Compaq CEO ponders a future without HP

The Associated Press
Wednesday December 12, 2001

HOUSTON — The head of Compaq Computer Corp. told employees that the company is exploring the company’s future prospects should its $24 billion merger with Hewlett-Packard Co. fall through. 

Last weekend Michael D. Capellas, chief executive of Compaq, e-mailed a memo to employees explaining that the Houston-based computer maker must “maintain a pragmatic view of our business and a clear focus on the future” given opposition by the Hewlett and Packard families to the merger. 

Capellas said in the memo that Compaq would focus on large corporate customers with packages of software, hardware and related services “whether we are part of the new HP or a stand-alone company.” 

He also reiterated his support of the merger. 

“Although we are disappointed, we continue to believe that the merger is in the best interests of shareholders, employees, customers and partners,” Capellas wrote. 

The Hewlett and Packard families, which control 18 percent of HP stock, have both said they oppose the deal. The David and Lucile Packard Foundation, which holds 10.4 percent of HP shares, said Friday its interests would be better served without the deal. 

HP and Compaq say they will continue to talk up the benefits of the deal in hopes of ultimately winning shareholder support. If either company were to pull out of the deal, it would owe the other $675 million. 

Analysts have said for the deal to win approval at this point, two-thirds of HP’s institutional investors would have to vote yes. 

HP shares were down 99 cents, or 4 percent to $22.01 in trading on the New York Stock Exchange, where Compaq shares were off 21 cents, or 2 percent to $9.49.