HP struggles internally with director’s vote on Compaq deal

Tuesday January 08, 2002

By Brian Bergstein 

The Associated Press 


SAN JOSE — The infighting at Hewlett-Packard Co. resumed Monday with the board accusing dissident director Walter Hewlett of misrepresenting his reasons for voting for — and then publicly opposing — the acquisition of Compaq Computer Corp. 

In a letter filed with the Securities and Exchange Commission, Chairwoman Carly Fiorina and seven other HP directors told Hewlett they were “particularly disturbed” by his recent contention he originally voted for the $24.7 billion deal only to help HP secure the best possible price. 

Hewlett said in a Dec. 27 SEC filing that he voiced concerns about the deal at several board meetings, but that an HP lawyer told him the stock-exchange ratio in the deal would have to be reworked if it did not have the unanimous support of the board. 

Hewlett said he was told he could approve the deal as a board member and vote against it as a shareholder, and made his intentions known even before the deal was announced Sept. 3. 

The new letter from the other directors said that “to suggest that you were pressured into approving the merger is inaccurate and inappropriate.” 

“You were never advised that HP would be forced to pay a higher price for Compaq if you voted against the merger,” the letter said. 

The letter also said the board and management had no idea Hewlett would vote his personal shares against the deal until a half-hour before he announced that publicly on Nov. 6. 

However, at the time, HP management said it was not surprised by Hewlett’s announcement. An HP spokesman did not return a call seeking comment. 

Hewlett opposes the HP-Compaq deal because he believes it is too risky, would lessen the contribution of HP’s profitable printing division and increase the company’s reliance on personal computers without effectively improving its services business. 

HP and Compaq are awaiting regulatory approval before setting a date for a shareholder vote, but Hewlett already is lobbying other investors to oppose the deal. His opposition camp includes Hewlett and Packard family interests with 18 percent of HP shares. 

The companies believe merging will make them a dominant player in key technology markets, improve their business-computing products and services and save them $2.5 billion a year. 

“We collectively concluded that the merger represented by far the single best strategic alternative for the company,” Monday’s letter said. “Quite frankly Walter, you have never offered an alternative strategy that we all haven’t debated and rejected.” 

The letter also criticized Hewlett for missing board meetings in which the merger was discussed. A Hewlett spokesman was unavailable for comment. 

Shares of Palo Alto-based HP fell 14 cents, less than 1 percent, to $23.02 on the New York Stock Exchange on Monday. Compaq gained 29 cents, or 2.6 percent, to $11.68, after the Houston-based company said fourth-quarter results will be better than previously expected. 


On the Net: