HP Chief Pressed to Explain Bank Call
WILMINGTON, Del., Apr 25, 2002 (AP Online via COMTEX) -- Hewlett-Packard Co.
chief Carly Fiorina was called back to the witness stand Thursday to explain why
she told a big investor its vote on the proposed acquisition of Compaq Computer
Corp. was "of great importance to our ongoing relationship."
The comment was made in a last-minute presentation Fiorina and HP chief
financial officer Bob Wayman made to Deutsche Bank investment managers just
before HP's March 19 shareholder vote on the Compaq deal began.
In a dramatic and combative sequence, Fiorina - who spent seven hours testifying
Tuesday and Wednesday - was called back up to discuss the Deutsche conversation
because a tape recording of the call did not become available to attorneys in
the case until Wednesday.
"We very much appreciate your willingness to listen to us this morning," Fiorina
told the Deutsche money managers as she concluded the call, according to the
transcript read by Stephen Neal, an attorney for dissident HP director Walter
Hewlett.
"This is obviously of great importance to us as a company. It is of great
importance to our ongoing relationship. We very much would like to have your
support here. We think this is a crucially important decision for this company."
Walter Hewlett is suing the company in hopes of overturning the shareholder vote
because he believes HP misled investors about the progress of its merger plans
and improperly coerced Deutsche Bank to support the deal after it originally
intended to reject it.
Fiorina has said no such pressure was applied, even though Deutsche Bank was
performing a variety of investment banking services for HP at the time.
She defended the "ongoing relationship" remark, saying it is a common way to
speak to an investment bank, particularly one such as Deutsche Bank, which buys
computer equipment from HP in addition to providing financial services.
HP lawyer Boris Feldman, who complained that Neal was standing too close to
Fiorina as he showed her the transcript, denounced Neal for implying that
Fiorina threatened Deutsche Bank.
"So this is what the bribery case comes down to now," he said sarcastically.
However, Neal did have more ammunition - communications between Deutsche Bank
officials.
In an internal call recorded March 19, Dean Barr, chief investment officer for
Deutsche Bank Asset Management in New York, said to the bank's proxy team that
controlled the vote on the shares: "You may or may not be aware we have an
enormous banking relationship with Hewlett-Packard. ... Obviously if you don't
want to change your vote, that's your call. I would suggest to you, and I'm not
trying to put undue pressure, but make sure that you have a very strong
documented rationale for why you voted the way you did as it relates to this
merger. This is extremely sensitive."
According to the official court transcript, a German representative replied to
Barr: "I don't want to be smarter than you people in New York, so if the
majority of you come to the conclusion that it's better for our customers to
vote in favor, I tried to change our vote here, but I have to see what I can
overcome. All the technical problems. I have to react very quickly."
Deutsche Asset Management has said it voted for the HP-Compaq deal merely in the
best interests of its investment clients.
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 - which means that Chancery Court Judge William B. Chandler
would have to do more than erase Deutsche Bank's 17 million votes to overturn
the deal.
To that end, Hewlett's lawyers have been trying to prove that the proxy campaign
also was corrupted by HP's refusal to release updated internal projections
showing the merged companies falling far short of their publicly released
financial targets.
Fiorina and Wayman have testified that the documents showing the shortfalls were
taken out of context, and drawn up by HP and Compaq managers with incomplete
information.
Hewlett's side also introduced as evidence internal memos from Compaq chief
financial officer Jeff Clarke calling the projections "ugly" and "a disaster"
and saying the integration team had "a mile to go."
But Clarke testified Thursday that those comments were also taken out of
context; he called them motivational messages. Echoing testimony made by
Fiorina, Clarke said HP and Compaq are more confident than ever about the
merger's ability to generate cost savings and increased profits for the new HP.
For example, Clarke said, $3.5 billion in cost savings are possible by 2004,
well ahead of the publicly touted figure of $2.5 billion.
Testimony was expected to end Thursday evening. Boeing Co. chief Phil Condit, an
HP board member, was among the witnesses expected in the afternoon.
In trading Thursday on the New York Stock Exchange, shares of Palo Alto,
Calif.-based HP were up a penny to $17.22. Shares of Houston-based Compaq were
unchanged at $10.36.
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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 |
