International -- Readers Report
Carly's Last Stand? Fans and Critics Weigh in
Merging two firms for more revenue, profits, and shareholder value is risky--and, according to recent research, only about 15% successful ("Carly's last stand?" Cover Story, Dec. 24). But you have to differentiate. The benefits of merging two farms for greater agricultural output is a given. The benefits of merging two composers for more valuable music is probably nil. So much for McKinsey & Co.'s argument: Because ExxonMobil reached its objectives, so eventually will Hewlett-Packard Co. and Compaq Computer Corp. Did integrating DEC and Compaq reach its goal?
When a company must lower its prices by 25% every year or improve its performance by the same amount, you do not have time for quarrels. Put two cultures together and you have the problem of telling two composers to unite and generate better music. HP should drop the merger idea with Compaq. There is little reason for it, and the risks are well above the iffy benefits for the millions and millions of satisfied HP customers.
Peter Niklaus
Merlischachen, Switzerland
So now, the dubious leader of a venerable engineering company (HP), who can't get traction inside, tries to take over a shaky operation in computer building (Compaq) that has had idle dreams of getting into the consulting business (DEC's client base would have been a start), but has failed to capitalize on original technology whenever it had the chance (selling the Alpha chip). Since when is this a recipe for anything?
Rogier van Vlissingen
Riverdale, N.Y.
Walter Hewlett and company don't realize that HP has only two options: Merge with Compaq in a huge entrepreneurial risk and go after large corporate customers. (IBM makes $8 billion a year in this market, so there is room for a competitor.) Or, remain stand-alone and sell everything except the printer business. (Since today's stock price covers only printers anyway, this divestiture should improve the stock performance and provide steady growth.)
The choice is a question of temperament. Unfortunately, Walter Hewlett and the other opposing stockholders hired Fiorina because they were attracted by high growth, but they forgot the risk that goes along with it. It seems that William Hewlett and David Packard did their families and employees a disservice when they shielded them from the risks.
Ray Salemi
Framingham, Mass.
If creativity and wisdom are somehow hard-wired into our genetic code, they seem to be generation-skipping characteristics--at least in the Hewlett and Packard families. If the two co-founders were alive, my guess is that they would be raising a toast to CEO Carleton Fiorina right about now, saying: "Vision and leadership still count. Carly, press on!"
Jeff Anthony
Yorktown, Va.
How to Audit the Auditors
"Let auditors be auditors" (Editorials, Dec. 24) recommends that the U.S. Securities & Exchange Commission consider requiring companies to change their auditors every three or four years. Brazil's securities commission, Comissao de Valores Mobiliários (CVM), published a similar requirement in 1999 and has been facing strong opposition in courts from Big Five accounting firms ever since. Although Brazil's capital markets are tiny compared with America's, Brazil faces similar challenges.
During the mid-1990s, two of the largest Brazilian banks went into Central Bank intervention after serious accounting issues that had been going on for some time were uncovered. The CVM published Instruction 308 on May 14, 1999, requiring that companies change their auditors every five years, in addition to separating auditing from consulting services. The accounting companies' union has challenged us in courts, and until today we have not been able to apply this instruction. In a separate action, one of the Big Five has also challenged us in court. I wonder what the Big Five will do if the SEC approves a similar instruction.
José Luiz Osorio
Chairman
Comissão de Valores Mobiliários
Rio de Janeiro
Auditor Arthur Andersen violated its legal responsibilities and its professional code of ethics. At a minimum, the partners and other CPAs involved on this account should be punished by whichever professional society governs their location--followed by their hasty and public exit from the firm. Only by dealing with this sort of incompetence or dishonesty will Andersen have a chance to be viewed as credible. The other large auditing firms should take a hard look at their behavior, as well. I suspect they are equally tainted, but undiscovered.
Michael Fenton
Morris Plains, N.J.
Hold the Ratings Agencies to a Higher Standard
"The fall of Enron" (Cover Story, Dec. 17) stated that Enron's maze of partnerships made it very difficult for rating firms such as Standard & Poor's to verify many of its debts. You even went further and stated that, even now, nobody really knows what other off-balance sheet liabilities exist. If that is the case, then what about other companies that have similar assets and potential liabilities off their books? What ratings should such firms be given?
It is high time that rating firms such as S&P informed their clients of such off-balance sheet items--so that nasty accounting malpractices such as those that overtook Enron do not take bankers, investors, employees, and creditors by surprise.
Clayton Othieno
Nairobi, Kenya
What France Can Teach Japan about Work-Sharing
Before writing off work-sharing as an important contributor to improving the Japanese economy, it might be a good idea to look at the recent performances of the French economy, which has moved in the direction of work-sharing, and the German economy, which has not ("Japan: Work-sharing will prolong the pain," Asian Business, Dec. 24).
The current year-over-year status of the French economy has gross domestic product up 2.0%, while Germany's GDP is up by only 0.3%. French unemployment is down from 9.2% a year ago to 8.9%, while German unemployment is up from 9.3% to 9.5%.
Note that work-sharing in France is designed to maintain worker incomes, a feature not associated with work-sharing as it is said to be under discussion in Japan. The Japanese government might also be well-advised to promise its citizens that older folks will never be compelled to go hungry or lose their homes. Such a promise can very honorably be made by a country that is still producing much more than it consumes or saves internally. Confidence in the future is always a key factor in discretionary spending.
Jetson E. Lincoln
Montclair, N.J.
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