Final chapter opens in heir's bid to scuttle HP-Compaq deal
WILMINGTON, Delaware, Apr 23, 2002 (AP WorldStream via COMTEX) -- Fighting to
save the biggest merger in high-tech history, Hewlett-Packard Co. chief Carly
Fiorina testified that she didn't deceive shareholders about the prospects of
the Compaq Computer Corp. purchase and never bullied big investors to vote for
the deal.
Fiorina's four-plus hours on the witness stand Tuesday came after lawyers for
dissident director Walter Hewlett said company memos and a personal diary showed
that HP executives knew the Compaq deal was likely to work out far worse than
the companies were saying publicly.
Hewlett attorney Steven Neal said internal memos show the dlrs 19 billion deal
likely would reduce the combined company's earnings per share by as much as 10
percent rather than boost them 12 or 13 percent, as the company claimed in
Securities and Exchange Commission filings. Company charts showed similar
problems, he said.
"The attached is a frightening reality check," said one staff e-mail sent to
HP's chief financial officer and read in court by Neal. "I see little realistic
upside and I am not alone. I sincerely hope we all start acknowledging the
realities soon."
The official certification of HP's shareholder vote on the deal, first announced
seven months ago, is expected within days, but Hewlett is asking a Delaware
Chancery Court judge to invalidate those results. A preliminary tally released
last week found that 51.4 percent of HP shares were voted for the Compaq deal,
and 48.6 percent came out against.
Neal said that in late February or early March, Compaq CEO Michael Capellas
wrote of a "sobering thought" in his personal journal: "At our course and speed
we will fail."
But under questioning from Neal and then an HP attorney, Fiorina meticulously
challenged the claim that HP misled investors, saying Neal had taken memos and
charts out of context and overlooked other reports showing the deal well on
track. Fiorina said HP made conservative estimates so as to "underpromise and
over-deliver."
She said she not only stands by the projection that the deal will generate dlrs
2.5 billion in savings in 2004 but now would be "very disappointed if we don't
do better than that."
Fiorina also denied a key element of Hewlett's case: that she or other top HP
officials threatened to withhold lucrative business from Deutsche Bank if
Deutsche's investment arm did not vote 17 million shares for the deal at the
last minute.
Fiorina was due to resume testifying Wednesday morning in what is expected to be
a three-day trial.
In trading Tuesday on the New York Stock Exchange, shares of Palo Alto,
California-based HP fell 23 cents to close at dlrs 18.04. Shares of
Houston-based Compaq lost 53 cents, or 5 percent, to dlrs 10.20.
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On the Net:
hp.com
compaq.com
Opposition site: votenohpcompaq.com
By BRIAN BERGSTEIN
AP Business Writer
Copyright 2002 Associated Press, All rights reserved |
