In a recent report on Hewlett-Packard Company (NYSE:HPQ), I discussed the falling sales of the printer and PC giant. The discussion was focused on the importance of the impending investors meeting and the move to replace the current management. Hewlett-Packard Company (NYSE:HPQ)’s existing management has been responsible for approving some horribly misguided acquisitions and squandering shareholder wealth. The board has once again escaped by a narrow margin and continues to call the shots on behalf of HP’s shareholders.
The company has also increased its dividend by 10%, which is way below what investors would have wanted. It made more sense for HP to return as much as possible to shareholders rather than waste the capital on useless acquisitions. At these levels the company dividend seems sustainable in the short run, but long term weaknesses in the PC and Printer segment are a threat to Hewlett-Packard Company (NYSE:HPQ)’s operating cash flows. Microsoft Corporation (NASDAQ:MSFT) and International Business Machines Corp. (NYSE:IBM) have lower OCF yields as compared to HP, but better long term prospects due to strong enterprise presence and well diversified business models.
Proxy Fight
The market was expecting that some major bad decisions by the current board would result in stern action by the shareholders. The move to replace current directors was initially made by the proxy advisory firm ISS. The firm had recommended that shareholders of HP should consider replacing the Chairman Ray Lane and two directors name G. Kennedy Thompson and John Hammergren. The recommendation was made due to the inability of the three individuals to stop the company from making a number of misguided acquisitions, including Autonomy.
The sacking was also supported by Glass Lewis and New Yorks’s public pension fund. Glass Lewis had also added Rajiv Gupta and Marc Andreessen to the list of individuals they wanted removed from the HP board. The company has been a long time critic of these individuals for their role in the election of the Hewlett-Packard Company (NYSE:HPQ)’s previous CEO, Leo Apotheker. The NY pension fund doesn’t hold a lot of sway in terms of share holding, but was being considered a major influence on the vote. The fund holds approximately 5.5 million shares of HP, which are a worth a total of approximately $130 million.
The Vote
Despite market expectations of a management change, the Hewlett-Packard Company (NYSE:HPQ)’s board members have managed to hold on to their seats for the time being. The vote still showed the shareholder displeasure of its importance as a number of major directors saw mammoth declines in their shareholder popularity. Ray Lane was once again elected as the chairman with just 58.88% of the vote, as compared to his 96% sweep last term. Hammergren saw a mammoth decline in his popularity from 81% last year to only 53.91% this time around. Thompson and Andreessen also saw a major decline in their popularity after being singled out by proxy advisory firms. Thompson’s vote decline from 81.2% to only 55.15%, and Andreessen’s shareholder trust was reduced to 69.77% from 82% last year. Rajiv Gupta and the current CEO Meg Whitman are still in the shareholder’s good books and were voted in with 80.25% and 98%, respectively.
