HP And Dell Feel The Heat From Shareholders

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Date: Thursday March 7, 2013 10:57:36 am
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    HP And Dell Feel The Heat From Shareholders

    Hewlett-Packard Co. and Dell Inc. got a lift from the big Dow surge on Tuesday — while both tech giants were also dealing with growing unrest from their shareholders that could have major implications in the weeks ahead.

    Michael Dell

    H-P HPQ +0.02% benefited the most from the Dow’s strong upswing, with its shares jumping more than 2% to $20.40 by late afternoon. And it leaves open the question whether investors were giving a thumbs-up to two shareholder advisory firms that came out against certain members of H-P’s board of directors.

    Glass Lewis is advising investors to vote against four of H-P current directors — including Silicon Valley venture capital star Marc Andreessen — citing in part their roles in some of the company’s botched acquisitions and subsequent write-downs, such as services giant EDS and the software firm Autonomy.

    “The company’s dismal stock performance during a period of massive restructurings coupled with revelations of an $8.8 billion impairment charge on the ill-fated 2011 acquisition of Autonomy Plc further call into question the oversight of the company’s longer-serving directors, all of whom maintain leadership positions on the company’s key committees,” Glass Lewis said in its advisory note, that was dated March 1 but became public on Tuesday. It advised voting against Andreessen as well as directors John Hammergren, Rajiv Gupta and G. Kennedy Thompson.

    Glass Lewis also recommended voting against ratifying Ernst & Young as the company’s auditor, noting that the company’s oversight was “poor” as evidenced in “multiple huge writedowns and high fees for non-audit work.”

    Late Monday, ISS Proxy Advisory Services came out with its own scathing commentary of H-P’s year in review, and advised voting against Hammergren, Thompson and H-P chairman Ray Lane. “Votes against these three directors are warranted for failure to apply sufficient oversight of the due diligence process in connection with the Autonomy acquisition,” ISS said in its advisory report to shareholders.

    Dell  DELL -0.52% is in a different boat, as the PC maker is trying to convince shareholders to accept a privatization bid from founder Michael Dell and Silver Lake.

    But some large  shareholders are opposing that deal, balking at what they consider to be a low price tag. On Tuesday, Southeastern Asset Management Inc. filed a letter with the SEC that it sent to the Dell board (Southeastern is Dell’s largest institutional shareholder).

    In the letter, Southeastern said it was “reiterating its opposition to the proposed go-private transaction.” Southeastern, headed up by investor O. Mason Hawkins, believes Dell’s management, including Michael Dell, and the board have placed its own interests above shareholders.  Southeastern is also seeking to inspect some of Dell’s books and records. Dell shares were up a fraction to $14.05 — above the $13.65 deal price proposed by the deal.

    The two tech giants are under fire as they each take their own approach to restructuring during seismic shifts in the computer business. It should make for an eventful and possibly fiery annual meeting season; H-P’s next shareholder gathering takes place on March 20.

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