HP Exec Denies Merger Memos Mislead
WILMINGTON, Del., Apr 24, 2002 (AP Online via COMTEX) -- Hewlett-Packard Co.
chief Carly Fiorina became agitated on the witness stand Wednesday under
questioning about company documents that allegedly show the purchase of Compaq
Computer Corp. would fall short of its financial goals.
In the second day of dissident HP director Walter Hewlett's lawsuit against the
company, Hewlett attorney Stephen Neal asked Fiorina how the teams that were
planning the merger arrived at their financial estimates. Charts introduced as
evidence Tuesday showed growing gaps between the latest revenue and earnings
projections and the figures HP had promised to investors.
Sighing several times in exasperation, Fiorina said Neal was drawing the wrong
conclusions about the meaning of the charts because they were taken out of
context, as if someone looked at selected snapshots instead of "the whole
movie."
She said the increase in the gaps was not surprising, because the business units
that contributed to the ongoing assessments deliberately set relatively low
targets so they could overshoot them later. She called the process
"sandbagging."
"Running a business is about identifying gaps between where we need to be and
where we are, and the disciplined closing of those gaps," Fiorina said. "That's
how you produce results."
At one point during the tense exchange, Neal said somewhat curtly, "Let me ask
the questions."
Fiorina responded, "Sir, you are accusing the CEO of a publicly traded company
of lying."
"I'm only asking you questions right now," Neal replied.
Fiorina also had stubbornly refused to concede points to Neal on Tuesday, the
trial's first day. When she finally stepped off the witness stand Wednesday, she
had testified for a total of seven hours.
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. That gives HP a
lead of 45 million shares.
Walter Hewlett is asking a Delaware judge to overturn the vote on the grounds
that HP misled shareholders about the progress of the merger planning and
improperly coerced at least one investor, Deutsche Bank's investment arm, by
threatening to withhold future business from Deutsche Bank.
Neal asked the trial's second witness, HP chief financial officer Bob Wayman,
about the last-minute lobbying he did to win over Deutsche Asset Management,
which had been opposed to the deal but switched 17 million shares for the merger
on the day of the vote.
Wayman said he assumed all along that Deutsche Asset Management would vote for
the deal, because Deutsche Bank analyst George Elling was supportive of it and
because Deutsche Bank had agreed to provide HP "market intelligence" during the
proxy fight, for $1 million fee, with a $1 million bonus if the deal was
approved.
"I would not want somebody not supporting this merger out there with my
investors," Wayman said.
Wayman said that a few days before the March 19 shareholder vote, he asked
Benjamin Griswold, a Deutsche Bank vice chairman, how the investment management
side of the company was going to vote on the deal. Griswold reported back that
the Deutsche money managers were going to vote for it.
But then two days before the vote, HP's proxy solicitor informed the company
that Deutsche Asset Management actually was going to reject the Compaq deal.
Wayman said he was agitated and frustrated with both the news and the fact that
he got wrong information.
Griswold was apologetic and embarrassed, Wayman said, and arranged a conference
call an hour before the shareholder vote with Deutsche proxy teams so Wayman and
Fiorina could make what HP called its first real chance to lobby Deutsche Asset
Management to support the deal.
Less than two hours later, Wayman said, he was told Deutsche Asset Management
would support the deal after all.
Deutsche Bank has said its money managers acted in the best interests of their
investment clients.
In afternoon trading Wednesday on the New York Stock Exchange, shares of Palo
Alto, Calif.-based HP were down 67 cents, nearly 4 percent, to $17.37. Shares of
Houston-based Compaq were up 15 cents, or 1.5 percent, to $10.35.
Hewlett sued HP in Delaware Chancery Court because the state regulates proxy
fights and other governance issues that concern companies incorporated in the
state, such as HP and Compaq. He was expected to testify later Wednesday or
Thursday.
If the judge vindicates HP, the HP and Compaq are prepared to begin officially
working together May 7.
---
On the Net:
hp.com
compaq.com
Opposition site: votenohpcompaq.com
By BRIAN BERGSTEIN
AP Business Writer
Copyright 2002 Associated Press, All rights reserved
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APO Priority=r
APO Category=1700
(PROFILE
(CO:Hewlett Packard Co; TS:HWP; IG:CPR;)
(CO:Deutsche Bank AG; TS:DB;) |
