Banc One's Salopek Comments on Vote to Support Hewlett-Packard
By Cesca Antonelli
Columbus, Ohio, March 14 (Bloomberg) -- Banc One Investment Advisors money manager Steve Salopek comments on the company's decision to support Hewlett-Packard Co.'s planned $21 billion purchase of Compaq Computer Corp.
Banc One Investment Advisors is a unit of Bank One Corp. and owns 0.26 percent of Hewlett-Packard's shares.
On the reasons for the decision:
``When we looked at this, basically the alternatives were H-P merged or a stand-alone company. Obviously, there are concerns about both. Although there is risk in a merger, over the longer term that is the better option. You're looking at least six to 12 months of management turmoil, possibly turmoil on the board. Call that `transition risk,' and then you look at Walter Hewlett's arguments for alternatives. Those alternatives have costs, and when we applied costs to those alternatives, it results in pretty substantial dilution.''
``They have under-invested in intellectual property for basically the last 10 years, and that is a long workout. They have to recreate themselves all the time. We like to see 10 to 15 percent of sales (spent on R&D), and H-P is running in the single digits. They would have to double R&D spending. The payback on that is a long time.''
``Just looking at earnings growth, at least there is the opportunity for consolidation as well as rationalization of costs. H-P is actually gaining intellectual property (in server computers and storage).''
On the reason for making the decision public:
``Our PR people said I had to. To be honest with you, I don't know.''
On who has momentum:
``It's slightly in the company's favor. This is going to be very, very close. Part of it is that as we go on, the opposition still is not putting enough detail into the options, into the alternatives. And I think that hurts them.''
On the personal attacks in the proxy fight:
``It's been nasty from the beginning. We've tended to kind of discount that. If this doesn't go through, not only are you going to have transition issues because obviously there are going to be some management changes, I'm also concerned about this: they're going to have a pretty dysfunctional board because you have a proxy fight being led by a board member. If this doesn't go through, either a lot of the people who supported this walk, or I don't see how these people can work together and actually come to decisions. They've taken this to a personal level.''
On whether managers and directors will be able to work together:
``That's a significant risk.'' |
