management software company Trustgenix Inc.
• Rounding out 2005, HP took German online photo site Bilderservice.de GmbH, just months after taking U.S. photo sharing company Snapfish.
• HP again went small in December 2006 with a deal for Chicago data warehousing technology maker Knightsbridge Solutions Holdings Corp. for undisclosed terms, and despite Hurd's comments the company should not be expected to make huge deals, analysts have not ruled out the possibility.