HP's Fiorina denies misleading investors on targets
By Caroline Humer
WILMINGTON, Delaware, April 24 (Reuters) - Hewlett-Packard
Co. <HWP.N> Chief Executive Carly Fiorina on Wednesday denied
misleading investors about financial forecasts for its planned
merger with Compaq Computer Corp. <CPQ.N>, saying a second,
lower set of internal numbers did not need to be disclosed.
The internal financial estimates for fiscal 2003, which
were below the company's public targets for its planned merger
with Compaq, were not forecasts, she argued, and didn't need to
be disclosed to shareholders or the HP board.
Fiorina made the comments during testimony in the Delaware
business court, where the Palo Alto computer and printer maker
is defending itself against allegations made by dissident board
member and son of a founder, Walter Hewlett.
In the trial -- which followed a lawsuit filed by Walter
Hewlett in March -- Hewlett's lawyer Stephen Neal, said that
the numbers prepared by the companies' business managers in
February and March showed that HP knew it would fall short of
the financial targets for the merged company.
Speaking in court on Tuesday, Neal argued that HP should
have disclosed that the numbers showed, among other things,
that 2003 operating profit would come in at $5.2 billion, not
$6.9 billion, as HP had publicly indicated in its documents to
shareholders ahead of the March 19 merger shareholder vote.
Fiorina said the lower estimates generated internally at HP
were not forecasts, saying that managers tended to
underestimate the numbers to ensure they met their targets.
For the second day in a row, she said she was certain the
company will meet its goal for $2.5 billion in cost savings and
a loss in revenue for the combined company of 4.9 percent.
"We could blow this in many ways. Our plan is not to,"
Fiorina said.
She also said that "running a business requires a
disciplined identification of gaps between where we need to be
and where we are and a disciplined closing of those gaps."
Fiorina, who was visibility exasperated after 6 hours of
testimony over the past two days, again denied allegations of
vote buying.
Walter Hewlett's attorneys allege that HP management had
tried to coerce Deutsche Bank into voting for the merger by
threatening the withdrawal of future investment banking
business.
Deutsche Bank worked for HP as a proxy solicitor and was
entitled to a $1 million bonus if the deal went through, Walter
Hewlett's lawyer said on Tuesday.
The investment bank switched its vote after a conference
call the morning of the shareholder vote, he said. Deutsche
Bank said its asset management team was not influenced by
banking relationships with HP when casting its vote.
Neal on Wednesday asked Fiorina if it took a "beautiful
mind" to understand that Deutsche Bank wanted to keep HP
management happy to retain its business.
Fiorina, however, said she had no way of knowing that.
"That's your inference, not mine. I can't draw any
conclusions about what's going on in their heads," Fiorina
said.
She also said: "We were clear with every shareowner that we
spoke with that we did not want them to vote against the
merger."
((Caroline Humer, New York Technology Desk, 646-223 6000))
REUTERS
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