Features

SAN JOSE — A Hewlett-Packard Co. director who heads a $769 billion investment company said Wednesday she was at first very skeptical that HP would be able to handle the complex absorption of Compaq Computer Corp., but is now convinced HP is up to the task. 

Patricia Dunn, chief executive of Barclays Global Investors, said she always thought buying Compaq would strengthen HP’s technology products for businesses, but worried whether HP could come up with an integration plan to “capture the prize that was clearly there.” 

She became sold after seeing how the 900 HP and Compaq employees planning the integration have studied what went wrong in failed mergers, and made clear decisions on which products and brands will survive and how the new HP’s sales and service organizations will work if the deal is approved. 

“It’s been: ’Make tough decisions, make it clear which way we’re going, and then get on with it,”’ Dunn said in an interview. “I think they can pull it off.” 

However, for the $22 billion deal to get to that point, it will require the approval of HP shareholders on Tuesday. Most analysts believe the race is too close to call. 

More than 21 percent of HP stock is publicly lined up against the deal, including Bank of America’s investment arm, which said Wednesday it will vote the 6.4 million HP shares it controls against the deal. 

About 8 percent of HP stock appears to be in the company’s camp, including the 3.1 percent held by Barclays. That firm put its vote in the hands of Institutional Shareholder Services because of Dunn’s HP connection. ISS blessed the deal last week. 

HP and the deal’s leading opponent, Walter Hewlett, both believe they will find sufficient support to win the proxy fight among the shareholders who have yet to announce their positions. 

“It’s unprecedented in a proxy contest for investors to be announcing their vote,” HP spokeswoman Rebeca Robboy said. “Remember, we have 900,000 shareowners. You’ve heard now from a handful, many with ties to the opposition. This is not a barometer of how all investors feel.” 

Dunn said she also has confidence in HP’s ability to combine with Compaq because its management learned a lot from the 1999 spin-off of Agilent Technologies Inc. out of HP’s scientific-equipment division. She said that process of subtraction was just as difficult as adding another company. 

Echoing comments made by other directors, Dunn said she would have a difficult decision about whether to remain with HP if the deal is rejected. 

She also urged investors to trust that the board has spent a great deal of time making certain that buying Compaq is HP’s best strategic option. 

“I believe in shareholder democracy,” she said. “But I also know that it’s very difficult for investors to replicate the process a board goes through in coming to a decision like this. I believe in this decision.” 

HP shares fell 45 cents, more than 2 percent, to $20.11 in trading Wednesday on the New York Stock Exchange. Shares of Houston-based Compaq lost 12 cents, 1 percent, to $11. 

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On the Net: 

Pro-merger site: http://www.votethehpway.com 

Opposition site: http://www.votenohpcompaq.com