Walter Hewlett offers no smoking gun in Compaq case
WILMINGTON, Delaware, Apr 25, 2002 (AP WorldStream via COMTEX) -- Testifying
against the Silicon Valley institution his father co-founded in 1938, Walter
Hewlett said he sued Hewlett-Packard Co. in search of the truth about how the
company won shareholder approval for the acquisition of Compaq Computer Corp.
Hewlett's testimony Wednesday in Delaware Chancery Court was a somewhat
anticlimactic coda to the hard-fought proxy campaign he waged against HP
management over the Compaq deal.
He offered nothing approaching a "smoking gun" to prove his claims that HP
misled investors about whether the Compaq deal could meet its touted financial
goals and that HP improperly coerced Deutsche Bank's investment division to vote
for the deal.
Hewlett did contradict a claim made by HP CEO Carly Fiorina and chief financial
officer Robert Wayman. Each executive testified that internal projections showed
the merger falling short of HP's revenue and earnings targets largely because
the business units that contributed to the estimates offered lower projections
than they knew they could hit. Fiorina called the process "sandbagging."
However, Hewlett said HP business units typically tend to be too optimistic and
aggressive about what they can deliver.
"It was the responsibility of the board to give them a haircut," said Hewlett,
whose 15-year tenure on the HP board ends Friday. HP management and his fellow
directors decided not to renominate him after he filed this lawsuit.
Hewlett said he carefully considered the effect his lawsuit would have on HP,
but said he only sought the truth about what happened.
HP lawyer Steven Schatz suggested Hewlett, who was derided as a "musician and
academic" during the merger campaign, was manipulated by advisers who stood to
make dlrs 12 million if the deal got rejected.
Hewlett sued HP in Delaware Chancery Court, which can oversee the governance of
companies incorporated in Delaware, in hopes that a judge will overturn the
March 19 shareholder vote on the deal.
A preliminary tally released last week found that 51.4 percent of HP shares were
voted for acquiring Compaq, with 48.6 percent against. That amounts to a lead of
45 million shares.
In trading Wednesday on the New York Stock Exchange, shares of Palo Alto,
California-based HP fell 83 cents, or 4.6 percent, to close at dlrs 17.21.
Shares of Houston-based Compaq gained 16 cents to dlrs 10.36.
That significantly lowered the "spread" - the difference between Compaq's stock
price and the price implied by the terms of the acquisition. Wall Street traders
monitoring the case said the shrinking spread meant that investors were
confident the deal will go through because Hewlett hadn't done enough to
substantiate his charges.
Hewlett's testimony was far less contentious than Fiorina's seven hours on the
stand Tuesday and Wednesday. She denied doing anything improper, and said the
documents showing gaps between HP's internal financial projections and its
public forecasts were taken out of context.
She got angry with Hewlett attorney Stephen Neal, who repeatedly pressed her to
concede that the internal numbers were meaningful.
"Sir, you are accusing the CEO of a publicly traded company of lying," she said,
glaring at Neal.
Neal asked Wayman about how Deutsche Asset Management, which had been opposed to
the deal, switched 17 million shares for the merger on the day of the vote.
Wayman said he and Fiorina never made a formal pitch to Deutsche Asset
Management because they assumed the firm would vote for the deal. After all, he
said, a Deutsche Bank analyst supported the acquisition, and Deutsche Bank was
giving HP "market intelligence" during the proxy fight for a dlrs 1 million fee,
with a dlrs 1 million bonus if the deal won approval.
Wayman added that a few days before the shareholder vote, Deutsche Bank vice
chairman Benjamin Griswold told him the investment side of the company was going
to approve the deal.
But then two days before the vote, HP's proxy solicitor informed Fiorina that
Deutsche Asset Management actually was going to vote no.
Wayman said he called Griswold, who was apologetic and embarrassed, and arranged
a conference call an hour before the shareholder vote so Wayman and Fiorina
could make a last-minute pitch to Deutsche proxy teams.
Less than two hours later, Wayman said, he was told Deutsche Asset Management
would support the deal after all.
Wayman conceded that he can decide whether HP gives future business to Deutsche
Bank. But he denied playing that card.
"I've had a long and successful career," Wayman said. "I don't threaten, I don't
coerce, I don't entice, I don't mislead."
Deutsche Asset Management has said it acted in the best interests of its
investment clients.
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On the Net:
hp.com
compaq.com
Opposition site: votenohpcompaq.com
By BRIAN BERGSTEIN
AP Business Writer |
